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People, Other Pubs Now Free on the iPad. So How Will They Make Money?

After months of an inexplicable hold up, magazine publishers starting with People magazine, will be able to offer their publications free on the iPad to magazine subscribers. Up until now, the iPad versions of People, Time, Sports Illustrated and Fortune have cost the same as the newsstand price. (via Fortune). Other magazines will be adopting this pricing structure within the next month.

Fortunes ponders why it took Apple so long to make this step - after all, CEO Steve Jobs had encouraged publishers from the beginning to make the content free to subscribers. However, the company apparently did not give them the necessary tools or guidance for that step.

Free Content?

This new development, though, revives a debate on how publishers will make money on digital products - a debate that has occurred across many platforms including Amazon's Kindle. Essentially the parameters of the discussion are this: consumers have been conditioned to receiving free content online, but on high-end devices they are willing to pay for such content. The question is how much are they willing to pay? Kindle book readers are outraged with publishers that are charging only slightly less for the digital editions, even though they are saving significant money on distribution and printing costs.

Magazine publishers have sidestepped this issue of perceived greed by offering their print subscribers a free digital version. How else though, to take monetize consumers who are presumably willing to pay for content because it is running over a mobile device?

$1.3 Billion in Additional Revenue

A new survey by Oliver Wyman, made on behalf of several publishers including Condé Nast, Hearst, Meredith, News Corporation, and Time, provides some answers. The report finds that by offering a robust product clearly differentiated from print, as well as other reasons, publishers stand to gain more $1.3 billion of incremental industry revenues - after accounting for the canabilization of print media. There are several reasons for this, it found:

Print and interactive bundles justify a price premium. "Unlike analog and digital versions of other media, the two formats of print and interactive are perceived as complementary by many periodical subscribers - 30% of renewing subscribers chose a bundle of both the print edition and interactive edition, at a 33% premium to the stand-alone price of either."

Automatic renewal decreases long-term churn.

There are more cross-sell opportunities. "The interactive format enables effective marketing of additional subscription sales via recommendation engines and browsing features." This opportunity to expand subscription relationships turned into additional sales for 17% of current subscribers, the report found.

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