But how long will these pricing strategies work? Digital still makes up only a tiny percentage of magazine publishers’ overall revenues: The Alliance for Audited Media (formerly the Audit Bureau of Circulations) reported in August that digital replica editions (which replicate most of a print magazine’s editorial and advertising content, and make up the vast majority of magazines’ digital versions) made up just 1.7 percent of overall circulation. The WSJ story says big magazine publishers think digital won’t hit 10 percent of circulation until 2015.

Pricing strategies that very early adopters appear to be accepting are not likely to work for a general population. Magazine publishers may need to adopt more nuanced digital pricing strategies as tablets take off. And they can look to book publishers — who are a lot further along in the digital revolution, with ebooks now making up over 20 percent of revenues at large publishing houses — for some help. Here are a few things they’ll have to think about:

The advertising conundrum

One of the biggest differences between the magazine and book publishing industries is that magazine publishers rely on advertising for revenue while book publishers don’t and never have. Print magazine subscription prices have plummeted, Hagey writes, because “magazine publishers have guaranteed advertisers their titles will reach a minimum number of readers and, to fulfill that pledge, they have long cut prices sharply for promotional subscriptions.” That’s why you can get an annual print magazine subscription for under $10. In tablet editions, magazine publishers see a chance to charge higher rates. Hagey notes that the average annual price of a digital subscription to a Hearst magazine is $19.99, “twice that of its average introductory print-subscription price of $10.”

At least for now, though, magazines’ digital editions bring the advertising from the print edition along for the ride. So digital readers aren’t getting an ad-free product in exchange for paying a higher price — magazine publishers are just charging more for the novelty of reading on a tablet. That’s a short-sighted strategy that probably won’t work as tablet adoption becomes widespread.

Will readers pay for enhancements?

The bells and whistles that magazine publishers are adding to digital magazines remind me of enhanced ebooks, which book publishers got very excited about a couple of years back. They hoped that by adding video and music to an ebook, they could charge more for it. Fast forward to 2013 and enhanced ebooks are widely considered a flop. So far, readers simply haven’t been interested in paying more for them. Book publishers have scaled efforts back and are no longer trying to charge higher prices for enhanced editions.

Magazines may be better suited to these enhancements than books are: E-commerce fits in well, for example, and videos and music may make more sense. But since a lot of this enhanced material is already available free online, readers may be reluctant to pay extra for it. The benefit for magazine publishers is that they can monetize those enhancements in other ways — through affiliate links to iTunes, for example, as Rolling Stone is doing. And Lucky is about to roll out a major e-commerce component that will likely rely on affiliate links as well.

Promotional pricing can work

Countless self-published authors have found that offering their books at initially very low prices is a great way to gain new readers: When the barrier to entry is low, readers are more likely to take a chance on an unknown name. This strategy is working less well as the ebook revolution progresses (and there’s a sea of self-published books out there), but magazine publishers, in the early stages of their digital era, can take advantage of it.

Magazine publishers already offer print subscribers discounts on other magazines they publish. Why not do the same thing with digital magazines? Or magazine publishers who sell print and digital editions separately could offer print readers a couple free digital issues or a discounted digital subscription for the first year. I also love the New Yorker‘s strategy of giving iPad subscribers free digital extras, like compilations of articles on a given topic and cartoon collections.

The good news for magazine publishers is that, with their digital revolution in the early stages, they can learn from those who came before them. The bad news is that many magazines are more threatened by free online content than most books are. As digital magazine reading moves from early adopters to a larger population, magazine publishers will have to find a way to give readers high-quality, no-substitute content at a reasonable price — or risk losing those readers to the internet.

Photo courtesy of Shutterstock / bernashafo

“If content is going to remain king, we have got to innovate,” Sauerberg said Wednesday at paidContent 2012, urging attendees to spend more time trying to come up with the next big thing rather than trying to keep older floundering business models on life support. Sauerberg’s conversation with paidContent’s Staci Kramer follows below in its entirety.

Check out the rest of our coverage of paidContent 2012. Full archived video on livestream (registration required).

