Mygazines – exclusive interview

“Bottom line is, we didn’t handle it right. We took bad advice, and followed it.”

A quick summary: in July last year, a website called Mygazines launched. It allowed registered users to upload scans of any magazine, and then share them for free. Faster than you could say “copyright infringement”, the site had more than 130,000 registered users, and everything from The Economist to Time was being scanned and shared on the site.

Opinions about Mygazines ranged from “theft, pure and simple” to “an idea whose time has come”. Various publishers contacted their lawyers to have it shut down, with the backing of the Magazine Publishers of America. Meanwhile, attempts to find who was behind the site met with digital obfuscation – the url was registered to the somewhat dubious name of John Smith in the Caribbean island of Anguilla. As one hosting service shut it down, it moved to another, travelling the virtual server globe, with lawyers in hot pursuit.

At least that’s how the story was told at the time. As speculation gathered, John Smith emailed various media outlets, including this one, defending the site, and denying it was a new Napster by promoting copyright theft through sharing.

Smith’s argument seemed to be based around two basic ideas. First, they weren’t doing anything wrong in allowing sharing:

“If you were to take all of the offices in the world that purchase magazines for the sole purpose of providing entertainment for their clients, is the same as sharing. Furthermore, these offices see different people everyday, so the sharing is constant and consistent and usually includes many back dated issues as well as new. By virtue of the fact that these groups change everyday makes it like a free magazine store.”

Secondly, there was more to Mygazines than met the eye.

“The true future of the industry lies in the final stages of our site concept. We can easily transition to the final revenue model quickly with the co-operation of the publishers. We cannot however reveal the full concept at this time as we are saving that discussion for the publishing industry directly.”
…
“The competitors have missed the boat. Even the sites that think they have come up with the future online version for magazines, they have not! Publisher friendly or not! There is a final stage missing that can’t be seen unless one has the freedom to think outside of the limitations of the industry as is.”

The lawyers soon had their day in court, and a swift settlement was reached in the US, and then upheld in Toronto. Soon after, the Mygazines website closed, citing lack of funds.

And then, earlier this month, it came back. No John Smith, no Caribbean islands, new funding (from “silent investors”) and a team working full time on making Mygazines 2.0 a commercially viable company, working with the magazine industry to produce digital editions of print magazines.

The site is now registered in the name of Yoav Schwartz, a former Microsoft manager originally from Israel, and Mygazines’ head of programming. John Smith, whose real name is Darren Andrew Budd of Ontario, Canada, remains as CEO of the company, and they’ve now hired Pierre Bisaillon – who set up digital magazine company ZMags Inc in North America as a franchise of Danish-based Danish-based Zmags ApS – to be Mygazines’ “VP, Corporate and Business Development”. The company is based in Ontario, quite a distance from their erstwhile Caribbean hideaway.

In a Magtastic Blogsclusive, I spoke to Darren and Yoav on the telephone about file sharing, being the industry’s pariah and those mysterious revenue models.

Who came up with the original idea of Mygazines?

Darren Budd (DB): I came up with the idea about two and a half years ago. I was standing in a magazines store and thought, gee, I want one article from that magazine, two articles from that, and I only have a limited budget – and even if I have an extended budget, I’m going to have too many magazines to carry, I’m not going to get around to them all.

So now you’re buying your biggest payoff. You’re not buying, say, Architectural Digest or a bunch of other things that might have one or two articles in [that you'd like] and are 12 dollars. You’re buying the biggest payoff for the smallest amount of dollar. What you do is buy the same week after week and not expand your reading.

The idea was that you need to have a place that you can choose, page by page, article by article… in Mygazines, that was one of the first things we created.

I was pretty specific with some of the technical things, not that I understand the deep-down technical aspects on how to get it done. All of that was formed with Yoav to bring it to reality.

I feel he’s as much responsible for the progress, and the company being able to be robust and alive now is because of the fact that he saw the vision, and was able to help with that vision. And Hamid [Hamid Abbas from Dubai] was very keen in programming that vision, technically speaking. [Abbas is now a shareholder of Mygazines].

