February saw two major developments on the digital front: Time Inc’s launch of an “all access” subscription model, followed two weeks later by Apple’s long-awaited announcement of a (somewhat more flexible) new business model for sub-based content apps sold through its App Store. Was this timing mere coincidence? Well, even Apple must’ve felt some heat after the world’s largest magazine publisher debuted a multi-platform sub offering that did not include the iPad, iPhone or iPod Touch.
Under Apple’s new terms, app content providers would still have to pay Apple 30% on all sub sales organically driven to the App Store (a large cut on what will certainly be a large volume of subs driven through this channel). Publishers get 100% of app sales from new / existing subscribers driven to the App Store by their efforts, and control subs’ terms / pricing. However, any app sub deals sold through other channels must also be available in the App Store at the same or lower prices, and publisher apps can’t include links to websites / other channels that let consumers buy content or subs outside of the app.
Auto billing of App Store sales (and customer account management capabilities) will continue through Apple. Importantly, customers buying through the App Store can opt to give the publisher their names, emails and zip codes and publishers may seek more information as long as consumers are given a clear choice. In both cases, customer data falls under the publisher’s privacy policy, not Apple’s.
Time Inc may – or may not - eventually add the Apple platforms to its all-access or other programs (word is that publishers will negotiate Apple deals based on their clout). But as originally announced, the all-access program, launched first for the Sports Illustrated brand, initially calls for Time Inc magazine sub apps to be available for Samsung’s Galaxy tablet and the huge Android smartphones user base, as well as through a dedicated brand website. Time Inc’s continuing platform expansion – it separately announced that it will make SI, People, Time and Fortune available on Hewlett Packard’s still-in-development TouchPad - is apparently independent of the Next Issue Media (NIM) digital storefront initiative in which Time Inc is a partner. (As of this writing, NIM’s launch hadn’t yet occurred.)
Not surprisingly - but important in terms of parsing where print magazines fit into Time Inc’s vision for the future - the all-access program does offer digital / print bundles. For SI, a print / digital sub bundle is priced at $48 per year or $4.99 per month, versus $3.99 per month for digital-only access.
Pricing strategies
As we wait to see how NIM-sold bundles are priced, the SI scenario provides a look at one initial cross-platform strategy from a major publisher. (People’s existing model of offering print subscribers free iPad app access may or may not continue indefinitely, but Apple’s new terms do allow for giving free app access to existing subscribers.)
Point one: SI’s current, about 2.9 million paid print subscribers (and perhaps its 206,000 “verified” / free print subscribers) will get the new digital access options gratis for the remainder of their terms. Point two: SI’s monthly print / digital bundle rate of $4.99 works out to $59.88 per year, or $11.88 more than the $48 for the full-year bundle. No surprise there: you get a price break for paying up-front for a full year, rather than opting to buy / not buy on a monthly basis.
Digging deeper, at that $48 annual rate, a new buyer of an SI print / digital bundle will pay $4.22 more than the average price paid by a print-only subscriber as of second-half 2010 (per SI’s ABC statement, showing an average annualised print sub price of $43.73). But at the same time, at $3.99 per month, a digital-only subscriber will pay $47.88 annually… essentially the same rate (OK, 12 cents less) as someone buying the combined annual print / digital deal.
For the sake of apps’ emerging profit model, one could argue that it’s positive that Time Inc is at least asking digital-only subscribers to pay as much as those receiving both print and digital. And certainly, assuming that this pricing set-up is grasped by (or actively promoted to) consumers, it will incentivise all but hard-core print scoffers to opt for the combined print / digital access deal… and incentivize print-oriented consumers to sample app versions.
Still, Time Inc is telling new (and older) generations of prospective SI customers that they can receive 52 weeks of print SI copies, in addition to their digital access to (“value-added,” interactive- and content-wise) editions, for 12 cents more per year than the digital access alone.
So, given the mega-higher expense of printing / distributing print copies, Time Inc must have designed this cross-platform sub structure with heavy emphasis on supporting the advertising revenue stream that still dominates the overall business model. The incentive to buy a bundle will no doubt enable SI to maintain / boost its existing paid ABC-reported copy numbers – including the print copies required (at least in these early app days) to preserve the rate base and accompanying lucrative ad CPMs that drive the advertising revenue stream – while driving paid-app adoption volumes.
ABC allows reporting of digital copies as part of total paid copies (undifferentiated from print copies) as long as they are “replicas” of print issues. Some titles (though not SI) were already reporting small numbers of single-copy iPad app sales, and with iPad (as well as other platform) app subs now fair game, the app numbers within total paid will leap. Presumably, all titles, Time Inc or otherwise, will make sure their apps meet the “replica” standard (until publishers manage to get that standard changed).
Initial observation: Time Inc’s stated determination to require consumers henceforward to pay “fair prices” for content (to rebalance the old, heavily ad-driven model), seems to apply to digital. But the SI print pricing strategy may speak volumes about where Time Inc believes its profitable model for the future lies, platform-wise.
