At John Kerry’s newspaper-bailout hearings today, Dallas Morning News publisher and CEO James Moroney grumbled about the pots of money Amazon (AMZN) extracts from him for Kindle distribution.
Specifically, Amazon takes 70% of the subscription revenue; the paper gets 30%. As Moroney complained to Congress this afternoon, that’s not going to save his paper. (It’s going to be awesome for Amazon, however–see below).
(We’d also point out that a 30% share of his Amazon Kindle subscription is a lot more than Moroney’s getting for his paper online, where he’s giving it away for free.)
Here’s a Moroney quote from the hearing transcribed by PaidContent:
“The Kindle, which I think is a marvellous device, the best deal Amazon will give the Dallas Morning News>—and we’ve negotiated this up to the last two weeks—they want 70 per cent of the subscriptions revenue. I get 30 per cent, they get 70 per cent. On top of that they have said we get the right to republish your intellectual property to any portable device. Now is that a business model that is going to work for newspapers? I get 30 per cent and they get the right to licence my content to any portable device—not just ones made by Amazon? That, to me, is not a model. Maybe what Plastic Logic comes up with or what Hearst comes up with, might provide a good model but today Kindles are less than 1 per cent penetration in the U.S. market. They’re not a platform that’s going to save newspapers in the near term.”
Now, Moroney’s loss, of course, is Amazon’s gain. If papers like the New York Times charge $15 a month and Amazon keeps, say, $10 of that, 1 million newspaper subscribers will be $120 million of super-high-margin revenue. 10 million subs (far from inconceivable) would be $1.2 billion of revenue.