An interesting article in today’s
newspapers as Amazon is rebuffed in its efforts to sign Kindle deals
with local publishers News Ltd. and Fairfax. From the SMH:
Mr Murdoch has questioned the benefit to
newspapers of using Kindle because Amazon keeps the lion’s share of
subscriber revenue, thought to be 70 per cent, as well as details of
subscribers which News argues should reside with it.
So the newspapers are either saying that the cost of producing and
distributing the physical (print) version newspaper is less than 70% of
the total cost or the 30% offered by Amazon is 30% of a too low amount
for online subscriptions. In the US, monthly newspaper subscriptions on
Kindle sell for between US$6 and US$14 per month.
It’s also
possible that the publishers think they can get a better deal out of
Sony or Apple. They could be right but I doubt it. From a publisher’s
perspective both Amazon and Apple ‘steal’ their customers. Apple’s
iTunes store is the model Amazon has adopted. When you buy on iTunes,
Apple holds all of the customer details and the publisher just gets a
cut of the sale price. No customer data is given to the publisher.
From the news today, it is obvious that News values the subscriber list as well.
It’s
also interesting to note that when you buy a book for US$9.99 on your
Kindle, Amazon pays the publisher US$14. The assumption is that Amazon
is making a good margin on the Kindle devices themselves. I wonder how
long this pricing model can be maintained?
What’s interesting in
all this is what is missing from the discussions. Where is the monetary
value of all the additional things you can do with an electronic
newspaper that you can’t do in print? Like live hyperlinking to
additional content and advertising, real-time news updates, searchable
archives, financial market prices in real-time, etc.? All of this
value-add information and analytics seem to be swept up into the
general pricing models.
In this market, content was king until
overthrown in a revolution led by the owners of technology-based
distribution channels. Information is useful but not really a player,
more a foot soldier in the revolution.
So I don’t know how this
story will end, but a Kindle with local content looks less likely
today. I’d also add that if Apple launches a tablet that competes with
Kindle, then News and Fairfax are still going to have to give up their
customers just as the music publishers have.
The lesson? If
information is an asset, then just like in traditional industries (like
manufacturing and print newspaper publishing) it’s not worth very much
if you also don’t own the distribution channel. Which is exactly why
physical newspapers are taken out of the print works by the publisher’s
own fleet of trucks each morning.
