May 25, 2011

∴ Paying More, Getting Less

I wrote about Wired Magazine's introduction of their iPad subscription version yesterday. After downloading a few issues and mulling over how I'll use the electronic version of my favorite mag, I got to thinking about the price.

A one-year paper subscription to Wired has sold for $12 for the last thirteen years, since Conde Nast took over publication of the magazine. Before that, a one-year sub ran $40, and there was a lot less advertising content. It took longer to read through an issue, too.

Now customers can get the iPad version free with their paper subscription. The paper subscription price remains the same. It's more than a gimme for paper subscribers, though, but I'll get to that in a moment.

Customers looking to ditch their paper subscription for an electronic one will instead pay $20 per year. That seems odd. Customers will end up paying more for less: iPad customers get the creative content, paper subscribers get the content and the physical magazine. The New York Times made a similar move when they announced their online paywall a couple of months ago:

Meanwhile, at least where I live in New York, a print subscription which gets you the newspaper only on Sundays costs $19.60 every four weeks — and it comes with free access to the web and tablet versions of the newspaper. Which creates the slightly odd proposition that if you want to use the NYT’s iPad app, you’re marginally better off subscribing to the print newspaper on Sundays and throwing it away unread than you are just subscribing to the app on its own.

(Via wired.com.)

The reasons go to how magazines (and newspapers) pay for what they produce. The subscription price paid by customers largely goes toward defraying the cost of getting the product to them. Printing, packing, trucking, mailing, these are all expenses above and beyond those incurred by creating content.

A publication's creative content is largely paid for by advertising. When Conde Nast acquired Wired Magazine, they greatly increased the advertising content. That offset the cost of producing the magazine's creative content, which the publisher passed on to subscribers. The magazine became a cheaper purchase.

Where this comes into play for the iPad is how much advertising Conde Nast, or The New York Times Company, can squeeze into their electronic versions. After reading through a past edition, the answer is, "not much." Subscribers will have to bear an increased portion of the cost of producing creative content, because advertising won't be as big a part of the product mix.

Getting back to the "gimme" of getting the electronic version free with a paper subscription, think about what's really happening. Ad rates for the paper version are set based on how many copies are sold. By giving away the electronic edition free to paper subscribers, while making the price higher for electronic-only subscribers, the publisher incentivizes customers to keep taking the paper version. That will artificially bolster paper circulation numbers as well as ad rates.

In this light, giving away the electronic edition free to some, and charging a higher rate for it vs. the paper edition makes sense. The question a subscriber has to answer, then, is whether or not it's worth $8 more to stop receiving a paper copy that will end up recycled or, worse, in a landfill. For me, when my current paper subscription expires next year, the answer will likely be "yes."

Then I'll have to find a place to stash my iPad, poolside on vacation, when I want to go in for a dip. Look for an investing opportunity in poolside lockers Real Soon Now.

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