MythBusters: the Free iPad
In today's episode of MythBusters, we take on old pal Philip Elmer DeWitt's contention that magazine publishers can't afford to bundle iPads with subscriptions. Concludes Phil on his authoritative Apple 2.0 blog this morning: There's not enough margin in a $60-a-year subscription to justify giving away a $499 iPad.
Not so fast, my friend. I believe there's a business model here that enables everyone to come out ahead.
As proposed here, it would require Apple to offer an OEM version of the iPad. The more aggressive Apple can be on the wholesale price, the more margin that resellers would have to bundle the iPad with content. The price differential would allow publishers to resell iPads along with subscriptions and digital sneaker phones — a searchable archive, videos and interactive content, exclusive access to features unavailable to non-subscribers — and still make a profit. While doing so, they seed a new generation of readers with a device that makes their publications relevant again.
If Apple made iPads available to publishers at $100 less than the retail price, Time could add $120 for a two-year subscription and offer consumers a Sports Illustrated-edition iPad for $519, payable in 24 monthly installments of $21.99. More aggressive yet, they could bundle trial subscriptions to every Time Inc. title for the first month, and a subscriber-only app that provides access to better seats for big games, and better prices on sports merchandise. That's where partnerships come into play, and entrepreneurial publishers find ways to create new revenue streams that surpass subscription revenue, driving the price of the iPad even lower. And maybe someday . . . free. (There's that word again. Free.)
There will undoubtedly be many consumers who pass on the iPad, figuring that they have enough capability in their front pocket without reaching into their back pocket to buy another device. A loaded iPad will be more attractive than a base model, if the price is right. A music lover might fall for a Rolling Stone iPad with updated playlists and access to artist interviews, and a business type might jump at a Bloomberg BusinessWeek iPad with commentary and real-time stocks. As noted elsewhere, the possibilities are limitless.
Maybe instead of buying the iPad from Time Inc., you lease one for the length of your subscription. At the end of two years, turn it in and get a new one (and another two-year subscription). Then Time Inc. donates the aging iPads to schools and takes the writeoff. Yet another incentive to buy an iPad from a publishing company, knowing that someday it will help a child who might otherwise never get the opportunity to use one.
What's in it for Apple? A powerful new distribution channel that turns every newspaper and magazine into an Apple reseller. All of a sudden Apple has more people crowding the aisles of its App Store, picking up apps and books and music on which Apple takes its cut. Ditto for AT&T, as iPad subscribers opt for 3G upgrades and monthly services for real-time updates to their subscriptions.
Myth? Not really. It will take partnerships to power the iPad. All that's needed is for someone to make the first move.