The iPad and the Customer Dilemma February 19, 2010
Posted by Michael Carney in : Uncategorized , trackbackComing soon: the iPad, a device that will change the world.
Or so you’d be led to believe, listening to Steve Jobs introducing the device a few weeks ago:
Magazine publishers in particular are quick to embrace the possibilities of this new distribution mechanism. Inevitably, WIRED magazine has been one of the first to prototype its offerings on the iPad. The mag sure scrubs up well through the device: see the WIRED demo video here
Interview Magazine, another early adopter of gizmos and gadgets, has put together its own demo (reported and demoed via the Huffington Post).
Will They, Won’t They (Pay)?
Publishers seem to think that the iPad will deliver revenues that simply aren’t happened across the traditional web. Are they right or are they simply dreaming?
First the good news. According to a recent Nielsen survey of 27,000 Web users in 52 countries, almost 50% of respondents would consider paying for online access to a magazine, while a little over 40% said they would pay for newspaper content on the Web.
However, a couple of caveats:
- Better than three out of every four Nielsen survey participants (78%) believe if they already subscribe to a newspaper, magazine, radio or television service they should be able to use its online content for free.
- At the same time, 71% of global consumers say online content of any kind will have to be considerably better than what is currently free before they will pay for it.
Good news for the illustrious iPad, then.
As the Financial Times notes in a recent report, however, there are some issues still to be resolved before the iPad can truly deliver the profitable, micro-paymented future sought by content providers (whether they hail from newspaper or magazine publishing or from the broadcast media).
The first is the matter of revenue-sharing. Some content creators are unhappy with revenue splits of 30% Apple, 70% provider — although arguably Apple’s share is not out of line with monies accruing to traditional resellers of the content.
The major stumbling block seems to be the notion of 30% commission forever — print publishers in particular have built up a revenue model based around high initial customer acquisition costs, recouped thanks to lower retention costs over the lifetime of a customer. The Apple terms will require a wholesale re-evaluation of longstanding business models. Which may not be a bad thing — for consumers, at least — encouraging long-term customer pampering strategies rather than upfront bribes followed by ongoing benign neglect.
A more serious concern for content providers, however, is the matter of who controls the customer data. As the Financial Times reports:
Apple’s practice of sharing with its partners little consumer data beyond sales volume is a problem. “Is it a dealbreaker? It’s pretty damn close,” said one senior media executive of a major US metropolitan daily newspaper.
Publishers have spent decades collecting information about subscribers such as names, addresses, locations and credit card numbers that influence marketing plans and, in some cases, the content of the publication itself. Apple’s policy would separate them from their most valuable asset, publishing executives said.
“We must keep the relationship with our readers,” says Sara Öhrvall , senior vice-president of research at Swedish publisher Bonnier, echoing the sentiment of other media executives spoken to by the Financial Times. “That’s the only way to make a good magazine.”
It’s a sentiment that’s hard to argue with. There’s massive value in intelligent customer segmentation — and the digital world offers ever more sophisticated ways to slice and dice, to everyone’s benefit. Publishers in particular have acquired vast expertise in direct marketing, and could use that knowledge to great effect through iPad-delivered initiatives, increasing revenues for themselves and for Apple in the process.
The music business, on which Apple cuts its digital teeth, was different. The record industry in general knew very little about its customers (with occasional exceptions — you know who you are, Grateful Dead). But many publishers (especially of magazines) have survived and thrived thanks to close relationships with their subscribers. It makes poor economic sense to disconnect that linkage.
Not that Mr Jobs is reading these words, but if he stumbled across them, we’d urgently recommend he reconsider his user data philosophies and enter into meaningful data-sharing in this new offering. It’ll result in more earnings for Apple Inc., okay?
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