Updated

You can read opinions of the overall worthiness of Apple’s iPad elsewhere. Here I’m concerned with its credentials as the eBook reader to lead the way from print to a brighter, possibly greener digital future.

On balance it’s a serious contender and likely to displace Amazon’s Kindle from pole position. While the iPad in its current form is still short of ideal, it nudges ebooks nearer the goal.

Of course, this barely matters. Consumers will buy the device regardless of its suitability as an ebook reader. In that respect, the iPad could be the breakthrough ebook device. My comments here relate only to Apple’s iPad as an ebook reader.

How I rate the iPad as an eBook reader:

Its size is about right. The iPad is lightweight, slim and big enough for comfortable reading.

I’ve some doubts over the way Apple will sell ebooks – in my view the company clips the ticket a little too hard. No doubt publishers will feel they have little choice but to conform. It’s an ironic lock-in given Apple’s historic market strategy of being the anti-Big Brother computer maker.

Ten hours battery life is at the low-end of acceptability. It may handle a long-distance flight, but other readers do better.

At 9.7 inches, the display size is right. Colour is good. The screen resolution at 1024-by-768-pixel is less than ideal for long-term text reading - I’ve seen reports of either 100 or 115 dots per inch (dpi). I’m indebted to Bruce Hoult (@brucehoult) who twitters a simple calculation sqrt(1024^2+768^)/9.7 shows it’s 132 DPI.

While this is way better than the 72 dpi on a standard PC display, it’s going to mean tired eyes. Likewise the LED-backlit display is less than ideal.

Apple’s price is respectable for a multi-function device able to handle many applications, but at US$499 plus, it’s a hefty tag for an eBook reader.

My first impression is it needs a lower price, better display and improved battery life if the iPad is to become a serious threat to the printed book – these are all matters Apple may address in coming months.

Scorecard (out of ten):

Finally

These opinions are based on media reports – I haven’t yet touched the device.

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Writing in APC (Australian Personal Computer) David Flynn asks Will 2010 be ‘The Year of the e-Book’?. His report is based on material from tech analyst firm Gartner which says ebooks will boom next year so long as they; “overcome hurdles in price, availability and lack of popular mainstream content”.

All these points are valid, but for ebooks to begin displacing printed books, there also needs to be a great leap forward in display technology. The current crop of electronic books are tiring to read when compared with print.

Higher resolution, large format, non-flickering, non-backlit displays are available, but not in the quantities required and not, yet, at a realistic price. After years of looking at other forms of electronic books, I’d say once ebook makers overcome this hurdle, they’ll be mainstream.

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Australian Reseller News, Computer Reseller News, New Zealand Reseller News and The Channel serve readers working at the sharp end of the information technology industry.

While many of the stories they cover are similar to those dealt with by other technology media, their specialised audience means the journalists need to filter information through a channel-oriented lens. In most cases this means asking “what does this mean for the channel” and sticking the answer at the top of the story.

Because people who sell or distribute technology read these titles, they are often slightly ahead of market trends. That’s because companies need to speak to resellers and distributors before speaking to the public.

When these publications work well, there’s a flinty realism to their approach. They tend to deal with the nuts and bolts of the business and not airey-fairy possibilities.

New Zealand’s The Channel is mainly advertorial – that is companies pay the publisher for stories written about their offerings. And all three other titles often run sign-posted advertising supplements – they also pad out local coverage with overseas stories of variable worth. Otherwise the publications are news-oriented.

You need to show the publishers of these titles you are a bone-fide computer industry person to get a subscription to the print publications, but all four run free access web sites.

Australian Reseller News

Computer Reseller News (Australia)

New Zealand Reseller News

The Channel (New Zealand)

Advertising sales revenue is the money publishers make from selling ‘space’ in their titles. Most publishers set aside printed pages or parts of printed pages for advertisers. The number of pages compared to the total number of pages in a public  is known in the business as the advertising ratio. Paid for publications have a lower advertising ratio than free publications.

Advertisements fall into two main categories:

• Display advertisements are larger and often more colourful – they can have highly creative text and images.
• Classified advertisements are smaller and often only text with a minimum of graphics.

Magazines typically sell display advertising by the page, although they offer double page spreads, half pages and other formats. Newspapers will sell pages, but they also sell column centimetres (or column inches). Classifieds sell as column centimetres, as lines of text or in some cases by the word.

