Why Ads on the iPad & Other Tablets Won't Make a Difference

Karsten Lemm, a San Francisco-based freelance writer who works mainly for the German newsmagazine Stern, makes a convincing case that my earlier post on the iPad gave short shrift to the advantages of tablet reading. As he puts it: "The Kindle is hardly a great device for displaying magazine content, and Amazon's conditions have been less than favorable to publishers. That's likely to change with increasing competition. The iPad, future Google Android tablets, and e-readers like Skiff and Plastic Logic Que give publishers at least a chance to offer a new kind of reading experience that people will be willing to pay for."


I hope Karsten is right, but I have strong doubts. The free genie is out of the bottle, and it will be extremely hard--if not impossible--to get people to pay for what they already get for free. Even an old print guy like myself has to make a confession: Far too often I'll peruse the contents of a magazine at a newsstand. If there's a story I'm keenly interested in reading, I'll pass on buying the magazine and simply go to the website. I've done this for The Atlantic, Rolling Stone, The New Yorker, Vanity Fair, Esquire, and Sports Illustrated, to name a few. There has to be three of four stories I badly wanted to read in a magazine before I'll pay for it on the newsstand.


Others suggested that tablet reading will allow advertisers to reach consumers in new and different ways, creating greater revenue for content providers. The basic problem with this argument is that few advertisers have used websites to smartly do multi-media ads, even though the ability to do so has been there for years. Even if advertisers take greater advantage of the digital space on an interactive e-book reader, it still won't offset the loss of print advertising. So the essential problem confronting old media doesn't substantially change. It's costs are badly out of sync with current revenue.


Yes, it's true that production and distribution costs account for a high percentage of the cost structure bringing down traditional media. Ad Age recently quoted Google's Hal Varian who says that typically 53% of a newspaper's budget goes to printing for distribution--costs eliminated through digital distribution--compared with 35% on the "core" functions of news gathering, editorial and administration. But what he many not know is that in many instances, costs are so out of control in traditional media companies that if every editorial employee were eliminated, they would still bleed red.


As Kathy Gill (aka kegill) smartly points out in a response to my blog post, there are significant cost savings associated with digital distribution. Kathy reminds us of an ugly truth many in journalism prefer to ignore: that readers have never really fully paid for content, anyway. "For newspapers," she writes, "we subscribers have never paid for the content of the paper with our wallets, we paid for it with our collective eyes. We paid for the convenience of having the paper delivered to our door, whether or not that fee actually covered distribution costs." 


Today, we've trained a generation of readers not to pay for anything. With the exception of The Wall Street Journal, ESPN, Barron's and a few other niche sites, no one has cracked the code on the paid formula. Even The New York Times, which has the highest quality content on a consistent basis, hasn't figured out how to get money for its very valuable journalism. So there's little reason to think that the emergence of the iPad and a lot of competitive products will alter this reality.


I'm not trying to view this glass as half empty, as Chris Herot suggests, but I'm not very optimistic here from a financial point of view. I am, however, enthusiastic about the reading experience on a tablet based on my experience using the iPhone. It's a great and convenient way to access quality journalism and participate in community around that journalism. I suspect the iPad and its rivals will really ratchet up digital reading.