Apple’s iPad won’t save newspapers

Rupert Murdoch described Apple’s iPad as a “potential saviour of newspapers” not long after the tablet computer first appeared. At the time, his optimism was misplaced. Both the numbers and the economics showed otherwise.

Small savings, big costs remain

Moving to the iPad saves publishers money on paper, printing, wrapping and distribution. Yet Apple’s 30 percent cut of subscription revenue is roughly the same as the margin taken by newsagents and other retailers. Editorial costs don’t go away, so the overall savings are relatively small.

More importantly, fewer readers are willing to pay for digital subscriptions than for printed copies. Evidence in 2010 suggested only five percent of readers would pay. Even if that number had climbed to 25 percent, copy sales revenue would still fall.

Fewer readers means less advertising

Print newspapers also enjoy a secondary audience. A copy bought in a shop is often passed from reader to reader. Digital editions make sharing harder because of copy protection. That reduces the number of readers per subscription and in turn makes advertising less valuable.

True, digital readers are more identifiable, which improves targeting. But advertisers ultimately want reach: fewer readers meant less ad revenue overall.

Analysts warn of limits

Ovum, a technology analyst firm, reached the same conclusion. In a May 2010 report, principal analyst Adrian Drury wrote: “Apple’s much-hyped tablet device alone will fail to secure the future of news and magazine publishing.”

He argued that while the iPad offered publishers new distribution channels, it was still just one device. Sales volumes would take time to build, while the challenge of finding a sustainable business model for publishing was immediate. Ovum also predicted the iPad media market would quickly become congested.

A turning point, not a saviour

Apple forecast it would sell 13.2 million iPads by the end of 2011. That compares with 25 million iPhones shipped in 2009 alone. While the iPad and later tablets reshaped media, they were never the cure for declining newspaper fortunes Murdoch and others hoped for.