Unlike book publishers, magazine and news paper publishers make the bulk of their money from advertising revenue. The cost at the news stand, or subscription costs, are there to cover the cost of dead trees and the costs associated with delivery of the physical product.
The way advertising pricing is computed for a specific publication is based on subscriber numbers, news stand sales numbers, the base demographics of the geographic locations of a subscriber base and the much more specific demographic information provided by subscribers and others who fill out survey cards.
There are many other sources of information that goes into the aggregate statistical universe used to justify to advertisers why they would benefit from purchasing an advert in a specific publication for a specified price.
That's how it works in the print industry. The information about readership flows back to the publishers in several ways.
Now, the electronic content delivery method comes along and removes the cost of dead trees and physical delivery of the publication. It gets replaced with any of several methods of delivery.
A publisher can build and maintain their own delivery mechanism, such as what Baen Books did. That allows them to become a conduit to their readers and even offer that service to other publishers, ie.. Tor, Del Rey, Nightshade, etc..
Most of the costs for the self distribution method are up front capital costs associated with the initial buildout of the web site, the work flow for content conversion, and management issues involved in getting all of your content creators into the system and working efficiently towards a new delivery mechanism.
A second delivery conduit is for a publisher to outsource electronic distribution to someone like Apple, Amazon or B&N in much the same way they outsource single issue sales to brick and mortar stores. They sell to the stores at a discount off the cover price, the stores then sell for some percentage markup over that, usually up to cover price. In this method, the publisher preps the electronic issue in the format required by the outsourced distributor and provides the digital copy to them. This is, essentially, identical to the way books are provided to the companies that actually print the dead tree versions.
The Agency model that has been discussed recently, and apparently is being adopted by both Apple and Amazon, removes the frontloaded costs of purchasing copies of a publication at discount from a distributor who delivers those copies to a store front for sale to customers. Since there is no appreciable cost to the retailers (ie.. Amazon, Apple, B&N) for each copy until that copy is sold to the reader, the original wholesaler model doesn't work. For this reason, the Agency model is preferable. There are quite a few articles that go into great detail about the Agency model out there. Check Scalzi's blog for one of the better ones.
All that being said, the magazine and news paper industry rely on advertising within the publication for most of their revenue. The business model for electronic readers for those kinds of publications in no way changes that primary source of revenue, nor does it change the conduits for demographic information that revenue source relies upon.
There is a huge potential in e-readers to allow an extremely granular level of user profiling, demographic information, and other information that can be useful for advertisers, content creators, interface designers, and everyone else involved in the creation of the publications.
This is, ultimately, something that will have to be negotiated between the publishers and the *readers*, not the hardware manufacturers. Just as with current business models, if the publisher wants demographic information more specific than X sales in Y geographic region, they'll need to go to the readers themselves for it.
Saying that Apple is denying them that information is FUD of the worst sort and does nothing more than alienate the very readers they want to get that information from.
great explanation of how all this works.. Thanks!!
i know some magazine formats take advantage of multiple viewing.. doctors offices, coffee table magazines.. national geographic.. etc etc. how much do advertisers count on this kind of viewership versus a single user viewership of their ads? for example, wouldn't it be better to allow a given magazine to be passed around up to X number of times so that others who would not subscribe anyway see their ads too - just like the doctors office, friends coffee table etc etc kinds of mags already offer.. dumb question maybe but it seems to me some magazines don't get read and tossed.. they stay around and are viewed several or many times by more than one person..