News industry analyst Ken Doctor takes a look at the iPad’s business model for media companies and digs out an important point: If a print publication decides to charge for an application, Apple will ask for 30% of the revenue.
“Just give me 30% off the top, says Steve Jobs,” he writes. “Ironically, that 30% is just a little higher than the costs of physical distribution for newspapers or the percentage that magazine publishers pay to get physical products to readers.”
So, Rupert, Steve is taking 30% of every $17.99 download of the Wall Street Journal. Doctor considers that fair. The 30/70 split is the inverse of Amazon’s Kindle deal and simply “sets a new cost-of-distribution.”
More from Ken: It’s rational, and knowable. And it just might lay a baseline as news companies try to rescale the news supplier/distributor relationship with Google, Yahoo, MSN, Comcast, AT&T, Verizon, Amazon and the pipes of the future. Of course, that means creating products that readers will pay for, the big hurdle. But if you build it, Apple will distribute it for you to the hordes and let you keep 70%.
If the 30% solution proves stable, it provides a new building block for digital business models, a critical piece of those new Newsonomics. Read more at Newsonomics >
Certainly, offering free apps, with lots of advertisers, is the other enticing appeal of the iPad to publishers. But here’s why it won’t save the magazine business.
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