Originally Posted by desarc
yes, but if a year [56 issues] is $40 [at 82% off cover price], HOW MUCH of that cost is in printing and delivery?
how much are people willing to spend on an iPad subscription? $40? doubtful.
$20? possibly, but apple will be taking 30%.
how much less will their advertisers pay in comparison to the print version?
i don't know the numbers any more than anyone else here does, yet everyone is posting that SI is being cheap.
Some real numbers to chew on: SI has a rate base* of around 3.2 million -- the Magazine Publishers Association (MPA) says its annual circulation is 3,158,101 (2009). You can then guess the revenue coming in from subscribers based on what you think they are getting per subscriber (and newsstand copies, which are low in comparison, except one a year -- swimsuit edition!).
The MPA also estimated SI's ad revenue last year at $560 million (down over $80 million from 2008). Ad revenue estimates tend to run high (no one gets the page rates printed on the rate card, so the revenue number is always lower than that estimated by outsiders).
Nonetheless, you can see that advertising revenue is always going to be a lot higher than revenue coming in from readers. (Most magazines have an even higher percentage of their revenue coming in from advertising than SI. SI actually does a good job getting people to pay to read the product.)
Many publishers today are convinced that they should charge readers for access to their web and mobile/tablet products -- they feel burned by the fact that they have "given" away the web for free these past dozen years. At the same time they are doing a poor job of selling advertisers on the value of this new readership. (While they recognize that advertisers pay the bills associated with print products, they want to make sure readers on the web, smartphones and tablets get used to paying for access to content. )
The key here is this: Apple has made it relatively easy to charge for access to content (whether through paid apps, or in-app subscription purchases). But it is the job of the publishers to get advertisers to pay for ads appearing in the tablet edition -- and that is hard at first because advertisers and their ad agencies want real numbers to look at.
So when all those folks paid to access that first issue of Wired the magazine was able to get $$ from readers -- but since advertisers knew that the first day that app appeared in iTunes the circulation level of that iPad edition was zero
they probably were not willing to pay for their ads to appear in that first iPad edition -- so the ads were either heavily discounted or given away.
It is hard to set ad rates when you don't know how many people are going to download the app. As a result, it will take time to get real numbers and present them to the ad community. That's why, for now, the readers are being asked to pay the freight (so to speak).
* Rate base: the level of circulation the magazine promises advertisers it will have. Ad rates are based on this number, if the actual circulation falls below this by too much the advertisers will expect a rebate.