Build bargaining chip to resolve e-publishing roadblock

Tussle for power with app platform owners over subscriptions shouldn't deter publishers from digitizing content for tablets, note industry watchers, who advise them to boost app quality and bargaining prowess.

Publishers should go digital to reverse waning print revenues and leverage the tablet insurgence, even if they face a battle with app platform owners for control over the potentially lucrative subscription model, market observers say, adding that this should spur the print industry to improve the quality of their digital content and bargaining power.

Reuben Foong, research analyst at Frost & Sullivan, said digitized content for tablets presents several newspaper and magazine publishers a "fighting chance for the third estate".

It would help them regain lost subscriptions suffered when Internet penetration rate reached a level that allowed the Web to take over as the dominant news source, Foong added.

This segment could prove especially viable with the increasing sales of tablets which, according to analyst group In-Stat, will reach 50 million by 2014.

Market players are already looking to tap this growth. News Corp, for instance, last month launched The Daily, a digital publication designed for tablets. Google is also pushing for its own digital news kiosk, allowing publishers to feature their content as apps for Android-powered devices, and Yahoo this week unveiled its upcoming "Livestand" mobile app in which content from Yahoo sites and external publishers will be optimized for browsing on tablet devices.

Lau Geok Theng, associate professor of the marketing department at NUS Business School, said offering subscriptions for digital issues is "definitely useful" for publishers as it ties their customers over a period of time, and helps develop customer loyalty since many readers do renew their subscriptions. In that aspect, subscriptions also help publishers reduce customer acquisition costs, he told ZDNet Asia in an e-mail interview.

Getting past platform owners
However, there have been roadblocks along the way. For example, sales of digital publications for the Apple iPad were typically limited to single issues, according to a New York Times report. The Wall Street Journal also reported that Apple took a 30 percent cut from payments for newspaper and magazine apps sold through its appstore.

Apple, though, took steps on Tuesday to address these issues with the launch of a subscription service for the App Store. Publishers will now be able to set the price and length of subscription. Payment will be processed by Apple within the appstore and the company will collect 30 percent of the revenue.

CEO Steve Jobs said in a statement: "Our philosophy is simple. When Apple brings a new subscriber to the app, Apple earns a 30 percent share. When the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing.

"All we require is that if a publisher is making a subscription offer outside of the app, the same, or better, offer be made inside the app so that customers can easily subscribe with one-click right in the app," Jobs said.

An article by Bloomberg had reported that European publications were unhappy about Apple's plan to keep subscription billing for the digital issues within the iTunes stores, which meant Apple would have access to subscriber data.

On its part, Apple said its users may be asked for permission to share contact information with publishers--valuable data that could facilitate targeted marketing and advertising, as reported by the LA Times.

Ownership of the customer relationship is important to publishers, said Ovum analyst Tim Renowden, making the app platform owner's control of content billing, payments, distribution and share of the revenue a thorny issue.

Foong noted in his e-mail that limitations set by Apple may not necessarily be adopted on other tablets. The iPad currently has a stronghold on the market, allowing Apple to dictate the terms of business, he said.

Increase bargaining power
The tablet and e-reader market segments are still in their infancy, as is the supporting ecosystem, so there is "much to look forward to", Foong said. He added that it could be several years before players catering to the needs and acting as intermediaries join the ecosystem.

According to Lau, the subscription model--or lack thereof--boils down to the bargaining power of the content distributors.

He suggested publishers could work together or partner other companies such as Microsoft or Google to develop alternative platforms to compete with Apple to weaken its bargaining power. This could pave the way for more flexible approaches to the distribution of digitized publications through apps, he said.

Subscription is a powerful tool, Lau affirmed, and there is a need for more competition and alternative platforms to facilitate the distribution of digital publications.

He urged publishers to be more proactive and help develop such alternatives to increase their bargaining power.

Go digital or bust
Ultimately, roadblocks should not deter publishers from making the move to digital platforms.

"Publishers don't have the luxury of ignoring digital," said Ovum's Renowden.

Print circulations around the world have been steadily declining for several years, partly due to the availability of free content on the Web, he said, adding that publishers "really have to go digital or go bust".

But, they will need to find a delicate balance between being left behind by the transition to digital publishing and cannibalizing existing print revenues, he cautioned. The most appropriate business model varies "significantly" given the type of content and publisher, he added. For instance, boutique literature publishers have different business needs from a tabloid or a consumer electronics magazine, he said.

Renowden noted that most digital editions currently still tend to ape the print edition in layout and design, which tends to look clunky on a tablet screen.

The onus is on publishers to produce digital edition content that plays to the advantages of digital technology to improve the reading experience and demonstrate to readers the value of buying a digital edition, he said.

Doing so will also help justify the price of the digital edition, he added, noting that while money is spent on creating the content, most consumers perceive digital editions to be cheaper than their print counterparts since printing and distributions overheads are removed.

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