The more you buy the cheaper it gets

As a rule, the more advertising an advertiser buys, the cheaper the rate per column centimetre (or page if they are buying magazine ads). So a full-page is cheaper than two half pages and so on.

Publishers also offer advertisers discounts if they commit to buying a series of advertising over a period such as a year or six months. So, booking a year’s worth of advertisements in a monthly magazine is cheaper than buying 12 single advertisements.

Some advertising positions attract a premium rate. On newspapers this would be the front page and maybe the front pages of the internal sections. Magazines typically charge extra for the back cover and possibly the inside front cover. Successful titles can also get away with charging a premium for early right hand pages or other attractive sites.

Agencies and commission

In some industry sectors, advertising is largely placed by specialist media buying companies who develop strategies for their clients and negotiate with publishers. These companies earn their income as a commission. Typically this is between 10 to 20 percent of the booking’s value.

In return for the commission, media buying agencies contract to pay their invoices by a set date after publication – typically a month or so after the advertisements appear.

Advertisers who buy their own space are known as direct clients in the industry. They often haggle over prices, but unless they are large-scale buyers of advertising have less clout than agencies who can buy in bulk. It often harder to collect money from direct clients than from agencies.

Rate cards

Publishers issue rate cards which show the prices or rates for each type of advertisement. Historically they were cards, but now they are usually available online, try Googling the term to see some. Rate cards prices are often, but not always negotiable. They also describe available advertising formats. Depending on circumstances rates shown on rate cards are negotiable.

When an advertiser or a buying agency buys advertising they are usually buying reach that is a publication’s ability to reach so many potential customers.

Advertorial

People in the business use the term advertorial when publishers offer advertising linked to editorial features, or in some cases when a publication’s editorial integrity itself is up for sale.

Advertorial deals come in many flavours. Many publications are more or less entirely made up of advertorial material – if an advertiser pays for space they are given a degree of say over what appears in the publication’s editorial content.

More credible titles wall off areas of content for advertorial projects. These might be clearly marked with terms like “advertising supplement” or “special advertising feature”, but it isn’t transparent to the reader.

Some publishers simply run editorial-style material provided by advertisers and charge for it. Others allow advertisers to send copy for inclusion alongside paid advertisements.

Publishers may or may not allow advertisers to sign off on their advertorial content. Some publishers will have journalists write advertiser-friendly copy for these sections, others keep up a strict demarcation between editorial and advertising.

It’s about the business model

As a rule, free publications are more likely to run advertorial and compromise editorial integrity for commercial consideration than paid-for titles. Paid titles are less likely to take this approach. Some paid titles have little in the way of advertising and charge a hefty premium for quality editorial content. This works best if they can manage a high circulation.

Have I missed anything here? Do you have any questions about how this works?

Other articles in this series:

Where the money comes from: - an introduction to traditional print publishing business models
Copy sales: – how traditional print publishers make money from selling copies

In Publishing business models: Where the money comes from we saw print publishers typically make money from  copy sales and advertising sales. Here we look more closely at copy sales:

Publishers don’t usually keep all copy sales revenue. Typically newspapers, magazines and books sell through newsagents, bookstores and other outlets. Retailers earn a margin of somewhere between 30 and 40 percent of the cover price – which may or may not also include sales tax, GST or VAT depending on local tax rules.

A second slice of the total copy sales revenue may go to a periodical distributor, but more often distributors charge a fixed fee per copy delivered and not a ticket-clipping percentage.

Sell-through rates

Not every copy of a publication sent out to a retail outlet is sold. Publishers talk of the sell-through rate – that’s the percentage sold. Retail outlets usually send unsold publications – often just the masthead – back to distributors to get a refund on unsold copies.

Some poorly managed titles have a low sell-through rate. Others can have a higher rate. There’s a range of rates, the number could realistically fall anywhere between 20 percent and 80 percent.

Some publications sell out – but this is rare and publishers may regard selling-out as a failure because they didn’t maximise sales. Long established, popular, frequently-published titles often have much better sell through rates than newer or irregular publications. That’s largely because publishers have more information to help them plan print runs and know where to send copies.

Revenue lags sales

Copy sales revenue for monthly titles usually takes a month or two to trickle from the reader, through the retailer and distributor back to the publisher.

