I wrote the other day about why the Kindle—at least in its current incarnation—isn’t going to save the newspaper industry. But I saw some new data that leads me to believe it won’t even make a ripple.
Bloomberg dropped some very interesting information in a story about how Knight Ridder spent three years working on a sort of paleo-Kindle fifteen years ago—that newspapers only get about 30 percent of the revenue from Kindle subscriptions.
Thirty percent.
So of the $14 a month a reader pays for a The New York Times, say, the Times itself actually gets about $4.20. The rest goes to Amazon and to the wireless carrier that transmits the data.
Ouch.
And that $4.20 is all there is folks. There aren’t any ads on the Kindle.
So let’s revisit that crude math I did the other day:
Let’s go to the chalkboard—or the back of the napkin, more like. If every one of The New York Times’s 1.04 million subscribers suddenly switched over to the Kindle at $14 a month, the “paper” would get $175 million in annual revenue (actually less, Amazon takes a cut, though I’m not sure how much). That’s nothing to sneeze at, but that’s probably about what the newsroom alone costs every year—the last figure I saw was $200 million, but that was before some recent cuts.
That $175 million number if all Times print subscribers suddenly switched to Kindle would now be $52 million. Basically, a Kindle subscription only covers about one-quarter of its weight in newsroom costs alone. Forget about marketing, sales, and other overhead.
That means that those subscribers are extremely unprofitable, especially as compared to newspaper subscribers (online-only readers at non-charging sites anyway are the biggest money losers there are). And even in a real-world scenario where Kindle subscribers make up only a couple of percentage points of the subscriber base, their impact will be minimal—negative if they are converts from the newspaper.
So, again, Rupert Murdoch is entirely right to be sounding off about not giving his content to Amazon. Here’s what he said:
I can assure you we will not be feeding our content rights to the fine people who created the Kindle. We will control the prices for our content and we will control the relationship with our customers. Any device maker or website which doesn’t meet these basic criteria on content will not be doing business long-term with News Corporation.
Especially if they’re taking 70 percent of your revenue.
So the gap between what the Kindle as is and what it needs to become to be viable for newspapers is even larger than I thought the other day. It would take even more ads at high rates, even higher subscription prices and a big shift in the revenue pie toward the content provider to make it even approach viability.
Until then (and that’s unlikely), the Kindle just looks like another way for newspapers to turn profitable customers into unprofitable ones.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.