Why Do Publishers Think the iPad Will Save Media?

More

Journalists like it when ideas and people seem to be in decline, because downfalls make for great stories (see: ObamaCare, Cap-and-Trade, Tiger Woods). But we also like to write about disaster because it sets up something even more irresistible: comeback stories (see: ObamaCare, Cap-and-Trade, Tiger Woods).

That's one reason why some journalists are hyperventilating over the capacity of the iPad to save their industry. The collapse of magazine advertising revenue has inspired breathless hand-wringing about the death of magazines. But now the emergence of a hot new piece of hardware has publishers and media journalists equally thrilled that our industry can atone for past mistakes by charging for content on Apple's news slab.  Please don't get me wrong: the iPad is exciting. It could potentially revolutionize popular computing and entertainment. But would it really revolutionize publishers' bottom lines?

Rory Maher of TBI Research crunches the numbers and finds that even with optimistic estimates about iPad sales and magazine app purchases, publishers should not expect e-readers to save them:

Even if iPad sales soar past expectations and reach, say, 16 million units over the next two years total magazine subscription revenue would equal about $2.8 billion per year under the above case scenario [50% of iPad owners subscribe to two magazines on average]. That's less than 30% of annual circulation revenue for the entire magazine industry and only about 10% of overall industry revenue (circulation + advertising).

It's useful to step back and consider the long game for publishers. Magazines get money from (1) readers and (2) advertisers looking for readers. The problem today isn't the readers, who are all over the Internet. It's the ads. Magazine advertising has slipped in the last two years by 12%. Nobody expects print ads to rebound to their early 2000s levels, and everybody is still waiting for That Big Idea that helps publishers monetize their online content. Maybe it comes from location-based ads. Maybe it comes from cross-publisher partnerships and a Netflix model that bundles magazine subscriptions and distributes them electronically to computers and e-readers. Nobody knows.

But this is the key to the story: magazines are losing ad revenue, but they're not losing readers. In fact most of them are gaining readers -- they're just gaining them online, where our eyeballs are poorly monetized. All publishers really want is a platform where they can charge readers for reading. The iPad gives them that opportunity. It's fair to say publishers are being overly-optimistic with their prices for iPad apps. It's not fair to say they're wrong for trying.

Jump to comments
Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Get Today's Top Stories in Your Inbox (preview)

Tracing Sriracha's Origin to a Seaside Town in Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

Where the Wild Things Go

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.

Video

Adults Need Playtime Too

When was the last time you played your favorite childhood game?

Video

Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.

Video

The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air

Writers

Up
Down

More in Business

Just In