iPad app pricing: A last act of insanity by delusional content companies

Kevin Anderson is a freelance journalist and digital strategist. He previously worked as the digital research editor at the Guardian, and held a number of positions at the Guardian and BBC. This article was originally published on Strange Attractor, where Anderson blogs with his wife Suw Charman-Anderson.

Looking at the iPad app rollout, you can easily separate the digital wheat from the chaff in the content industries. And you can separate those who are developing digital businesses from those who are trying to protect print margins, and who see the iPad as a vertical, closed model to control and monetize content.

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There are those who believe that they sell content and that they should be compensated for it. Just as with the music industry, they couch this in terms of repaying content creators, when it really is more about wistfulness for the days of double-digit profit margins.

Those who view their primary business as selling content believe that not only can they charge for it but that they can actually charge the same or more for it, just because it is on the iPad. Time, for example, is charging $4.99 a week for their iPad “magazine”.

Scott Karp, CEO of Publish2 and editor of Publishing2.0, put it as clearly as it needs to be put on Twitter:

Paying $4.99 for magazine on newsstand includes cost of printing/distribution. Now you pay for iPad instead, so magazine should cost less.

What do you get for $4.99 a week? “Unique interactivity including landscape and portrait mode, scroll navigation, and customizable font size.”

Oh, I’ve never seen that in a mobile web browser, I say with incalculable levels of sarcasm. That’s like morons in the ’90s having Java animation that you actually couldn’t do anything with and calling that interactivity. You think that’s insane and delusional, just wait, it gets even better! No content sharing on the app, which I’m assuming means you can’t bookmark or Tweet your favorite stories, and you’ll have to buy and download the app every single week. There is also no indication that they will charge for their now free iPhone app or their website.

Note to Time digital strategists: Sorry, caching your site so I can take it with me when I’m on the move isn’t a feature worth your premium pricing. I do that now, and have done it for years, with an open-source app called Plucker and an aging Palm T3. I’m truly sorry. Do you actually use the internet or digital devices? Or do you just indulge your bosses’ angry fantasies about the good old days?

Let’s look to Rupert Murdoch’s proud paid content pioneer, the Wall Street Journal. What is the Wall Street Journal selling? The past. Alan Murray, deputy managing editor and online executive editor for the Wall Street Journal, says on MarketWatch:

We have come up with a version of the Wall Street Journal on the iPad that I think is closest you get to a newspaper reading experience on a digital device.

To be fair to Murray, he goes on to say that anyone giving their content away for free on the web won’t be able to convert those web readers to paid readers on the iPad. Murray says:

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You have these apps, but you also have a web browser. So I don’t see how any newspaper that is giving its content away for free on the web is going to be saved by the iPad because the iPad makes it easier to access that free content.

Unless the Wall Street Journal’s app not only delivers a “newspaper reading experience”’ (which I frankly am not missing anyway) but also picks my stocks for me so that I can retire next year, I’m not going to pay $17.99 a month for it when I can subscribe to the website for $1.99 a week. I didn’t work on a journalist’s salary and still manage to be in a financially secure position by giving money away to grumpy old media moguls like Murdoch.

Paul Kedrosky, venture capitalist and private equity investor who writes the blog Infectious Greed, said on Twitter, “Paying $17.29/mo for WSJ iPad app should disqualify you for something important, like being allowed to use money.”

As I’ve said before, Murdoch for all of his brash brilliance has no understanding of the economics of digital businesses. I give him props for still having the power to shift the discussion, and I think that his paywall strategy at the Times might help it stem its £250,000-a-day losses. However, his paywall strategy is a defensive move, not a long-term strategy. Unless he starts building credible digitally-focused businesses as soon as the paywall brings in some cash to stabilize the finances, it will be a brief pause on the path to collapse.

Now, let’s look at other strategies for the iPad. Let’s look at the Financial Times. Robert Andrews, UK editor of paidContent, says that the FT secured sponsorship that allows it to offer its iPad app for free for two months, after which time it will shift to subscription model with the promise of additional features. Much cleverer.

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Suw and I say often that one thing really lacking when it comes to digital content is commercial experimentation. The FT securing sponsorship for a free app for two months is a good step at not only experimenting with content but also with payment models. The Economist earlier this year released a report on social networking, allowing users to download it for free and giving sponsors prominent credit for the offer. This is clever. Premium sponsorship opportunities for special content or services.

Look at the development thinking behind National Public Radio’s iPad app. NPR did market research and found that up to 5 percent of its audience planned to buy an iPad. It knew what the opportunity was. It also used iPad development to improve the experience for visitors coming from search or social networking services, explains Kinsey Wilson, senior vice president and general manager of NPR Digital Media.

Compare the strategies and thinking. On the one hand, we have a set of pricing models that deliver marginal value for premium prices and show very little to differentiate themselves from the web experience. These pricing models are based on a sense of entitlement to set pricing as it was in the days of print. I won’t even call them strategies because they lack any kind of realistic strategic thinking.

On the other hand we have a set of strategic pricing structures. NPR takes a realistic look at the commercial potential, does market research, and develops its app not just for a single device but also as a chance to make improvements to its overall service. The FT experiments not just with content but also with the commercial strategy.

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In terms of who is positioning themselves for the future by delivering value to their audiences and experimenting with business models, it’s clear. If any company thinks that the iPad will allow them to rebuild the monopoly rent pricing structure of the 20th century, then you’ve really fallen prey to Steve Jobs’ reality distortion field, and you’ve blown yet another chance to build a credible digital business. I’ve got a game you might want to check out — Final Fantasy.