If your responsibility is to make money from content, what should you do next? If the answer was easy, we’d all be on vacation. It’s not — which is why several hundred execs in media, entertainment, information and technology will be at The TimesCenter in New York today for top-level discussion about what’s working, what hasn’t and what’s showing the most promise. We’re hosting a star-studded roster of digital media leaders, including News Corp.’s Jon Miller, Pottermore CEO Charlie Redmayne; Martha Stewart COO Lisa Gersh; WordPress creator Matt Mullenweg; new USA Today Publisher Larry Kramer; and Condé Nast’s Bob Sauerberg. We’ll talk about making video pay, true cross-platform publishing, discoverability and much more.

Can’t make it in person? Our staff will be writing about it here, you can follow the hashtag #pc2012 — and, even better, you can join us virtually via the livestream of paidContent 2012 here.

Live-blogged stories from the event:

• Content, not hardware, have made tablets the current king
• The new digital newsstand: Enabling “pass-along” — and saying no sometimes
• Digital story-telling and the rise of the new publishers
• Fred Wilson: Content owners, don’t fear the future
• New ‘radically simplified’ WordPress is on the way
• HTML5 is a newspaper’s best friend – even if it has a mobile app
• Conde Nast’s Sauerberg: Get busy innovating, or get busy dying
• Don’t think of it as content, think of it as information
• For discoverability, traditional tools still dominate
• Does social beat search, or does “peacocking” get in the way?
• Financial Times exec: iOS apps don’t work for publishers
• Jon Miller: Hulu still essential to broadcasters
• Social media doesn’t speed up the news cycle — it kills it
• Richard Russo: Amazon puts great young writers in “particular peril”
• Is a vast video library worth the time and money?
• Harry Potter’s publishing wand can tame Amazon, pirates

I’m also thinking about the range of interviews on tap, including two I’m doing. As president of Condé Nast, Bob Sauerberg is managing the translation of some of the magazine industry’s most iconic brands to a variety of devices and formats. In some cases, CN has tried to revive a brand by going pure digital, most famously with Gourmet Live. We’ll talk about what Sauerberg has learned, how committed CN is to app distribution, whether magazine consortium Next Issue Media can gain any meaningful traction and more.

Jon Miller is the chief digital officer of News Corp., the home of tablet tabloid pioneer The Daily, as revolutionary in its own way as USA Today was in 1982, and of a lot of digital experiments and acquisitions with mixed results (including MySpace, an acquisition Miller didn’t make but had to unwind after numerous rescue attempts failed). A current fixation for the former AOL CEO: video across properties, including the Wall Street Journal and IGN, not just the traditional sources of Fox networks and studios. And through it all, News Corp. has to protect its traditional billions and cope with the constant image hits in the UK. The same internet that offers so much potential revenue also makes it easy for every ripple to go tidal wave.

Other one-on-ones include:

• betaworks CEO John Borthwick with GigaOM Founder Om Malik
• VC Fred Wilson with Mathew Ingram, who outlined some ideas here
• Pulitzer Prize-winning author Richard Russo will talk with our legal writer Jeff Roberts about the challenges facing authors from copyright to consolidation to pricing
• Pottermore CEO Charlie Redmayne will talk to Laura Hazard Owen about taking a beloved brand digital
• Automattic’s Matt Mullenweg in conversation with Anil Dash about platforms, power and disruption.

And that’s just part of the day. Check out the complete schedule and the full list of confirmed speakers is here.

The remaining ickets are selling fast — so if you want to take full advantage of the opportunities that come with networking from breakfast to closing cocktails, I strongly suggest you register now.

Thanks to our sponsors for their support. If you’re interested in sponsoring paidContent 2012, please contact eventsales@gigaom.com.

Thumbnail image courtesy of Shutterstock user [Joshua Haviv].

