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Publishers of digital content face uphill battle

The publishing industry has not been having fun in the last few years. Newspapers, magazines and books were hurt by competition from the Internet and the changes caused by consumers choosing digital content rather than traditional ink on paper. The industry has literally been decimated: roughly one in ten developed world publishers from 2006 isn't even around any more.

With two of the world's largest tech companies, Apple and Google, wooing them with new subscription pricing plans last week, one might think their business is about to get better.

One would be wrong, listening to the publishers' comments in the press.

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Before we get to that, let me share a story about my recent travels and reading habits. For the last two weeks I was giving a series of Predictions talks for Deloitte in France, Belgium and Turkey: trains, planes, and my suitcases were already close to 23 kilos! On only my third day, I finished the last book I had packed, and snagged the last Stieg Larsson book and David Mitchell's latest, The Thousand Autumns of Jacob de Zoet at Gagliani, a great English language bookstore in Paris.

By Turkey, I had finished those and English bookstores were not to be found. Although I am old fashioned and prefer paper books, my iPad was starting to look like the best, or at least the only, choice. In the mood for some trashy thrillers, I saw that Alistair Maclean's entire oeuvre (if one can use that word about his novels) was available as eBooks.

I bought two that I remembered fondly from the 70s, but noticed that a third was not on the iBooks library…but it WAS available on two other platforms. Same price. But I would have needed to get up, cross the room, find my wallet, and enter my credit card info.

Meh. At the end of a long day, I was just too lazy, so Breakheart Pass remains unread by me, at least in this millennium.

Now back to last week's news: Apple has said that if publishers want their content to be sold on the Apple platform, then they have to offer it at the same price as on their own websites… and they have to give Steve and friends a 30 per cent cut. The rationale for this split is that Apple is making it much, much easier for consumers to purchase published content. Especially for things like digital newspapers and magazines where consumers have become used to - and want - annual subscriptions, rather than buying one issue at a time.

The tricky bit here is that the publishing industry says it doesn't really have any money to give away… see the comment about decimation in the first paragraph. But do they have a choice?

From Sunday's New York Times, Sara Ohrvall of Bonnier, the Swedish company that owns Popular Science said: "As an industry, we can't keep punishing the consumer because we don't like the terms … we came to the conclusion that we need to provide that [subscription]option in a store they want on a device they want."

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What about using Google, instead of Apple? Publishers I have talked to believe the tablet is likely to be the dominant device for reading digital content, and Apple has a very big early lead. That installed base of tablets, the iTunes store and the more than 100 million credit cards already signed in makes it a market that will be too big for many to ignore … even as they complain about the economics.

Will Apple or Google (or someone else) end up "winning the subscription war?" I don't have a clue, and I don't think it actually matters to publishers … they will probably end up having to deal with both.

I am very sure that for publishers to talk about their business model and how it is threatened by these new deals is the wrong way to go. Readers don't understand how the business model is changing. And even if they did, they wouldn't care. They want to read great content, and they want to do so in the easiest way possible.

The publishing industry has had to deal with distributors before - some of whom took a more than 30 per cent cut. If buying becomes very easy, then we can expect sales of books, newspapers and magazines to rise, not fall.

Think about my flight home from Istanbul. I bought $25 worth of eBooks. Yes, a cut went to a middleman. But wasn't that better - for the publishing industry - than me watching 12 hours of movies?

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About the Author
Technology columnist

Duncan Stewart is the Director of Deloitte Canada Research in the areas of Technology, Media & Telecommunications (TMT). Duncan has two decades of experience in the TMT industry. As an analyst and portfolio manager, he has provided research or made investments in the entire Canadian technology and telecommunications sector. More

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