Information Is An Asset

[Steve Bennett]

An interesting article in today's newspapers as Amazon is rebuffed in its efforts to sign Kindle deals with local publishers News Ltd. and Fairfax. From the SMH:

Mr Murdoch has questioned the benefit to newspapers of using Kindle because Amazon keeps the lion's share of subscriber revenue, thought to be 70 per cent, as well as details of subscribers which News argues should reside with it.
So the newspapers are either saying that the cost of producing and distributing the physical (print) version newspaper is less than 70% of the total cost or the 30% offered by Amazon is 30% of a too low amount for online subscriptions. In the US, monthly newspaper subscriptions on Kindle sell for between US$6 and US$14 per month.

It's also possible that the publishers think they can get a better deal out of Sony or Apple. They could be right but I doubt it. From a publisher's perspective both Amazon and Apple 'steal' their customers. Apple's iTunes store is the model Amazon has adopted. When you buy on iTunes, Apple holds all of the customer details and the publisher just gets a cut of the sale price. No customer data is given to the publisher.

From the news today, it is obvious that News values the subscriber list as well.

It's also interesting to note that when you buy a book for US$9.99 on your Kindle, Amazon pays the publisher US$14. The assumption is that Amazon is making a good margin on the Kindle devices themselves. I wonder how long this pricing model can be maintained?

What's interesting in all this is what is missing from the discussions. Where is the monetary value of all the additional things you can do with an electronic newspaper that you can't do in print? Like live hyperlinking to additional content and advertising, real-time news updates, searchable archives, financial market prices in real-time, etc.? All of this value-add information and analytics seem to be swept up into the general pricing models.

In this market, content was king until overthrown in a revolution led by the owners of technology-based distribution channels. Information is useful but not really a player, more a foot soldier in the revolution.

So I don't know how this story will end, but a Kindle with local content looks less likely today. I'd also add that if Apple launches a tablet that competes with Kindle, then News and Fairfax are still going to have to give up their customers just as the music publishers have.

The lesson? If information is an asset, then just like in traditional industries (like manufacturing and print newspaper publishing) it's not worth very much if you also don't own the distribution channel. Which is exactly why physical newspapers are taken out of the print works by the publisher's own fleet of trucks each morning.

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