• On Friday, Facebook is set to flip the switch from years of hyped speculation to the reality of a mega-hyped IPO. It’s waiting for regulatory approval to spend $1 billion on Instagram. As I write this, the news is breaking that Pinterest is about raise a round that will follow it at $1.5 billion. A quick scan of our own news pages shows hundreds of millions being invested in the digital content ecosystem — often with a firm belief that there is revenue somewhere to justify those investments, but without any real sense of where it will come from. We’ll ask John Borthwick and Fred Wilson, among others, where they are investing and why.
• Cable and broadcast networks have been unveiling new programming slates into a more fragmented video universe than ever before. Discovery Communications bought Revision 3 for $30 million, Turner Broadcasting invested in Funny or Die. At the same time, YouTube’s $100 million investment in original programming is rolling out channel by channel, AOL is finally moving ahead with its major video plans, Yahoo is investing in original programs with Tom Hanks, Katie Couric and others — and so are Hulu, Amazon and Netflix. Brian Bedol, who is trying to replicate his success as a cable network founder with YouTube channels and other efforts; Lisa Gersh, president and COO of Martha Stewart Living Omnimedia, and Rob Burnett, CEO of David Letterman’s Worldwide Pants, will take us inside their thinking as they make their way through The Video Boom.
• Just this week, one of our moderators turned from board member and adjunct professor to active exec again. That means Larry Kramer will be sitting down as president and publisher of USA Today with John Paton and Jim Bankoff to talk about what it takes to lead and innovate, to be a “new publisher.” Since paidContent 2011, Bankoff taken SB Nation, a network of sports sites, to Vox Media and added a tech vertical with The Verge and has a gaming vertical on the way. Paton, meanwhile, has added MediaNews to his Journal Register portfolio, and is now the the CEO of the much-larger DigitalFirst.

As much as things change, one goal remains the same: the creation and evolution of sustainable business models that will support quality media, entertainment and information across platforms.

We’ll be covering the topics that matter to you in our signature one-day, single-stage, 360-degree style. We have a stellar roster of speakers and moderators who are more than up for the task, including:

• Jon Miller, Chief Digital Officer, News Corp.
• Bob Sauerberg, President, Condé Nast
• Vivian Schiller, Chief Digital Officer, NBC News
• Josh Marshall, Editor & Publisher, TalkingPointsMemo.com
• Mark Johnson, CEO, Zite
• Matt Mullenweg, Founding Developer, WordPress and Founder, Automattic

The full list of confirmed speakers is here.

Just as important as the speakers, though, is the fact that we have great attendees with a lot to add to the discussion.

But space is limited and tickets are selling fast — so if you want to take full advantage of this jam-packed agenda and the opportunities that come with networking throughout the day from breakfast to closing cocktails, I strongly suggest you register now.

If you’re interested in sponsoring paidContent 2012, please contact eventsales@gigaom.com.

Condé Nast owns the magazine Bon Appétit, the extremely popular food cooking and lifestyle portal Epicurious as well as the Gourmet brand, which no longer exists as a print magazine but lives on as a Web publication and in TV programming and cookbooks. Though Condé Nast didn’t detail its exact plans to integrate ZipList’s universal recipe box service into its own Web portals, it appears to be letting the company maintain its independent status for the time being. Here’s the statement issued by Condé Nast president Bob Sauerberg:

“This acquisition enables Condé Nast to deliver on our commitment to marry quality content and innovative technology, giving unprecedented scale as we focus on creating additional revenue streams in the digital space. … Our goal is to build ZipList as an independent company while collaborating with our food brands to integrate its core technology, and to create partnerships that allow other companies to do the same.”

Like other recipe clipping apps, ZipList allows its users to grab dish ideas they find on different food sites and store them in a digital recipe box. The difference is ZipList doesn’t view itself as a destination site or portal like Paprika or KeepRecipes. Instead it acts as the recipe-saving service and grocery list-generating app for 6,500 food sites and blogs. But rather than keep those recipes and lists trapped in thousands of different mutually exclusive recipe boxes, ZipList has made its box universal, accessible through the same login credentials on any partners’ sites as well as its own Web portal.

That puts Condé Nast in a somewhat awkward position. Presumably it will add ZipList’s universal recipe box to Epicurious and its other Web properties, which means customers will be aggregating and accessing its competitors’ recipes from within Condé Nast’s sites. Likewise, some of Condé Nast’s biggest rivals in the food biz — MarthaStewart.com for one — use ZipList’s service. If they continue to work with ZipList they will do so knowing they’re supporting one of their biggest competitors in food and lifestyle media. It will be interesting to see how Condé Nast walks this line.

