Wednesday, February 23, 2011

The Subscription Food Chain

The world has probably learned more about the arcane business of magazine subscriptions in the last ten days than in the last ten years. And most of the news is coming from technology companies, underscoring where much of the marketplace power resides.

Subscriptions are a vital part of the U.S. magazine business with about 8 out of 10 customers coming in through the subscription door. In most developed countries the opposite is true; most people buy their magazines at the newsstand.  Subscriptions serve as a linch-pin for ongoing customer relations. Publishers know a lot about these subscribers and with that knowledge can sell them affinity products. Thus publishers refer to the lifetime value of the customer.

So no wonder the angst of publishers when Apple got in the middle of that relationship, denying publishers the opportunity to sell through iTunes full-term subscriptions and also retain data.  The recent subscription announcement by Apple has been met by publishers with the sound of one hand clapping.  Apple's scheme, while not publisher friendly, is clever. Apple has kept the basic 30/70 revenue share but allows publishers to keep 100% of revenue if a transaction involves existing customers. Apple lets the consumer decide whether to order from iTunes or go to the publishers site and what data to share. Apple requires that the price of a digital edition be the same across channels, a requirement that will not please publishers. Publishers cannot link an in-app subscription offer to their own web site. 

Before this digital ink had dried Google announced it's One Pass program that allows consumers to purchase magazines and newspapers with a simple sign-in using email and password. Publishers can offer full subscriptions, partial subscriptions and I assume bundled offers of one kind or another. Google Checkout processes payments. Publishers collect 90% of sales on every transaction. Publishers retain all the data.

I just read that the website for the German news magazine Focus is using Google's One Pass to test the selling of article-level content for 10 cents each.  We know by and large consumers won't pay for news or general sports information but they might pay for articles on ten facts about parental leave or what to do if you lose your driver's license.

 Both Google's One Pass and the Focus magazine experiment seem like very good ideas. Newspaper and magazine companies have tons of premium, evergreen content that can be monitized. Publishers have spent a fortune digitizing their archives.

Looks like Google is providing a painless way to get some of that money back.

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