Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Could Bundled Deals Set The iPad Free?

Posted by Tom Foremski - February 16, 2010

The low-end iPad has a retail price of $499 and a materials and manufacturing cost of about $229, according to iSuppli.

Clearly, Apple has plenty of room to be flexible on pricing, just as it did with the iPhone, which started at $599 and is now $199.

Apple plans to take a 30% cut on any media that is bought by iPad users through its online store.

That means Apple could sell the iPad for $100 and still profit from all the media it can sell over the lifetime of the iPad.

But what is more likely is a situation where Apple can sell the Pad for $100 to publishers and then they can offer it for free as part of a subscription deal.

For example, Ryan Tate over at Gawker, reports that the New York Times is considering charging as much as $30 per month for a subscription to the iPad version of the newspaper.

At that price, the New York Times would have enough margin to offer a 'free' iPad with an annual subscription. Especially since it can charge advertisers higher rates for the richer ads it can deliver on the iPad.

Another scenario is that publishers will band together and offer a free iPad with a bundle of subscriptions, say a local newspaper, a book of the month club, and some magazines such as Atlantic Monthly or the Economist...

Whatever the bundle, there is clearly plenty of room for jiggling the maths and coming up with a free iPad deal in exchange for a subscription.

A key advantage for Apple is that the publishers will be advertising the iPad bundles, Apple won't have to spend a dime on that promotion -- another reason why it can offer the iPad for a reduced price to the publishers.

However, while newspapers and magazines can ask for higher ad prices on iPad media, they will also have to provide metrics data. Unlike a paper publication, the digital iPad will provide a means to track which pages were looked at, which ads were touched, videos viewed, etc.

The risk is that bundled deals might attract the wrong type of customers, those that want a cheap iPad. That means they aren't viewing the ads, and that means the publishers' ad revenue could be disappointing.

But for Apple, it's all good because more people have iPads and that means potential sales of all other media from other publishers: music, books, Hollywood, etc.

Either way, the economics of the media industry could set the iPad free. That means trouble for other eReaders. That also means preemptive strikes by Amazon Kindle. Techcrunch reports that Amazon is trying to figure out how to give a free Kindle to Amazon Prime subscribers.

- - -

Please see:

The iPad And Its iDelete Censorship Technology

Analysis: iPad Is an iDRM Storefront For Apple Ambitions To Dominate All Digital Media Sales

Analysis: DRMStore Wars Begin...Bad News For E-Books, E-Readers But Good For Notebooks


Story link | Subscribe free | Categories: A Top Story, MediaWatch




ForemskiInnovator.jpg

The Holmes Report names Tom Foremski one of the top 25 Innovators of 2013.




-->