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After attending a series of meetings this week with various service companies and groups of publishers, I am amazed how much lingering misinformation and bad feelings remain when it comes to the fees being charged by Apple within the Newsstand and the issue of reader information.
The problem starts with the issue of paid circulation. In general, the industry would like to pretend, or at least often pretends, that their very livelihood is dependent on paid circulation. But the fact is that very few consumer magazines rely on turning a profit from their circulation efforts, and even fewer B2B titles do.
For a magazine like Consumer Reports, that does not accept advertising, paid circulation revenue is vital. But even CR offers readers a reasonable rate for an annual subscription, currently $29. As a nonprofit, the magazine is dependent on contributions and other revenue sources other than just reader subscriptions. But at $29 for a year of print magazines, it is most unlikely that the amount generated, just over $2 per issue, covers print and distribution costs (in fact, there is no way it does).
But it is the nature of print magazine publishing that this is the way circulation works: the goal of a circulation manager is to sell single issues and subscriptions, manage the costs of the department, and if highly successful, end up with as small a loss as possible.
Looking over the P&Ls of some of the B2B magazines I have managed, I see that circulation generally accounts for between 10 and 15 percent of all costs (slightly less if a title is hit with high administrative costs, those costs passed on to the title by the corporate entity). When postage is added in, generally seen as a production (or "mechanical") cost, that number is doubled. In other words, things associated with circulation account for a quarter of all costs, and next to nothing in revenue towards the bottom line.
With this in mind, it remains a mystery why the issue of Apple's 30 percent commission on subscriptions and single issue sales was, and remains for some publishers, such a big deal.
Some media sites, and more than a few tech sites, have written pieces that make snide remarks about the number of paid subscriptions sold by some magazine publishers inside the Newsstand, concluding that the numbers are not adding up for the publishers.
What is not being taken into account, beyond the production costs being saved by few print readers, is the positive effect digital subscriptions is having on rate bases. The last batch of ABC reports is showing that many publishers are reporting higher overall circulation, easily maintaining their rate bases despite falling print numbers. This fact is saving more than a few publishers from having to rebate back paid ad space revenues.
While paid circulation strategies are more complex than they first appear, varying both within the consumer and B2B magazine industries, the issue of information is just as complex. One of the biggest grips heard by many vendors is that Apple's Newsstand is does not automatically share the information on the buyer of a digital magazine subscription, and that very few readers are opting to share their information with publishers.
