Friday, June 11, 2010

Sideways (3): Business models for tablet publishing

This is the third of three posts concerning Sideways 10.06.

In my first post I mentioned that months ago I speculated that the most interesting tablet publications might come from start-ups, and that traditional print publishers would be making a mistake to simply port over their print products into mobile media. But I also was pretty sure that the first tablet publishing efforts may come from start-ups or tech companies who are usually aggressive in adopting new technology and platforms.
I may have been wrong about that last point: traditional media companies have been early adopters of Apple's iPad -- generally through the work of such companies such as Zinio and Exact Editions Ltd., but also through technology partnerships such as the one between Adobe and Condé Nast. But efforts have been generally unimaginative.

That is why I was pleased to see the rise of Sideways LLC, a company that that is developing its own digital platform for use on tablets and mobile devices, and has now launched its own iPad magazine as a way of experimenting with the form, as a capabilities showcase, and possibly as a profitable business. It is this last point that is at the center of this third and final post.

For media properties such as Time and Wired, it is possible to create an iPad app, put a price on it equal its print cover price and then sit back and see what kind of sales it can generate. Wired's editor Chris Anderson wrote via Twitter last weekend that the new Wired iPad app had sold 73,000 downloads in its first nine days in iTunes. That is close to the normal level of newsstand sales -- and $4.99 per app, that translates into $364,270 in sales, of which it gets to keep 70 percent.

In essence, popular magazine brands can use their tablet products as extensions of the newsstand, possibly raising their base rates and therefore their ad rates to profit from the venture. Then when some enhanced ads are sold into the tablet version this is pretty much gravy.

But for an app like Sideways 10.06 which is selling for $3.99 a copy, but has no established brand name, what is the amount of sales they can expect? No one knows, but I would guess that 10,000 copies would a wild success -- a very wild success. But even giving a start-up magazine 10,000 in sales for an app would mean that the magazine would only clear $27,930.

In the case of Sideways, selling only a handful of apps may be worthwhile of experience gathered and the ability to use the app as a showcase for their clients. But start-ups that will not have software businesses supporting them, there will be a need to either sell enough apps to survive, or to monetize the app through advertising sales.

"We will definitely experiment with advertising, and transactions, and serialization, and price model" said CEO Charles Stack told me this morning when discussing monetizing both periodical and book publishing projects. "I think they are all open to experimentation."

Most magazines and newspapers who have brought their content over onto the iPad have taken one of three approaches: leaving the ads in unchanged or enhanced; pulling the ads out completely; or have gone to a single-sponsor model. The single-sponsor model has a lot of merit when buying time to educate the sales team and making it to fall planning. The New York Times single-sponsored app, NYT Editor's Choice, has always felt like a temporary solution while the company decides what to include in a final, paid version.
Image and video hosting by TinyPic

The NYT Editor's Choice app has a single-sponsor.

For B2Bs, the single-sponsor model seems like a natural as trade publishers work with their biggest clients to finance their first tablet efforts. But for a B2B start-up, tablet publishing may be an effective way to limit costs and effectively under cut their print counterparts. While there has been some complaining about Apple's data sharing policies, the fact is that many new apps now include registration mechanisms that are even more effective than reader qualification cards as they are 100 percent electronic and can include much more information than some B2Bs currently gather.

A more detailed discussion of business models for tablet publishing will have to be left for a time when more app sales and readership data can be gathered. But Sideways LLC is leading the charge, apparently strongly committed to the form, so no doubt more will be learned over the next few months.