““Byting” into a Paper Byting” into a Paper World World

Zinio Case StudyZinio Case Study

Questions I have…Questions I have…

• ……for you:for you:– What is What is ZinioZinio??– How attractive is ‘the market’?How attractive is ‘the market’?– How can we segment the market?How can we segment the market?– What is the value Zinio offers to these customer What is the value Zinio offers to these customer

segments?segments?– What are the main drivers of profitability?What are the main drivers of profitability?– What are the major barriers for Zinio’s adoption?What are the major barriers for Zinio’s adoption?– Does Zinio have a play? (Your recommendation)Does Zinio have a play? (Your recommendation)

QuestionsQuestions

What is Zinio? What is Zinio?

What is Zinio?What is Zinio?

• Piece of software to read printed materials digitally…

• Readers?

• Magazines?

• Retailers?

• Advertisers?

Back

How attractive is the market?How attractive is the market?

Market AttractivenessMarket Attractiveness

• POWER OF SUPPLIERS (Publishers)

• SUBSTITUTES (Paper magazines)

• BARRIERS TO ENTRY

• DEGREE OF RIVALRY (Digital magazine distribution)

• POWER OF BUYERS

Back

Question:Question:

How can we segment the market? How can we segment the market?

SegmentationSegmentation

• B2B and B2CB2B and B2C

• Users and ReadersUsers and Readers

Back

• USERS:USERS:– Professional– Academic– Super Professional/Content Management– Advertisers?

• READERS:READERS:– Subscribers– Readers who purchase at newsstands– Professional/scientific

QuestionQuestion

• What is the value Zinio offers to each What is the value Zinio offers to each customer segment?customer segment?

VALUE CREATION FOR EACH VALUE CREATION FOR EACH PLAYER?PLAYER?

• ReadersReaders

• PublishersPublishers

• etc.?etc.?

Back

Value of Online FormatValue of Online Format

• Convenience to reader?Convenience to reader?

• Speed of delivery

• Price

• Breadth of selection

• Integration of other media into the reading experience

• Environmental benefit

QuestionQuestion

Can the Zinio model be profitable? Can the Zinio model be profitable? • What are the main drivers of profitability?What are the main drivers of profitability?

Determines ProfitabilityDetermines Profitability

• Digital magazine penetrationDigital magazine penetration

• Digital reading device penetrationDigital reading device penetration

• Extend to which it becomes standard Extend to which it becomes standard (capture value in the ecosystem) (capture value in the ecosystem)

• Cost of acquisitionCost of acquisition

• Cost of retentionCost of retention

• Cross-sellingCross-selling Back

QuestionQuestion

What do you think about alternative uses of What do you think about alternative uses of Zinio such as the catalogue business?Zinio such as the catalogue business?

Factors Affecting Rate of AdoptionFactors Affecting Rate of Adoption

• Perceived Advantage for Customer Perceived Advantage for Customer • CompatibilityCompatibility• ComplexityComplexity• Ability to communicate product benefitsAbility to communicate product benefits• ObservabilityObservability

Supply Side BarriersSupply Side Barriers

• Supply side:Supply side:– Lack of contentLack of content– Suppliers become competitorsSuppliers become competitors– Others?Others?

Back

DOES ZINO HAVE A PLAY?DOES ZINO HAVE A PLAY?

• As what?As what?– Why should it play?Why should it play?– How should it play?How should it play?– Where should it play?Where should it play?

• Are there any models out there it could Are there any models out there it could emulate?emulate?

• Will Zino work?Will Zino work?Back

ALL PROS AND CONSALL PROS AND CONS

• ProsPros– SavingsSavings

• Printing, distribution, retailingPrinting, distribution, retailing

– Deep customer knowledge acquisitionDeep customer knowledge acquisition– Richer productRicher product– Probably more impulse buyingProbably more impulse buying– More cross-selling opportunitiesMore cross-selling opportunities– Probably lower costs of customer acquisitionProbably lower costs of customer acquisition– Publishers could economically test new magazinesPublishers could economically test new magazines– Produces value to users who want to use Zinio for Produces value to users who want to use Zinio for

lower cost, speed of delivery, archiving, etc.lower cost, speed of delivery, archiving, etc.

• Cons:Cons:– Low barriers to entry (Newsstand Inc., QMags and anyone can

distribute magazines)– Publishers may prefer to deal with several retailers to have more

power over the channel (e.g., iTunes vs. the traditional music model)

– Publishers may decide to vertically integrate and deliver directly to the end consumer

– Still not counted in official circulation counts for advertising purposes

– No advertising revenues go towards digital magazine distribution– Some companies in the value chain may retaliate against Zinio

(e.g., powerful printing companies such as Quebecor and printing machine companies like Heidelberg)

Final ThoughtsFinal Thoughts

• ‘‘Market stabilization’ under way but uncertainMarket stabilization’ under way but uncertain• ‘‘Product qualification’ under way but uncertainProduct qualification’ under way but uncertain• Network Effects!Network Effects!• Success of Zinio highly dependent on suppliersSuccess of Zinio highly dependent on suppliers• Success of Zinio highly dependent on tech Success of Zinio highly dependent on tech

developments in other areasdevelopments in other areas• Success of Zinio highly dependent on Success of Zinio highly dependent on

transformation of (entrenched) customer transformation of (entrenched) customer preferencespreferences

• Likely a ‘winner-takes-all’ marketLikely a ‘winner-takes-all’ market