Yoav Schwartz (YS): My role has been in bringing Darren’s vision, and quite a vision it was, to fruition. At face value it looks like another digital newsstand, but what separates our system is that the very basic core of what we were trying to achieve was to base everything not as a whole magazine but as its parts, which are pages. It’s like saying that a CD is just a CD whereas really it’s comprised of a bunch of songs.

DB: There’s a key thing that then changes. If you click on the table of contents in a digital magazine, you can jump straight to that page. So you can charge by article, or you can offer a subscription, some content will be free, some won’t. And then the key is the community around that.

So let’s say you’ve got a community, and you’re going on there because you want to reference a recipe, type up a topic, I want to put 5 pages together and send it to my 5 groups of friends who are working in the same office. It’s not just how do you read, it’s how do you make it better for people.

I’m gong to spend the same budget [on magazines] anyway, so maybe I’ll be a member of three different sites with that budget, but what I am now is part of that community, I’m getting information, I can reference it I can purchase it, use it as a daily tool.

That also gives you advertising possibilities. Is the first page the most expensive? The middle, the end? You can offer advertisers to be where they want to be, on the most popular article or whatever.

You can also offer dynamically generated ads, which can be embedded into the publication. And these ads will bring you closer, because they’re database-driven for each member. You’ll get similar ad rates as you will in a regular magazine, as opposed to the current sidebar ads, whose revenues are not commensurate with print.

Why will digital ad rates change to be more like print?

DB: One thing must change before the other thing changes. So the page manipulation will come together first, to let the ads be specifically focused. On our site we have notifications, and we were the first guys to do that. “If an article is published on health or finance, let us know every five days”. So now you have push advertising. If these are dynamically generated ads, then you’re getting specifically targetted spaces, which is what the whole advertising industry is based upon.

How much of what happened with Mygazines 1.0 did you foresee?

DB: I think that we would say this: we were more technically oriented and creative people. We were a little bit out of our range in dealing with the legal aspect. What we really wanted to do was to reach the industry. We didn’t know what would come in the open upload.

We had some uploads from publishers who wanted their information up, and some turned out not to be [the original publishers]. And instead of going with our instinct, which was to get back to the publishers and say “if this isn’t you, how can we work with you?”, we listened to what was PR-based advice – probably not the best advice – to continue and show the publishers the way.

I think that was arrogant and probably misguided. Well, it was misguided. I take full responsibility for how we approached the industry, because I think they might have been more than amenable to speaking about our new way of looking at it. But once we tried to get through to them [after launch], we were dealing with their lawyers, so it wasn’t even possible to speak to them directly.

Even before we settled, if any individual publisher was saying “please take these off” we were scripting against it, but what they wanted – and rightly so – was “we don’t want to come to you individually when someone uploads something and say ‘take it off’, you should make sure in general it doesn’t happen.”

Bottom line is, we didn’t handle it right. We had a great technical idea, we had a very good site that could be good for the industry, but we didn’t handle it properly, and the way we’re approaching it now, we’ve brought on people who are experts in their field, who know the industry a lot better than we do. And we can stick to what we’re good at, which is vision and technical, and not try to be PR people.

At the end of the day, you can blame anybody you want. We took bad advice and followed it, and I will take responsibility for it.

YS: We are now as legitimate as we can be. We’ve proven ourselves in terms of the technical ability of our software, and very shortly we plan to prove ourselves in terms of reaching those publishers and moving forward with our entire vision.

We’ve basically taken a lot of what we had in terms of technology, which was geared more towards the consumer, and now we’ve put just as much focus on publishers, to provide them with the tools and the metrics, and the control that we now understand they require. So what you might see on Mygazines.com is a full 180 degree turnaround from what we had, now geared towards publishers and providing them with tools, but there’s more than meets the eye, and the two will be merged quite soon.

DB: We’re not blaming the industry. We handled it improperly and that’s the bottom line. We now understand how the industry works, and you can’t paint every magazine with a broad stroke. Every publisher has a different way of making money, so you have to build the site around their ability to do what they need to grow.