Condé Nast’s Sauerberg and Martha Stewart Living president and COO Lisa Gersh will both be appearing at paidContent 2012, May 23 in New York City.

But Sauerberg, then the group president of consumer marketing, came off as the go-to guy for putting consumers, not advertisers, at the center of Condé Nast’s business. (David Carey, who left a few days later to run Hearst’s magazine unit, was at the same event but in the background.) As the company escalates its digital R&D efforts, it’s been up to Sauerberg to connect those dots to success in the short term — and to the long-term strategy of making more money directly from consumers who feel passionate about Conde’s niches and brands. The results from the first months of iPad apps show some of the efforts literally are paying off: through June, users paid for 182,000 downloads of Wired, GQ and Vanity Fair.

As Sauerberg stressed when we spoke soon after his promotion was made public, it’s still a very small business but it’s an example of what he has to accomplish as president of Condé Nast. Some excerpts from the interview:

– Conde DNA: Asked to explain concisely how Condé Nast was going to deliver on this strategy, Sauerberg replied: “Our DNA at Condé Nast is content in how we start the cultural conversation in everything we do. We are now going to get organized to develop our content and our brands in a way that starts with the foundation of the magazine but also extends into other platforms and in a way that develops a more balanced revenue stream for us.” He admitted ruefully, “That’s a mouthful.”

But how is Condé Nast going to get users to continue to pay more digital access than they do for print? How do they get past blow-card pricing? “You start with creating content experiences that people really value and you make it easy for them to consume and to buy. I think that’s the foundation of all of this.” The R&D process is a big part of that. “We’re trying to understand what it takes to move the needle with them. You don

The announcement was timed to a regularly scheduled meeting of Condé Nast publishers, Sauerberg told paidContent in an interview. That’s why today was chosen but the timing is also tied to a sense that Condé Nast’s business has improved. “Sometimes when you’re in a good place and things are doing well, it’s a good time to try to figure out how you can double down and improve on our strength.” Sauerberg said the strategic shift is the result of about six months of review by Townsend.

He also said it’s too soon to share how his new role and the shift to a more consumer-centric company will play out over the next few months. “We are now going to get organized to develop our content and our brands in a way that starts with the foundation of the magazine.”

That wasn’t the only change. Lou Cona moves up to CMO from EVP, Condé Nast Media Group, responsible for CNMG’s integration into a “seamless multi-media, multi-platform sales and marketing services facility.” (Seriously, that’s a direct quote from the release.) COO John Bellando adds CFO to his titles, overseeing finances for Condé Nast, Fairchild Fashion Group and Parade. The full release is below as is my recent video interview with Sauerberg. More from today’s interview to come.

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Press release

Condé Nast is charting a new strategic course as a consumer-centric media and entertainment company in order to accelerate growth, it was announced today by Charles H. Townsend, Chief Executive Officer, of Condé Nast. The company will be realigned to better embrace and harness developing technology; broaden consumer touch points; and create contemporary value propositions for advertisers. To achieve these strategic priorities, several senior leadership changes were announced.

Mr. Townsend will remain C.E.O., with continued responsibility for the entire company, reporting to S.I. Newhouse, Jr., Chairman. He has appointed Robert A. Sauerberg as President of Condé Nast. Mr. Sauerberg, formerly Group President, Consumer Marketing, will work with Mr. Townsend in overseeing the company

In a casual video interview after the unveiling of Gourmet Live, Sauerberg told paidContent the continued evolution of Wired‘s content for the iPad will be accompanied by pricing changes. For instance, return readers can get the second issue for $3.99. “We’ll be using a variety of marketing approaches and prices to stimulate more volume for the second issue. We’ll see how it goes and we’ll learn from there.” Subscription strategy will wait for fall.

For more about Wired, the re-imagining of Gourmet and other Conde Nast digital initiatives, check out the video embedded below. Using an iPad or iPhone? Click here for the HTML5 version.