Given printers often require payment – or a guarantee of payment before the presses role, this means a publisher would need to carry the costs of at least three editions of a monthly title before seeing a penny in copy sales revenue. More in the case of weeklies, less in the case of bi-monthlies and quarterly publications.

This revenue lag explains why so many publishers are keen to sell their titles direct to readers through subscription sales.

Subscriptions are particularly lucrative from a publisher’s point of view for two reasons.

First, the money arrives upfront – usually a year in advance, but some publications offer two-year and even three-year subscriptions.

Second, a publisher gets to keep all the revenue – there’s no retailer cut – but mailing out subscriptions has a cost attached and, often, there’s a small management fee paid if an external company handles subscriptions.

Have I missed anything here? Do you have any questions about how this works? Please add your comments and questions below or get in touch through my contact page.

Also in this series:

Where the money comes from

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Publishers are experimenting with new online business models. So I’m starting a series putting newspaper pay walls, electronic books and other strategies in context. My plan is to show how old-school publishers made and continue to make money, then use this to examine their digital strategies.

This is a basic look at the print publishing business model. You may consider it oversimplified, but the big picture is more important than the details.

Revenue

Historically print publishers earned revenue from copy sales and advertising. Some publishers, mainly in the trade press, rely solely on advertising. Others, such as book publishers, rely solely on copy sales. Most newspapers and magazines make money from a mix of the two.

The balance between advertising and copy sales revenue usually determines a title’s editorial strategy.

The revenue part of a publication’s business model is simple:

Revenue = copy sales + advertising sales

Publishers who rely mainly on copy sales for their income typically spend more on producing quality editorial to attract readers. Advertising-focused publishers often put less emphasis on editorial. In extreme cases, they do away with editorial all together producing publications which closely resemble catalogues.

In part 2, we’ll look at print copy sales.

This post is deliberately short and simple. In future I’ll ask readers have I missed anything here? Do you have any questions about how this works?

Please add your comments and questions below or get in touch through my contact page.

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By Bill Bennett

Magcloud is an online magazine shop selling digital print titles. It looks like an interesting idea, until you peer closer and realise like other forms of digital publishing, it is a more expensive proposition than traditional publishing.

While Magcloud is digital and the shop is a website, it isn’t online publishing. When you buy a title, the issue is custom-published using something called HP Indigo technology. Then Magcloud mails the item to you.

Will it catch on? I doubt it. The first title that caught my eye when I browsed through the wares on sale at Magcloud was something called emDash. It’s put together by George Mason University Graphic Design students and is a showcase for the student’s design work.

As you’d expect, it is a good-looking magazine. But, a single issue costs US$7.70 for a 48 page publication. The only advertisements are house ads – so your $7.70 buys concentrated editorial goodness. But even so, that’s expensive – more than NZ$11 for just 48 pages.

EmDash’s price is typical of the publications now on offer.

There’s a tie-in with Hewlett-Packard somewhere along the way. But the relationship isn’t made clear at the web site. Or if it is, I couldn’t find it.

So, you pay more for a title that you would in a conventional magazine shop. You wait considerably longer to get your hands on your purchase. And you have to jump through some hoops creating an account to use the service.

On this basis Magcloud is not the magazine shop of MY future.

Image by Rowen Atkinson via Flickr

Practical subscription models are possible. Micro-payments need a lot more work and may never be a serious option.

Many traditional newspaper publishers plan to charge for online news and other material. Or maybe it would be more correct to say they hope to charge.

Currently online publishers mainly earn money from advertising. They say, with some justification, this doesn’t generate enough revenue to pay for the teams of journalists and editors who produce online newspapers and magazines. It certainly doesn’t deliver the ‘rivers of gold’ profits they enjoyed back in the heyday of newspaper publishing.

But publishers wishing to switch from an advertising revenue model to a charging model or a mixture of advertising and pay-to-read face an up-hill struggle.

For a start, only a small percentage of existing readers are willing to pay any money. Judging by what I’ve heard from people  in the industry, publishers believe somewhere between one and 10 percent of existing readers would be willing to hand over money.

The precise number depends on many factors including the value of the material being offered. But most publishers who’ve tried this in the past have only managed to sell paid subscriptions to one or two percent of online readers.

