Thursday, February 24, 2011

Is Apple's 30-Percent Solution Really So Bad?

The new iPad subscription model certainly has its flaws, but for the American magazine industry to complain about Apple's 30% take is the height of hypocrisy.

In the print world, the vast majority of consumer magazine publishers would give their eye teeth for subscription contracts where the agent only keeps 30%.

A dirty little secret of the U.S. magazine industry is the "negative remit" subscription, where the publisher actually pays an agent for a new subscriber to help it meet ratebase (the circulation level promised to advertisers). Because the renewal rates on such subscriptions are usually low, they're an almost-certain money loser -- except for their impact on ad revenue.

Some big publishers have banned negative-remit subscriptions, but they still have plenty of deals where the agent gets most or all of the take. To most magazine circulators, a 70% remit (what Apple is offering) sounds like heaven.

Publishers' legitimate concerns about the iPad subscription model have to do with being cut off from the subscriber. Publishers are not able to provide demographic data to advertisers about their iPad subscribers or to renew or cross-sell those subscribers.

But even those complaints look silly to some people on the Web side of the publishing business. Many publishers are making plenty of money with their Web sites without having any data on the sites' readers.

Advertisers judge the sites not based on number or type of eyeballs but rather on consumers' actions -- such as click-throughs, purchases, and sales leads. Will they end up using those same measurements for in-app ads?

Other recent commentary on the magazine industry includes:

No comments: