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Summary:

Publishers saw the iPad as a chance to turn back the clock and convince consumers to pay for content in a new form. But that dream has collided with reality, and now some content producers — including MIT’s Technology Review — say the standalone content app is dead.

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When Apple’s iPad arrived on the scene in 2010, many magazine and newspaper publishers saw it as a gift from the gods: a chance to turn back the clock and convince consumers to pay for their content in a new form. But for many, that dream has given way to the cruel reality that apps are at best a stop-gap measure, not a dramatic new business model. As MIT Technology Review editor and publisher Jason Pontin points out — in a post about why his magazine has decided to kill its app — the benefits don’t outweigh the negatives for both readers and publishers. It’s a lesson that some other content producers might want to consider.

The iPad — and the content economy that Apple created along with it, thanks to iTunes and more recent additions like the Newsstand — was alluring for many publishers because they believed it could overcome what they saw as the “original sin” of not charging for their digital content in the first place. It seemed like the perfect solution: a device that would replicate the magazine or newspaper experience in digital form, with Apple handling all of the annoying back-end details around payment. As Pontin describes it:

Publishers believed that because they were once again delivering a unique, discrete product, analogous to a newspaper or magazine, they could charge readers for single-copy sales and even subscriptions, reëducating audiences that publications were goods for which they must pay.

This idea soon collided with reality in a number of ways. For one thing, Apple enforced its usual 30-percent commission on any subscription sales, and changed the rules to make it more difficult for publishers to get around that barrier. For a lot of content companies this was a significant disincentive, since Apple’s cut in some cases removed any upside to selling content through the device at all. And then there were the technological limitations involved in reproducing content on the iPad — particularly image-heavy magazine issues — which added to the costs, and made apps less appealing for some users.

Apps don’t fit with the way content works online

But I think Pontin is right when he says that many of these technical or structural issues weren’t even the biggest problem for content apps. The biggest problem is that apps are walled gardens by design — most allow you to share articles through social media, but they don’t contain links and in most cases they don’t have comments either. And that just doesn’t fit with the way many people consumer content now, especially the assumption that users will download a single app or subscribe to a single provider instead of using aggregators or apps like Flipboard and Zite. Says Pontin:

When people read news and features on electronic media, they expect stories to possess the linky-ness of the Web, but stories in apps didn’t really link. The apps were, in the jargon of information technology, “walled gardens,” and although sometimes beautiful, they were small, stifling gardens… I hated every moment of our experiment with apps, because it tried to impose something closed, old, and printlike on something open, new, and digital.

That’s not to say some publishers haven’t produced excellent-looking apps, and there have been some interesting experiments with the app form — including Richard Branson’s magazine Project or the gamified magazine that Gourmet came out with, which “unlocked” new content after users had consumed a certain number of articles. But Pontin notes that even successes like Condé Nast, which saw its digital sales increase by 268 percent last year, are still relatively small potatoes in the overall scheme of things: Wired magazine has just over 7,00 digital single-copy sales, according to figures from the Audit Bureau of Circulations, which is less than one percent of paid circulation.

The Economist is doing better than many others with its digital edition: according to a recent report from the company, the magazine had about 50,000 subscribers to the iPad version in March. But AdWeek notes that this still only amounts to about 6 percent of total circulation — and that is among the highest levels in the industry. As Pontin points out, a recent Nielsen study found that although 33 percent of tablet and smartphone users had downloaded news-reading apps, only 19 percent of the users surveyed had actually paid for them. Says the MIT Tech Review editor:

The paid, expensively developed publishers’ app, with its extravagantly produced digital replica, is dead.

Is Pontin right? Is the dedicated magazine or newspaper app dead? Some publishers disagree, and others are increasing their bets on the iPad ecosystem — such as Next Issue Media, a kind of one-stop newsstand approach. But at the same time, there seems to be increasing interest in the model adopted by the Financial Times, which uses HTML5 to duplicate the look and feel of an app. It’s an approach that is not only cheaper in many cases, but also allows the publisher to do an end-run around Apple’s 30-percent commission — and in the long run, that could make it a much more realistic dream for content producers than the one that Apple has been selling.

Post and thumbnail images courtesy of Flickr users Jennifer Moo and Rego Korosi

  1. I am not sure about the ROI, but the Bloomberg Businessweek magazine has a great reading experience. I don’t think I will continue with my six-month old subscription if it changes to a web app.

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    1. Why wouldn’t you continue with your subscription if it becomes a web app? Just curious.

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      1. I used the FT web app for a bit and I did not have offline access, had loading issues and was overall a notch below the packaged downloaded mag experience. I am assuming Businessweek will have to rely on the same tactics if they get out of Newsstand.

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  2. Interesting article, but i don’t think we should look at iOS as the only possible model for app-store distribution of content. For example:

    Apple’s 30% rule is just plain draconian. If the store operators need to see some revenue for supporting this model then content distribution apps should have their own classification. Maybe an app that costs a few dollars per year to keep enabled?

    Linking to articles is purely a technical problem of the store operator. There’s nothing stopping publishers using deep links into apps (http://blog.ablepear.com/2010/01/itunes-deep-links-demystified-how-to.html). These same links could be used for content on the web, behind a paywall but freely accessable to a search engine.

    Same applies to comments. There’s nothing stopping app developers integrating Disquss or facebook comments.

    Apps do not need to be in a walled garden. Some publications just aren’t doing it right. And with increased competition I think we’ll see Apple’s 30% rule disappear.

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    1. Thanks Joe — you are right that many of the limitations we see in apps are not hard and fast, but the result of decisions made by publishers. Thanks for the comment.

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    2. What if I use Android. What If I have a desktop. How does the link work then :)

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      1. A regular URL can be interpreted different ways on different devices. The URL does not need to be device specific. Remember that a browser is just an application, like anything else.

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  3. This article is so negative.

    Annoys me when one magazine or publisher has a bad experience, that everything is doom and gloom, and people jump on the bandwagon to criticise.

    Plenty of publishers (Future being one of them) are making a decent business from tablet publishing, and plenty more will come. Yes, Apple take 30%, but the market is massive, and most fully-interactive editions are doing well. Even some of the replica editions are seeing download numbers into the 10,000 per month across iOS devices.

    The tools are becoming cheaper, for example Adobe DPS will be part of the CS6 package.

    So, most major publishers will have editions on sale via Newsstand, and we will see huge growth across the board over the next 12-18 months as more tablets are sold.

    Please be more positive?

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  4. Jason Hanson Monday, May 7, 2012

    I think one big reasoning for low earnings in digital content providing are the results of the publisher’s thinking at the start. The ones that already have a physical hard copy magazine or paper subscription provided, that cross over into the digital realm are under the delusion that both physical and digital versions should cost the same price…some even more for the digital version. Take out the actual production of the physical product (procuring content, paper costs, color costs, printing, shipping, etc) which is also utilizing paid advertising to supplement…and put it into digital format, you are cutting out a number of costs that are not required anymore (printing, paper, color, publishing, shipping, etc)- yet still retain the supplemental advertising earnings potential. The cost vary drastically from print to digital form. Not even the costs of web development, app development, hosting, etc would add up to the cost of digital offerings. Yet they still desire to think that digital will acquire more customers to pay for subscription apps that cost just as much…all in thinking it is the same as print versions.
    I agree that Apple is hindering things with the 30% charge for using them…and that something more along the lines of 15% would help dramatically, but seeing what other apps offer of lesser costs- if not some being free, and having great success is more excuse and blame gaming than anything. It all depends on what you utilize it for really.
    Resources like Facebook are free…no one has to pay to utilize it, be it company or customer. And while drastically limited and inferior to an app or digital publication…is still used as a vehicle for publishing, advertising, informing, even customer support. Utilize the designed digital publication in a similar vein…and instead of seeking grand profits or thinking of it as a main profit earner, offer a little/lower subscription cost for content and a general investment resource will bring more interest and usefulness to them. The more interest you have, the more advertising you get. Just look at people who have become viral video successes..not that the luck of that is being left out here..but the success is that interest in them beget advertiser interest, which beget profit earnings for them for doing nothing more than making an interesting video. Do that with a more realistic intent of publishing digital content, making it as interesting as the content in print, offer it at nominal purchase costs if any, and more will flock to it. Change the thinking of ‘selling print form as digital=same’ and utilize it for more of what makes social media successful…interesting, appealing, interactivity, connecting with people easily with linking, word of mouth, advertising and so forth. Stop thinking of it as must be main profit center…we’re still far from that.

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  5. Maybe if their apps didn’t suck so bad people wouldn’t be so averse to buying them.

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  6. I used the FT web app for a bit and I did not have offline access, had loading issues and overall a notch below the packaged downloaded mag experience. I am assuming Businessweek will have to rely on the same tactics if they get out of Newsstand.

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  7. Kelly Brough Tuesday, May 8, 2012

    I am surprised we have not seen more of this already. There will certainly be a few publishers who have such a compelling app experience and original content that the ROI will be there. For many, the requirements of running a parallel app and web business will mean additional resource commitments that deplete their profits. The more important factor is the business model and scarcity of published content. This beats form factor as an ROI driver any day.

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  8. Howard Zoss Tuesday, May 8, 2012

    Article missed the point … Simply, people are not paying much for content anymore … Whether printed journalism, music or video …. They now think it should be free and they are not going back … The delivery mechanism is irrelevant. Secondly, as noted by the author, they are no longer willing to be merely receivers in the content stream … They want to be participants. No one is going to pay for magazines … Just look at the music industry, because that is the new norm.

