Peter Kafka

Recent Posts by Peter Kafka

Why iPad Magazines Won't Be a (Really) Big Business for a While–and Why Prices Won't Come Down, Either

Will tablets save the magazine business? Nope. But if the industry’s hopes for the iPad and its ilk pan out, digital editions could give the industry a billion-dollar boost in a few years.

That’s the conclusion of a new study sponsored by Next Issue Media, the “Hulu for Magazines” consortium that’s supposed to figure out the industry’s future.

It says iPad magazines and similar stuff will generate $3 billion in advertising and circulation revenue in 2014, assuming that the market expands beyond Apple (AAPL) to include Google (GOOG) and other competitors. But after you account for print dollars the digital versions will cannibalize, that nets out to $1.3 billion in incremental revenue.

Context: Time Warner’s (TWX) Time Inc. generated $900 million in the last quarter alone.

On the other hand, any kind of incremental growth has to sound good to an analog industry facing digital disruption. Ask anyone left in the music business.

And if the magazine folks are lucky and/or good, they can get more out of the new technology. The study doesn’t factor in new potential revenue streams, like digital ads sold at a premium, for instance.

Another interesting part of the 1,800-person survey, conducted by the Oliver Wyman consulting group, is the best-case scenario it presents for publishers.

Consumers, the study says, are happy to pay print prices for digital magazines.

A couple of charts make the argument. Here’s how existing subscribers, paying $1.49 an issue for their print magazines, are supposed to react to digital titles at the same price (click images to enlarge):

And here’s how non-subscribers are supposed to react:

So there’s justification for publishers like Time Inc. and Condé Nast–which have kept their iPad prices close to their print prices–as well as for Hearst, which is talking about increasing the price for some digital titles.

That’s also never going to fly with many of you, who will insist that any collection of bits and bytes cost less than its physical counterpart.

Martin Kon, who led the study for Oliver Wyman, feels your pain. He says lots of consumers feel the same way–unless they’re getting something really awesome.

“If it’s a PDF replica of the print version, there’s no value add,” he says. “But when consumers see that there’s something more valuable, then suddenly they think about it in a different light.”

So digerati, what do you think–are any of the iPad magazines you’ve seen so far worth print prices?

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