The Wall Street Journal has used such a system to become the largest circulation daily in the country. The weekly subscription to its iPad app is $3.99 (but is available to subscribers free for a limited time), compared to $2.69 for print and online, $2.29 for print only, and $1.99 for online only. Its Kindle subscription runs $14.99 per month, a bit cheaper than its iPad app. (The Journal sidesteps sharing subscription revenue with Apple by making its app free and requiring customers to pay the Journal directly to register to use it, which is ingenious if cumbersome.) Amazon doesn’t release newspaper subscription numbers, but the Journal recently disclosed that it has 64,000 iPad subscribers and 15,000 Kindle subscribers, compared to its daily print circulation of nearly 2 million.
That’s probably a high benchmark—many publications have only a couple hundred e-reader subscribers. Official, industry-wide statistics on e-reader subscribers are scarce, but these numbers are sure to rise, perhaps dramatically. Also, in order to maintain the optimal balance between quantity and “quality” of their readers and viewers, news outlets will likely have to keep some content—especially short, breaking-news updates—outside of their digital paywalls, as The Wall Street Journal does now.
At ten to twenty dollars per month, on average, subscriptions won’t add up to much, especially if publishers are not able to regain some modicum of control over pricing (whether through the so-called agency model with third-party retailers or through their own stores). Moreover, surveys conducted by Forrester Research have shown that consumers expect a 40 to 50 percent discount on the price of yearlong subscriptions and single issues relative to print editions.
But subscriptions have never paid the bills for newspapers. Advertising, of course, was the moneymaker, and this is the major shortcoming of the Kindle and its e-paper ilk. Once you’ve got the infrastructure and the subscription system in place, you need to crack the ad problem. The fact that no model exists to get ads onto these devices has left many media companies that have worked with Amazon angry and frustrated, and despite repeated promises that such capability is on its way, nobody is sure when it will arrive.
Meanwhile, Apple’s new operating system (OS 4) for iPhones and iPads, whose release is expected sometime this summer, will include the new iAd mobile advertising platform, which news outlets and other developers can use to embed personalized ads directly into their apps. It works just like Google’s AdMob service for standard Web sites, but has the same limitation as AdMob insofar as Apple, rather than publishers, retains control over ad sales and strategy. Apple plans to take a 40 percent cut of the ad revenue. And like Google, Apple will probably go after the largest, national advertising campaigns rather the locally oriented, small- and medium-sized ones that have been periodicals’ bread and butter.
It is unclear how Skiff and Next Issue Media’s advertising services will compare to iAd and AdMob. Both will surely feature some kind of revenue-sharing agreement with publishers, but again, Next Issue says the publishers will control ad sales and pricing, which is a step in the right direction for the news business. Once the infrastructure is in place, many media executives believe that paying mobile subscribers will present an attractive, captive audience to advertisers, especially given some of the hyper-targeted advertising possibilities that the devices will allow.
4 From subscription structure to advertising, there is a lot we don’t know about how the e-reader market will take shape for the news business. The answers will come only through aggressive experimentation, through trial and error. That process is well under way in Europe, and the efforts there have some lessons for the U.S. market. A Flemish paper that handed out 200 e-readers to subscribers in 2006 and measured their response found that most of them likened the experience to reading the paper product rather than the Web site, and 45 percent said they would consider buying an e-reader. NRC Handelsblad, the Dutch newspaper, expanded delivery of its digital edition to a variety of devices after an exclusive launch on the iRex iLiad reader in 2008 drew “substantial sales.” In other words, people like these things and will pay to get news on them.
Next Issue Media has also done consumer research and found a high level of interest in e-readers and digital news, especially once people have seen a demonstration. Nonetheless, in the U.S., most media companies have so far proceeded with caution. “What I see is a lot of watching, waiting, and one-off initiatives,” says Forrester’s Sarah Rotman Epps.