I have been having an interesting chinwag with a few people on Twitter this morning about how publishers can make money from tablet magazines. While there are some clear savings (no paper or distribution costs) there are still some additonal costs like the % paid via iTunes to Apple. I don’t know exactly what these figures for VAT and iTunes are, but according to people who know more about publishing costs than me they are around 40% of magazine costs, the same as paper, printing and distribution for paper products.
However, even if publishers can keep costs down they face a much bigger problem and that’s technology. The most important thing about print publishing was its high barrier to entry. If you wanted to produce a magazine in the 90s you needed plenty to money to pay printers and paper merchants, and that’s before you even approached a distributor who could make or break your mag by getting it into the stores.
In the early days of online content the barriers to entry were still high, it was just that brands didn’t want to advertise online. Ironically by the time brands recognised the opportunity of online publishing blogging had arrived and the barrier to entry was gone. Publishers, with their existing high cost business models, simply couldn’t make enough money from online content – not that too many bloggers in the UK have made money either…
Now magazine publishers are pinning their hopes on tablet magazines. They’ll offer the same magazines, with added interactive features, in tablet forms, invariably charging the same price for them. The one big issue they face is that while the barrier for entry for producing a tablet magazine is high at the moment, when the WordPress for tablets arrives, as I am sure it will shortly, people (bloggers, enthusiasts and indie media companies) will produce their own tablet magazines, and they will be delivered more frequently and have more content than those from traditional publishers. They will be free too, funded solely by ad revenue. And as smaller companies do deals with image agencies, as the most successful bloggers have done (see Anorak.co.uk) so they will have the images people are searching for and want to see well before the weekly or monthly tablet mags appear.
The same is true for apps? Pretty soon anyone will be able to produce an editorially driven app, or one that harnesses UGC, and it will be very tricky for publishers to monetise content apps.
The main problem mainstream publishers face is that each time technology creates a new opportunity, they only have short window to monetise that content before the barriers to entry are lowered. This then leads to an explosion of content (which is invariably free) that inevitably drives advertising revenue down.
Ultimately I think that Jeff Jarvis has got it bang on. Publishers are good at creating communities. They should look to focus on these. They should also look again at their business models, reduce costs and get used to the fact that, for now at least, profit margins are going to be a lot lower than they used to be.
The Jarvis article is here http://www.buzzmachine.com/2010/08/04/whither-magazines-2/#