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Magazines Free on the iPad – How Can Anyone Make Money?

For weeks we have had some very heated conversations about the iPads and e-

By Howie Fenton
Published: August 25, 2010

For weeks we have had some very heated conversations about the iPads and e-readers, which included the possible threat they pose to printing but possible salvation for publications (i.e. paid subscriptions for newspapers and magazines). For me, a frequent flyer, I love buying my books, newspapers and magazines for my Kindle. However, free delivery for electronic reading devices threatens this business model.

After months of delays, People magazine last week announced they will offer their publications free on the iPad to magazine subscribers. Up until now, the iPad versions of People, Time, Sports Illustrated and Fortune have cost the same as the newsstand price. But if you talk to people who are Kindle fans you learn that they are outraged when publishers charge the same or a slightly lower price for the digital editions. Most people are willing to pay for digital content on their e-readers but they want it for less than their printed counterparts.

This may be what has motivated People magazine's parent company, Time Inc., to offering its brands on iPad, including Fortune and Sports Illustrated, for free. But who will make money if it’s free?

A new survey by Oliver Wyman, sponsored by several publishers including Condé Nast, Hearst, Meredith, News Corporation, and Time provides some answers. The report finds that by offering a robust product clearly differentiated from print, can result in publishers earning more than $1.3 billion of incremental industry revenues. The study concludes that print and interactive bundles justify a price premium.

"Unlike analog and digital versions of other media, the two formats of print and interactive are perceived as complementary by many periodical subscribers – 30% of renewing subscribers chose a bundle of both the print edition and interactive edition, at a 33% premium to the stand-alone price of either. The interactive format enables effective marketing of additional subscription sales via recommendation engines and browsing features." This opportunity to expand subscription relationships turned into additional sales for 17% of current subscribers, the report found.

But there is a hitch. Over a dozen photo agencies that supply celebrity pictures from the paparazzi are teaming up to withhold their product unless they get an additional cut from People magazine. As a result, the launch of People's iPad app has been delayed. As the situation develops, other publications are waiting anxiously for a solution since whatever deal they come up with could set the standard for the industry.  Photo agencies are taking an interest in the iPad because while they get a fraction of their print fee for the online usage of their snapshots, they recognize the potential for the tablet market to be another form of revenue.

What makes more sense: free publications for e-readers or discounted publications?

Howard Fenton is a Senior Consultant at NAPL. Howie advises commercial printers, in-plants, and manufacturers on workflow management, operations, digital services, and customer research.

Howie Fenton is InfoTrends' Associate Director of Operational Consulting. For over 25 years, he has focused on benchmarking operational and financial performance in in-plants and commercial printers. He can be reached via e-mail at Howie.Fenton@infotrends.com.



By Eddy Hagen (VIGC) on Aug 25, 2010

Howie: your title may be misinterpreted. It's only free for people that already have a print subscription. Not to others.

But: valid points.

And one you might add: how about the use of fonts? Not the technical issue, but the legal issue... Does your basic licence agreement cover embedding a font in an iPad app, in an e-book?

This came to my mind when I was discussing the poor typography of an e-book with somebody from the publishing industry about half a year ago. So I looked at EULA's (end user licence agreements) of multiple font foundries. None of them said anything about e-books. Most, but not all, do allow to embed it in a PDF. But with e-books, it might be different.

At this moment I do find a few results on the same query. E.g. Monotype, ITC Fonts do have special licences for eBook publications. Price? Ask a quote...

I wonder if all those companies that are now launching e-verions, are aware of the font licencing issue... It's similar to your example of photo agencies charging extra for an 'extra' publication: read the fine print of the contract!
(yes, I know that those contracts are complicated, boring, etc ... and that many people only read them when they are already in troubles)


By Charlie on Aug 26, 2010

I think the point many publishers are missing is that the e-reader and Internet versions should be used as the "carrot" to lure more print subscribers by offering either a free digital version in the bundle or a deeply discounted rate when put together. Not enough in my opinon is done to use this as a way to draw subs


By Michael Jahn on Aug 26, 2010

Yes, I agree with Eddy, I could not even stand reading this post without wanting to stop to type in my response!

- if you are a subscriber to the printed version THEN the iPad version is free. Many more Magazines charge for BOTH.

Each publication is different for sure. If I were a photographer and contributing my images to a publication, i think the amount i am paid is never that simple - there is a bigger price certain celebrities doing certain things. People might have to come up with a method to show circulation numbers, but lets face it, if a picture goes viral, you really can't expect People to pony up and pay someone more.

To Charlie's comment - not sure i agree that the iPad version is the carrot - here's why...

Lets take Consumer Reports. If I am a subscriber, I dare say the iPad version is far more valuable than the printed version - the ability to search through all my copies when researching 'what to buy' if far more useful than trying to flip through back issues.

It is not that simple. Each magazine will have to re-think what they are selling and which version is better for their customers.


By Andy Nauman on Aug 26, 2010

Great points all around. The world is changing around us - we either adapt or go out of business. Today, more than ever before, the younger generation combined with daily advances in technology, is pushing this adaptation faster.

Michael says it well, magazine publishers have to evolve.


By Eddy Hagen (VIGC) on Aug 28, 2010

This morning my newspaper had an article on The Newport Daily News (http://www.newportdailynews.com/) which is taking a different approach: they charge a yearly fee of 345 US$ for online only access. For a print + online combo this is only 245 US$ (being: 145 US$ for the print version + 100 US$ for online access).

Why? The revenue (ads, ...) from the print edition is higher than from the online version. So they want to get as many people to their print edition as possible. And if you really need the news (a few hours) faster than the printed edition can bring it to you, you will probably be willing to pay that extra fee...


By Matt M on Aug 28, 2010

For paid pubs, this is not a bad way to allow them to access their issues. The issue is for trade/b2b/controlled books, print advertisers are'nt jumping for joy w digital print ad delivery. An issue as ad rev is the lifeblood in B2B. Are B2C advertisers thrilled about their designed for print ads being served up online? So publishers want to provide what the reader wants, digital, print whatever; readers want choice. We need to work to connect the dots with advertisers and convey the value no matter how the ad is served, and get them excited about this potential.


By Howie Fenton on Aug 28, 2010

Great reply. I think this is an example of the multi-delivery option tiers that will result from electronic versions of magazines. This one, however, seems somewhat backwards to me. I would expect the online- only version to be less than the rest, but I understand the thinking. You always start higher in pricing, then come down. There are always some early adopters willing to pay more. I understand that traditional publishers want to keep the print version alive for circulation purposes and ad pricing, but I think that the majority of people who only want the online version (techie people and younger folks) will wait for much low prices. Think about your kids, those who are just graduating high school or college, for example. What will they be willing to pay for? I believe they will be waiting for a much cheaper price for the online version alone. I think publishers need to find new revenue streams from online versions that will allow them to charge less for online versions.


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