Pubs Flirt With Kindle but Don't Carry a Torch

Amazon Reader Isn't So Friendly to Biz Model, Yet Mags Sign up. Here's Why

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NEW YORK (AdAge.com) -- Amazon's new offer to give book publishers and authors 70% of Kindle royalties does not apply to magazine and newspaper publishers, who are still typically stuck with a 30% cut of sales. The periodicals also get little to no information on their own Kindle subscribers and don't have much leverage over pricing their Kindle subscriptions, not when Amazon algorithms typically suggest prices near half the cheapest advertised print offer. Participating publishers also risk cannibalizing their print subscribers, whose names they know and who also see ads. And competition from other electronic readers and approaching tablet computers means the Kindle is hardly the only choice out there.

So why, again, are some of the country's biggest magazines and newspapers using the device?

As it turns out, for every publisher who has decided to stay away, there are participants who can mount pretty reasonable defenses. Here are five:

IF THERE ARE CANNIBALS, THEY'RE LIGHT EATERS

For one thing, there aren't so very many Kindles out there; Citigroup analyst Mark Mahaney has estimated Amazon sold at least 2 million in 2009, a fraction of the penetration you see for, say, iPhones.

"The numbers are still so small that we can be sure they aren't cannibalizing our circulation," said Peggy Northrop, VP-global editor in chief at Reader's Digest Association. Reader's Digest has nearly 9,000 Kindle subscribers, the company said, compared with the title's guaranteed paid print circulation of 5.5 million.

Not only are the numbers small, not every Kindle subscriber is canceling a print subscription. Some Kindle subscriber reviews say they'd quit subscribing to Reader's Digest in print but began subscribing again on the new device. "There are no ads interrupting stories, no inserts that cause the magazine to fall open at a particular place, no sub cards falling on the floor, all reasons they say they dropped their subscriptions," Ms. Northrop said. "It's worth it, despite the time and trouble of working with Amazon's formatting, and despite the so-far small returns."

Kindle distribution also gives publishers access to a different pool of readers, another magazine company executive said.

POOR REVENUE SHARE, BUT ZERO PHYSICAL COSTS

A major newspaper publisher said it's worth collecting new revenue even if Amazon takes the bigger cut, especially when the Kindle subscriptions don't burden publishers with traditional and significant expenses.

"You have to factor in [that] I no longer have paper or distribution costs, so it's all profit," said a circulation director at another newspaper. "And in these years of declining advertising, you need to make a profit on circulation."

IT'S WHERE CONSUMERS AND COMPETITORS ARE

If a Kindle owner looks for your publication at the Kindle store, do you really want their search to come up empty? "The argument that one platform takes away from another can be made for many things, from the internet to mobile and anything else digital," said Susan Lavington, senior VP-marketing at USA Today. "But it's not something we subscribe to. We're on the Kindle because it makes sense for USA Today to be where are our customers are and it makes sense from a business sense."

Some theoretical cannibalization is possible, Forbes stated, but said that wasn't the chief concern. "More importantly, denying consumer choice does not seem like a winning strategy," a spokeswoman said. "If someone uses a Kindle and you are not available but a competitor is, it seems likely the user will buy the competitor rather than go out of his way to buy your printed magazine."

THIS KINDLE IS NOT GOING TO KILL PRINT

Time Inc. has taken a measured approach, putting only Time and Fortune on Kindle and holding back the rest of its portfolio, which includes People, Sports Illustrated, Real Simple and Essence. "We don't disclose sales figures but they're not material," a spokeswoman said. "We've said all along we don't believe the Kindle, in its current incarnation, will be a substantial distribution channel for magazines. We look forward to the introduction of color readers with advertising capabilities."

THIS ISN'T A PERMANENT MARRIAGE

"You can always drop the Kindle," said the newspaper-circulation executive. "It's not a big long-term commitment like music companies did with iTunes. I don't have any e-paper agreements longer than two years, which also allows us to reopen the terms for other issues."


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