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?