How much does a single page cost?

Let’s for arguments sake here agree that 10 percent of an online publication’s existing readers would be prepared to pay for content. Remember this number is higher than anyone appears to achieved to date.

This means in order for the paywall to generate as much money as the current advertising model each paying reader will have to contribute as much revenue as ten existing readers.

Online advertising is generally charged by the CPM (cost per thousand). Typically publishers can earn somewhere in the region of $50 for every thousand page views (I’m using indicative numbers and not precise numbers). This is 5 cents per page view. Then to make the same money a single online page would cost 50 cents to read.

If publishers can only convert 2 percent of existing free readers into paying readers the single page price would rise to $2.50 – which is close to the A$3.50 The Australian Financial Review charges for each story.

Charging by the page for online newspapers

While billing users by the page to view online content may look attractive to publishers, it’s not a cost free transaction. The price of delivering a single web page to a browser is so small it is in effect negligible. The cost of adding a per page billing system to a site with ecommerce gateways, security and the paywall technology is slightly higher – though still small compared with the $2.50 fee calculated above.

However, that fee would only replace online advertising revenue. As Rupert Murdoch says, the existing revenue isn’t enough to pay the bills, let alone make a profit. On this basis the cost charged per page would need to rise to at least $3.00, but let’s say for the sake of argument Murdoch needs to make $3.50 per sold online page to cover costs and keep his shareholders happy.

The micro-payment price is just plain wrong

There’s something very wrong with charging readers US$3.50 to read a single online story, or for that matter the A$3.50 charged by the Australian Financial Review. It only costs $3.00 to by a print edition of the newspaper, containing somewhere in the region of 64 tabloid pages. The physical newpaper has been written and edited by a large team, printed on dead trees, wrapped up and distributed across an entire continent to arrive at a local newsagent, who takes a 30 percent or so slice of the cover price. It has at least 100 stories – usually plenty of really good reading – and vast amounts of valuable information. All for 50 cents less than the cost of a single online page that cost the AFR’s publisher nothing to deliver to your screen.

Not only that, but the printed paper is your property for as long as you want. It’s hard saving or downloading the AFR’s online content – though you can print it out at your own cost – probably another 10 cents or so on top of the $3.50 you’ve already paid.

Similar logic applies to any other newspaper sold piecemeal online – it’s not really a sensible purchase. There are times when it makes sense to pay for the occasional story, but over the long haul it is much cheaper to buy the print edition. In fact a subscription to the print edition is 20 percent cheaper than buying the paper each day directly from a newsagent, which makes purchasing stories online relatively more expensive.

What about digital subscriptions?

If buying online stories piecemeal doesn’t make sense, what about digital subscriptions? The model closest to home for me is The Australian Financial Review which charges A$75 a month for access to the digital edition only – that’s the same price as a subscription to the print edition. Which from a reader point of view makes far more sense, but doesn’t pass on any of the savings involved in not printing or distributing the physical paper. Given the costs involved, the margins on this would be huge – which may cause resentment from readers, though probably not the well-heeled types who buy the AFR. But it’s important to recognise the Financial Review covers a specialist niche and its readers can afford to pay a premium online – though by all accounts not many do. It would be much harder for a general newspaper to charge this kind of price.

It’s pretty clear after looking at the numbers that publishers are going to follow the subscription model for online content sales and not micro-payments and selling stories one-by-one. Maybe it’ll work for Murdoch, after all, this is the man who convinced half the western world to pay for television – something that had previously been free. Yet there are other complications. As The Sydney Morning Herald points out Murdoch’s claims that readers would be willing to pay for ‘quality journalism’ is, well, something of a talking point.

Also, there are are major privacy concerns about Murdoch’s plans. As Wendy Davis explains at MediaPost, Murdoch wants to collect reader data – that’s not a move to endear yourself to customers when you’re about to hit them up with new charges.

As I’ve said before, as a journalist and editor, I’ve a vested interest in publishers finding ways to make readers pay for editorial. Unlike many I’m not in principle against the idea, I’m just don’t think it can work without major disruption and top-to-bottom reform of the entire publishing industry. Only a fool would dismiss Murdoch, he knows the media business inside out, but this could yet turn out to be News Corporation’s Vietnam.  We’ll know soon enough.