"Kindle is just another way for papers to lose money," according to the Columbia Journalism Review, having studied the breakdown of how income from subscriptions is shared between publishers, Amazon and the wireless carrier. The new Kindle DX, with a far larger screen than its predecessor the Kindle 2.0, seems targeted at newspaper and magazine reading, and has been welcomed by the news industry.
Writer Ryan Chittum was shocked to discover that newspapers only get about 30% of the revenue from Kindle subscriptions. Given that there are not any advertisements on the device, this does not constitute a huge revenue stream. Chittum mentions that the New York Times, for example, would therefore only receive $4.20 out of the $14 that readers are charged for their monthly subscription. And say the paper's 1.04 million subscribers switched to a Kindle subscription, the income would be $52 million, which would account for about a quarter of the costs of the newsroom. Essentially, not enough.
Chittum believes that if the Kindle is to become viable for newspapers it will take higher subscription prices and more advertising at high rates. Until then, he says, it "just looks like another way for newspapers to turn profitable customers into unprofitable ones."
Could other e-readers offer newspapers a better deal? Plastic Logic's as yet unnamed device is due to launch early next year, with a large screen that will aim to offer users a newspaper and magazine reading experience that is close to print. In an interview with PL vice president business development Daren Benzi in March, he told the Editors Weblog that the device will support advertising, including the possibility to click on an ad to see more information. The effectiveness of ads could also be assessed to an extent, he said, as PL will be able to "track the information about what the customer is doing with the device." No information has been released yet about how subscription revenue will be shared.
Although it is clear that given the current income generated, e-readers are not going to be the saviour of newspapers, they may well be able to provide an important revenue stream as part of a more complex business model, if newspapers' share of subscriptions is increased, or further supplemented by advertising. It makes sense that the subscription price is far lower than for a print publication, as production costs are considerably reduced. Presently, the high price of e-readers ($489 for the Amazon Kindle DX) is likely to be prohibitive for most but there is potential for newspapers to subsidise part of the cost for subscribers. Detroit Media Partnership has been working with Plastic Logic to develop a lease plan that would allow DMP subscribers to rent the device, for example.
Source: Columbia Journalism Review