Will the iPad change the world?

This week in eBuzz from Michael Carney’s Marketing Week:

  • The iPad and The Customer Dilemma:
  • The New Zeal of the Music Industry

The iPad and The Customer Dilemma

Coming soon: the iPad, a device that will change the world. Or so you’d be led to believe, listening to Steve Jobs introducing the device a few weeks ago:

Click here to watch Steve evangelise.

Magazine publishers in particular are quick to embrace the possibilities of this new distribution mechanism. Inevitably, Wired magazine has been one of the first to prototype its offerings on the iPad. The mag sure scrubs up well through the device.

Interview Magazine, another early adopter of gizmos and gadgets, has put together its own demo (reported and demoed via the Huffington Post).

Will They, Won’t They (Pay)?

Publishers seem to think that the iPad will deliver revenues that simply haven’t happened across the traditional web. Are they right or are they simply dreaming?

First the good news. According to a recent Nielsen survey of 27,000 Web users in 52 countries, almost 50 percent of respondents would consider paying for online access to a magazine, while a little over 40 percent said they would pay for newspaper content on the Web.

However, a couple of caveats: Better than three out of every four Nielsen survey participants (78 percent) believe if they already subscribe to a newspaper, magazine, radio or television service they should be able to use its online content for free.

At the same time, 71 percent of global consumers say online content of any kind will have to be considerably better than what is currently free before they will pay for it.

Good news for the illustrious iPad, then. As the Financial Times notes in a recent report, however, there are some issues still to be resolved before the iPad can truly deliver the profitable, micro-paymented future sought by content providers (whether they hail from newspaper or magazine publishing or from the broadcast media).

The first is the matter of revenue-sharing. Some content creators are unhappy with revenue splits of 30 percent Apple, 70 percent provider — although arguably Apple’s share is not out of line with monies accruing to traditional resellers of the content.

The major stumbling block seems to be the notion of 30 percent commission forever — print publishers in particular have built up a revenue model based around high initial customer acquisition costs, recouped thanks to lower retention costs over the lifetime of a customer. The Apple terms will require a wholesale re-evaluation of longstanding business models. Which may not be a bad thing — for consumers, at least — encouraging long-term customer pampering strategies rather than upfront bribes followed by ongoing benign neglect.

A more serious concern for content providers, however, is the matter of who controls the customer data. As the Financial Times reports:

Apple’s practice of sharing with its partners little consumer data beyond sales volume is a problem. “Is it a dealbreaker? It’s pretty damn close,” said one senior media executive of a major US metropolitan daily newspaper.

Publishers have spent decades collecting information about subscribers such as names, addresses, locations and credit card numbers that influence marketing plans and, in some cases, the content of the publication itself. Apple’s policy would separate them from their most valuable asset, publishing executives said.

“We must keep the relationship with our readers,” says Sara Öhrvall , senior vice-president of research at Swedish publisher Bonnier, echoing the sentiment of other media executives spoken to by the Financial Times. “That’s the only way to make a good magazine.”

It’s a sentiment that’s hard to argue with. There’s massive value in intelligent customer segmentation — and the digital world offers ever more sophisticated ways to slice and dice, to everyone’s benefit. Publishers in particular have acquired vast expertise in direct marketing, and could use that knowledge to great effect through iPad-delivered initiatives, increasing revenues for themselves and for Apple in the process.

The music business, on which Apple cuts its digital teeth, was different. The record industry in general knew very little about its customers (with occasional exceptions — you know who you are, Grateful Dead). But many publishers (especially of magazines) have survived and thrived thanks to close relationships with their subscribers. It makes poor economic sense to disconnect that linkage.

Not that Mr Jobs is reading these words, but if he stumbled across them, we’d urgently recommend he reconsider his user data philosophies and enter into meaningful data-sharing in this new offering. It’ll result in more earnings for Apple Inc, okay?

The New Zeal of the Music Industry

Last week Loyalty New Zealand announced that the Fly Buys programme now has 280,000 songs available to download via Fly Buys Music, after signing a contract with Universal Music New Zealand.

According to the company, 65 percent of all music is now available on Fly Buys Music, including artists from two of the main music industry players, Sony and Universal.

Fly Buys members can redeem points in exchange for 30-, 60- or 90-song download vouchers, The music downloads are DRM-free in MP3 format.

The Fly Buys Music programme is just the latest example of the evolution of the music industry (previously digital atheists) into digipreneurs — with digital downloads the currency of choice.

Other examples? Per Musically.com: in mid-2009, EMI North America announced a partnership with Pollard Banknote to create music-themed scratch-off lottery games. Players could win either cash or prizes such as album downloads and ring tones, redeemed by an EMI-operated website. EMI gets the full wholesale cost of the downloads while Pollard gets a younger demographic to buy its scratchcards.

Then came a prepaid Visa Card programme with MYPLASH, offering artist-themed cards to consumers that are non-credit card carrying teens, calling it a ‘public badge of honor for fans’. Sold in supermarkets, the cards also offer an awards scheme that lets cardholders redeem their points for merchandise, cheap downloads and other EMI promotions.

Then there’s Vevo.com, the record-industry-owned music video site. As we’ve previously blogged (on MarketingWeek.co.nz):

Interscope-Geffen-A&M Chairman Jimmy Iovine painted the big picture [for the music business]:

“Vevo for the first time will give labels the ability to push out our product without having to go through radio or TV stations. Before, we had to make it, ship it and pray for a hit. Now, with Vevo, we can create the content, sell the ads, and even use the data to market new music to people alongside things they already like.”

Beats litigating against your customers anyday.

  • And make sure you check out the Marketing Rebooted eCourses. As the name might suggest, is all about the challenges facing marketers as we head into the second decade of the new millennium. Under that name, we’ll be bringing you a series of eCourses for marketers trained in traditional advertising and marketing methods, who know a little about new generation marketing tools and techniques — but not enough. The first installment will be on social media. And there’s a rundown of the course content and what it will cover here.

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