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  9. What this article also lacks to mention is that most publishers with tablet editions have been using it as nothing more than as incentive to sell print subscriptions (with access to ipad edition) for not much more than the cost of the ipad-only edition. Since this is nothing more than a cynical marketing ploy, it’s no surprise that the product is usually nothing more than a PDF of the magazine with nothing substantially interesting about it.

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  10. Trevor Doerksen Tuesday, May 8, 2012

    When I delivered newspapers as a kid I was paid 40%. When Walmart sells a magazine in it’s store it takes at least 70%. Apple is a delivery system and retailer. 30% is not draconian. Further, if iTunes is a store. It does not get as many visitors every month as Walmart stores world wide, but iTunes does get more visitors than Walmart.com. If 19% of Walmart shoppers bought a magazine with worse margins we would not complain. The assumptions in this article are ridiculous. 30% is 10 points better than the paperboy and 19% is likely higher than magazine sell-through in Walmart – and that is with high fees paid for product placement next to the till.

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    1. Mr San Diego Tuesday, May 8, 2012

      Agree with Trevor. To pile on…Barnes & Noble’s Nook is taking 50%. Apple’s 30% take is reasonable compared to Nook. Agencies such as the school subscription programs take 85% and remit 15% to the publishers. Let’s face it, publishers have taken a beating for a long time. We’ve never received our fair share of the pie as a result of depending on advertising versus circulation revenues.

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      1. As a consumer, if you don’t want to pay an unnecessary 40%, you skip the paperboy and get a paper at convenience store for just the days you want it, or you read it free as provided on the tables at the local Donut shop. If you don’t like the price at Walmart, you can get your magazines through other channels. Where else can a consumer get a digital magazine for their iPad? Technically, any company could set up the databases and ecommerce to deliver their iOS magazines from their own servers, so Apple is not out any cost of a store, but APPLE WON’T LET THEM. Draconian, outdated for our times. Good for Apple to get a head start, try to crush Adobe and get a leg up on Google, but not the model that people and companies will want to support. Think on this, when there are thousands of your partners and clients that can’t wait till there’s an alternative to your closed system, you are on thin ice.

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  11. Micke Kazarnowicz Wednesday, May 9, 2012

    “[Popular Science] has made more than $1 million NET revenue (after design costs, licensing of our platform and Apple’s cut) on its iPad edition, or Popular Photography […] has moved more than 10 percent of its 350,000 rate base to iPad”
    – When reading Tech Review’s original post, our CPO Mike Haney wrote a reply that definitely is relevant as a comment for this post as well:
    http://www.magplus.com/tech-review-please-call-us-before-you-give-up/

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  12. Move to mobile-web or you can.t survive!

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  13. Personally, I’d rather read a well designed iPad magazine app than a story like this where there are hot-links every other sentence, and I feel like I have to click to a dozen different places to get the story.

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  14. pawelnjetnowak Tuesday, June 5, 2012

    UTalkMakreting has a good point about being only 2 years down the road.
    http://blog.utalkmarketing.com/uncategorized/are-publishers-waking-up-from-their-dream-about-apps-—-tech-news-and-analysis/

    What I’d add to Jason Pontin post is an entry barier today vs 2 years ago.
    It was huge investment for publishers to build their own apps two years ago, but today landscape filled with software as a service publishing sollutions that literally take and hour and a few hundred bucks to start your own app. Test your idea small scale, before going full power, right?

    Disclamer, I work with http://presspadapp.com, one of those companies. That said, I still stay by that statement even if I wasn’t.

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  15. James Brocklehurst Monday, June 18, 2012

    As other commenters have outlined, Jason Pontin’s position is ill informed and flawed.

    1. Apple’s 30% may seem steep compared to the web, but this is an unfair comparison considering that it is very difficult to obtain any sort of reasonable revenue from the web. Consumers perceive web content as ‘free’ whereas they are happy to pay for (iOS) apps, in their billions. Printed media on the other hand has manufacturing and distribution costs, which typically eat up cost more than 30% of total revenue. Apple’s fee gives you direct exposure to their user base, the devices sat in their pockets and their bank accounts, without the users having to do any more than what they already do.

    2. There are no technical limitations to app publications if developers know what they are doing. Book/magazine apps can be built using HTML5 and do everything a web app can do, including linking to content within the app or elsewhere. But by wrapping it in an app, you make it a purchasable, or subscribable item.

    3. The design of many book or magazine apps to date are poor. They either have readability or usability issues, or contain an abundance of multimedia or ‘interactive’ elements that distract from the experience of reading (see Wired). Pontin’s cancelled app was a prime example of this.

    So the point is, to dismiss app publications as ‘unworkable’ seems a little premature, particularly if this statement is based on poorly executed examples. Publishers should try employing experienced app developers and designers and properly evaluating the results before giving up.

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