Issue: Newspaper and Magazine Publishers have gotten pricing wrong on the Kindle.Â They need to get it right for the iPad.
Commentary by: David Vinjamuri
I used to teach a pricing class at NYU whose enrollment was approximately one quarter of the number of students I routinely see in my new media survey courses.Â Pricing is one of the most important decisions that a marketer can make, but it’s a chore much less interesting to marketers than advertising or promotions.Â At the largest consumer companies, pricing is often set at the highest levels within an organization, and as a result young brand managers may have very little practical experience with the consequences of making bad pricing decisions.Â The magazine and newspaper industry is no exception.Â In the past few years, these publishers have repeatedly erred when pricing their content for the Kindle.Â With the upcoming launch of Apple’s iPad, these folks have another chance.Â They’d best not waste it.
As the clock ticks down to first shipment of Apple’s iPad, the company is reportedly in deep talks with magazine and newspaper publishers.Â While early deals with book publishers got much of the attention before the iPad launch, robust content deals with print publications may be at least equally important to both the iPad’s success as well as the future of the traditional news media.
As this advertising blog has noted previously, print publications are living on borrowed time.Â Rate bases have been shrinking and might have done so even if these organizations not been so quick to post their content freely online in the mistake belief that online advertising revenue would offset the sales loss from cannibalization.Â Just as the iTunes store did for the music industry and the Kindle has begun to do for book publishers, the iPad may create a new revenue model for newspapers and magazines.
The cardinal rule of pricing is that it’s easier to lower a price that’s been set than to raise it.Â Publishers seem to have learned this a bit two well.Â Newspaper pricing on the Amazon Kindle is far too aggressive, ranging up to $14.99 a month for the New York Times.Â Many newspapers and magazines routinely offer new or lapsed subscribers significantly cheaper deals for print subscriptions than the fixed price for the Kindle.
Publishers need to remember that the “right price” for a product is the highest price a consumer is willing to pay and feel that a fair value has been received.Â “Fair value” is an important concept here.Â Photos and graphics reproduce poorly on the Kindle.Â There is no sense of holding the newspaper or being able to scan the front page.Â What you get is literally the news.Â And consumers are aware that the production costs of a printed magazine are entirely absent from the electronic version.Â There is no justification for the substantial prices for these publications on the Kindle.
The iPad is a more complex story.Â Because of its high resolution color screen and its ability to show video, the iPad will allow publishers and advertisers alike to create a richer, multimedia experience that may far surpass the printed publication.Â But refining these efforts will take time, and demand patience from readers.Â Therefore, publishers would be wise to price magazines and newspapers at a level that encourages consumption rather than placing a choke-hold on growth.Â Penetration pricing, rather than skim pricing is the correct strategy here.Â If publishers attempt to overcharge, they’ll have only themselves to blame for losing their last, best chance to find a new revenue model.