Why did you hide behind the name John Smith?

DB: It all came pretty quickly. You’re trying to raise money, you’re trying to design a site, you’re trying… really we were just a bunch of technical guys. With the open upload – honestly I thought people would make their own magazines and upload those.

You have to understand, when this was going on, all the lawyers and lobbyists and anyone involved in the business who might have helped us all opted out because they’re all part of the industry. So the viewpoint that we kept ignoring these things is not looking into the situation, which was us calling everybody, and not having the ability to get advice from any of these people because none of them were willing to work with us.

So it was both inexperience, and inability to get that experience, that led to… just not handling it properly. It’s our fault regardless, because we should have foreseen people uploading, and we should have had a way of getting hold of the industry.

YS: That’s our past. Everybody makes mistakes. We’re trying to do everything we can to move forward and maintain the vision and bring it in a way that publishers will really appreciate and come on board.

DB: And that’s why we all settled fairly quickly – there was no quiet secret, it was between us and them, here’s what you need to do to make us secure, and we were amenable to that. We made a mistake and we needed to deal with it.

Mygazines 1.0 was based around the idea of a single newsstand of titles and articles, and you seem to be suggesting this will return. Why would a magazine want to be on an open newsstand, alongside their rivals, rather than creating their own branded digital space?

YS: Among our main products are our Express, Pro and Enterprise options. The Enterprise is a self-branded newsstand for an individual publisher or group of publishers. Mygazines will still have a global newsstand for publishers who want to be a part of it, but we’ll also offer publishers their own spaces that have nothing whatsoever to do with our newsstand.

DB: If they want to have a separate e-commerce solution via their own newsstand, that’s available. Paying by subscription, by article – it’s all up to them.

YS: That’s part of our new upgraded software. It looks like the reader is the same as it was before, but it’s not – the resolution is much higher, full screen, you can print at high resolution if the publisher allows it, download for offline reading if the publisher allows it, embed rich media, streaming videos, Flash files… there are also other key features, such as clipping, which is perfect for coupon flyers – you could select all your favourite coupons and then print them out as a batch.

So we’ve really taken the other side, saying ‘ok, we know what consumers want and we have that. Now let’s make sure we have everything publishers want.’

DB: We are in discussions with people constantly. It’s not just pie in the sky things. In some cases, some of the things we’ve come up with are specific customisations for clients that we find will be useful for the publishing industry as a whole.

Will I still be able to share articles with people who haven’t paid for them?

YS: That’s a technical decision that we’ll come to when publishers decide how they want to share. Given our system, we’re able to do almost anything. So it really comes down to implementation, not the system.

DB: Let’s talk about the free model – let’s say that dynamically generated ads have now kicked in and the publishers are getting as much or nearly as much for an online ad as in their printed magazine. The answer would be that you can do everything, it doesn’t matter, the concern is to get readers. You only must join the community to read the articles – we have to know who you are so we can make money off the community.

If the model is not free, there are many different ways to do it – and that’s why we’ve tried to provide the infrastructure. A publisher could have two tiered levels – say, $5 for all archived material, and one new subscription of a digital magazine, and I can share with everybody on that tiered price level. There may be another package which is $9.99, and allows me access to all the magazines on a newsstand, and I can share with anybody in that pricing level.

YS: Every newsstand will have its own community, and the marketplace will choose. If most people want a paid-for newsstand, that’s what will happen. If dynamic ads bring enough dollars, maybe you’re charging a dollar a month, and it’s going to be an unlimited reading of everything. The market will end up telling you which of those models it prefers, and it might be different for different magazines or publishers.

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Mygazines claims to have many clients already signed up, including non-magazine clients. My own doubts are around the sheer complication of so many communities, pricing models and sharing ability. If iTunes has taught us anything, it’s that simplicity and ubiquity will win. I’m also not sure if ad rates for online magazines will match their print equivalents – there are several reasons why that may never happen.

As for the deeper question, ‘Are magazines nothing more than collections of articles?’… I’ll leave that for another day. It’s not going to go away.