Hearst's Carey talks digital, new Time Inc CEO

NEW YORK November30 Wed Nov 30, 2011 7:33pm EST

NEW YORK November30 (Reuters) - Hearst Magazines expects to reach one million digital subscriptions by the end of next year as more people sign up to read titles on tablet computers, the company's president told Reuters on Wednesday.

"We do expect in 2012 at some point to be able to have more than a million on e-subscriptions," Hearst Magazine President David Carey said.

The division now has about 400,000 digital subscribers to Cosmopolitan, Esquire and its other titles.

Carey gave the projection during the Reuters Global Media Summit just as Hearst rival Time Inc announced a new chief executive to replace Jack Griffin, who was ousted in February after five months on the job.

Time Inc, the magazine division of Time Warner that publishes Sports Illustrated and People among other titles, appointed publishing outsider Laura Lang, chief executive of digital marketing agency Digitas, to the role.

"My first impression is it seemed like a smart hire," said Carey of his rival's action. "Operating an agency is a different sort of business. Everyone's time is measured. She'll have all of that and she'll have to learn ... It's our game to win or to not."

Magazine companies are facing unprecedented challenges as a growing number of people choose to read content on digital devices like tablet computers and smart phones instead of in traditional print format.

Carey, who joined Hearst last year after a career at Conde Nast where he launched the ill-fated business magazine Portfolio and served as publisher of the New Yorker, is well aware the industry has to change.

Hearst's digital strategy differs from its competitors in that it charges for digital subscriptions whether or not a person is a print subscriber to one of its magazines.

By contrast, Time Inc, for instance, is aligned with Time Warner Chief Executive Jeff Bewkes' vision of "content everywhere" that lets consumers pay once and access content, be it from magazines or from its pay TV channel HBO, across a variety of platforms.

Carey argued that the cost to subscribe to a monthly magazine, which ranges from $12 to $15 on average, is low enough to charge more for other products.

"We feel if people want the content in multiple formats they should pay for it," he said. "At our price points we don't feel compelled to offer another free product to the end user. We could always pivot back into it. We don't want the word 'free' connected to content in this medium."

Hearst makes the digital titles of its 19 magazines available on several tablet computers, including Barnes and Noble's Nook, which commands the largest percentage of its digital subs, Amazon's Kindle Fire, and Apple's iPad. The digital magazines are priced at $1.99 for a monthly subscription.

Carey said tablet providers take roughly a 35 percent cut of subscription revenue, meaning Hearst gets to keep 65 percent. For traditional print newsstand sales, publishers typically keep 55 cents on the dollar.

Earlier this year, many publishers balked at what they considered Apple's onerous terms for subscriptions generated through its App Store. Not only do publishers have to share revenue, but they also have to give up ownership of valuable subscriber data used to sell advertising if a consumer goes through the App Store to purchase a magazine subscription.

Apple lets consumers opt to share their personal data, and Carey said that 60 percent to 65 percent of iPad subscribers choose to share their personal data with Hearst, which he conceded was a higher amount than expected.

"There was so much drama with Apple negotiations," Carey said about the magazine industry. "(You would) expect someone to sell the movie rights from all that debate last spring."

"It's a pretty efficient distribution for us to be honest," he added.

(Reporting by Jennifer Saba and Lisa Richwine; Editing by Peter Lauria)