May 19, 2011

Tablets and digital newsstands: Are they really a good deal for publishers?

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The advent of tablet computers fueled publisher’s dreams of combining an immersive user experience with a new subscription market. However, Apple’s steep cut and tough rules has given many publishers (most recently Time Inc.) pause. Plus, recently News Corp reported less-than-stellar initial performance for its iPad-only paper, The Daily.

Against this backdrop, this week Barnes & Noble is launching its Nook e-reader app for Android tablets. But B&N refuses to say how it will handle subscription revenue and data, so it’s unclear whether this is a good deal for publishers…

By Amy Gahran

B&N’s press release touts that its new free app gives Android tablet users access to more than 140 titles in the NOOK Newsstand, including interactive magazines and several newspapers. All subscriptions offer a 14-day free trial.

Barnes & Noble says that this app is optimized for Android tablets at least seven inches wide running the “Honeycomb” version of the Android OS. But apparently the app will run on tablets running Android 2.1 “Eclair” and higher. There are several low-cost Android tablets on the market that run Eclair. Honeycomb-powered tablets tend to be far more costly.

According to B&N: “With NOOK for Android on larger tablets, magazine reading is easy and engaging with full-color pages in landscape and portrait mode, and Barnes & Noble’s exclusive ArticleView technology (formerly available only on NOOK Color) which features only the article’s text, customized to the reader’s favorite style, on a central panel on the display. NOOK Magazines also feature a universal, easy-to-use reading experience with a slider to jump to the desired page, pinch and zoom to enlarge images and more.”

B&N tight-lipped on publisher terms

When asked about terms for revenue splits and subscriber data for publishers, B&N spokesperson Carolyn Brown replied only, “We do not disclose the terms of our agreements with publishers.”

This probably means that B&N is negotiating custom deals with publishers—a strategy that typically favors only the largest publishers. If medium-sized and smaller publishers can be kept in the dark about sweetheart deals offered to giants, that limits their negotiating room and profit potential.

Subscription content has always been a tight-margin business—one that relies heavily on advertising to an established reader base, as well as upsells and marketing via subscriber relationships (strategies that require access to subscriber data). These parts of the subscription business model typically far outweigh direct subscription revenues.

So whether B&N will release subscriber data to publishers is a key point. In fact, it could make or break whether the NOOK tablet app represents a viable market for publishers—and whether or not it’s a better deal than what Apple is offering.

Presumably publishers who sell subscriptions through the NOOK tablet app will be able to place advertising in their content. However, the revenue potential would depend on the size of that market.

Android digital newsstand competition heating up

So far, the Apple iPad dominates the tablet market with an 85% market share. But market share is a moving target: Gartner recently predicted that by 2015 less than half of tablets will be running Apple’s iOS.

Apple maintains fairly monolithic control over how companies can sell content, apps, and services on its devices. But since Android is an open platform used by many device makers, publishers already have a variety of digital newsstand options for Android.

In the long run, this competition might motivate B&N to be more forthcoming (and perhaps more accommodating) about its NOOK Android tablet app subscription terms.

Right now, Next Issue Media (a consortium of five major magazine and newspaper publishers) is poised to launch its own Android digital newsstand—initially just for the Samsung Galaxy Tab, but it’s expected to expand to other Android devices this summer.

Next Issue Media describes itself as “a company established by publishers (five of them) for publishers (all of them). Our mission is to provide not only publishers, but advertisers and technology partners alike, an easy and economical entry into the digital reading channel.”

...This indicates that other publishers besides the founders might be able to sell subscriptions through this digital newsstand—although Next Issue Media has not disclosed any information about the terms for such arrangements.

For publishers, a key drawback of Android is that it’s a far more technically challenging platform for publishers to serve. Compared to the one-size-fits-all iPad, the diversity of size and other Android device characteristics—as well as fragmentation of the Android OS itself—is likely to always make it more difficult to offer a consistent user experience.

Since users are prone to change devices or own multiple devices, keeping Android users happy with their subscriptions will be a huge issue.

The News Leadership 3.0 blog is made possible by a grant to USC Annenberg from the John S. and James L. Knight Foundation.

By Amy Gahran, 05/19/11 at 4:00 am