The other week at the Adobe Max conference, I listened as CTO Kevin Lynch discussed the new Adobe Digital Publishing Suite. I was pumped. As he sold it (and I believed), this would be a new opportunity for people wanting to jump into the digital publishing space, reducing barriers, and all that good happy stuff. Here’s what I learned that caused my happiness to drain, my wallet to theoretically shrink, and my business hopes and dreams (not that I planned on starting my own digital magazine – just sounded cool), to crumble. (FCC: I’m not paid, endorsed, compensated, or sponsored by Adobe…yet. Adobe: I’ll take a free copy and update this review if you are interested <wink> <wink>)
Adobe is selling 3 versions of the product: single, professional, and enterprise. Forget enterprise – I’m not going down that path today, so let’s just look at single and professional.
Single is great. For a one-time price of $395 (very reasonable in the digital publishing field) you can have your own iPad app that will be a magazine of your choosing. The downside is, you get 1 app…no updates. So, you’re really not publishing a magazine, more of an informational app that will never change. I’m not sure who this will really work well for. I guess if you’re going to, say, create a app for a school project, have a hobby that you plan on doing once (maybe a book or short story) – than yah, this is great for you. But I’d want something I can update and change, which rules this out. With that in mind – we upgrade ourselves to the professional edition.
The term professional just sounds fun – don’t get me wrong. I can go from an idea in my head to iPad app in a +/- a few weeks. I really think they put together an awesome product (from what I’ve seen). The web interface looks great for arranging and managing the magazine. There’s simple integration with InDesign – everything you look for in an easy iPad publishing solution. I was excited…until I started digging into the pricing. Here’s the real business-angle breakdown of the pricing and a little break-even analysis.
First, a few assumptions, as there are a few pricing levels:
- We’re a new magazine with no clue how much our reach will be. We’re in year 1 of operations and we will publish 12 issues a year. We’ll only explore the costs associated with using Adobe Digital Publishing Suite (yah – you still have overhead, labor, etc.).
- Readership levels will impact price. We’ll assume steady growth as follows:
- Months 1-3, 1,000 per month
- Months 3-6, 3,000 per month
- Months 6-9, 5,000 per month
- Months 9-12, 7,000 per month
- Total: 48,000 downloads in year 1
- Final pricing note: We’ll purchase a “package” based on what our current readership levels are. We’re a new company and don’t have a lot of extra funds to go throwing away.
- We’ll assume you’re giving away the app and your revenue stream comes through subscriptions (I’m sure you have ads too, but we’ll skip those for now).
Okay. Now for some Adobe expenses:
- Fixed rate of $495/month for the license, or $5,940 for year 1.
- The lowest download package is for 10,000 ($.30/issue costs) units at $2,995. We’ll need 5 of those to cover our downloads in year 1: $14,975.
- Total year 1 costs to Adobe: $20,915
- Fixed rate of $99/year for a license to distribute on the app store (this is assumed as Adobe doesn’t make it clear if things are published under their name or yours.)
- Variable cost: 30% cut of all subscriptions fees (we’ll come back to this).
The big question is: how do you price your subscriptions? Let’s look at the end of year profit you’d take at a few price points. In the back of your head – you need to ask yourself: How much would my customer/friend/fan/etc. pay for this subscription? (Remember we have 48,000 downloads in year 1.)
| Revenue / Issue | $ 0.99 | $ 1.99 | $ 2.99 | $ 3.99 | $ 4.99 |
| Total Revenue | $ 47,520 | $ 95,520 | $ 143,520 | $ 191,520 | $ 239,520 |
Now, let’s take away our known costs outlined above:
| Revenue / Issue | $ 0.99 | $ 1.99 | $ 2.99 | $ 3.99 | $ 4.99 |
| Total Revenue | $ 47,520 | $ 95,520 | $ 143,520 | $ 191,520 | $ 239,520 |
| Apple Cut (30%) | $ 14,256 | $ 28,656 | $ 43,056 | $ 57,456 | $ 71,856 |
| Adobe | $ 20,915 | $ 20,915 | $ 20,915 | $ 20,915 | $ 20,915 |
| Apple | $ 99 | $ 99 | $ 99 | $ 99 | $ 99 |
| Total Expenses | $ 35,270 | $ 49,670 | $ 64,070 | $ 78,470 | $ 92,870 |
| Total Profit | $ 12,250 | $ 45,850 | $ 79,450 | $ 113,050 | $ 146,650 |
This leaves us with one question: How much is your time worth? 12 issues, 48,000 downloads, and 1 growing magazine. On the other hand, how much will your customers pay? For comparison:
- The Daily (note this is a weekly magazine) charges $.99 / issue or $39.99 / year
- Wired (monthly magazine – 10 issues) charges $1.99 / issue or $19.99 / year
- O Magazine (monthly) charges $3.99 for individual issues, $1.99 for a monthly subscription, or $19.99 / year.
So, at the $1.99 industry standard, you’re looking to take in only $45,850 / year. Now, we can assume you’ll throw some ads in there a get a little extra revenue, but if you’re a new magazine on the streets, you might not be ready to throw hundreds of ads at your readers. Sure, maybe you get another $5k per issue for ads, bringing you around $106k per year in profit. You still have labor and other costs to carry – I’m sure you have a website with your magazine, phones and emails to manage, etc. Bottom line – this doesn’t seem like the best deal in my book.
I should note: if we know we’ll be selling a substantial number, Adobe offers 3 additional price points for package downloads, which could save us some money. In this scenario, we were a year 1 magazine with no clue on readership numbers. In year 2, we might adjust to a larger package and assume more risk. Here are the other packages:
- 25,000 downloads: $5,495 ($.22 / issue cost)
- 250,000 downloads: $37,500 ($.15 / issue cost) * requires annual license commitment
- 500,000 downloads: $60,000 ($.12 / issue cost) * requires annual license commitment
Where is the money going? Two places: 1) Apple, but that won’t ever go away. So just be ready to give them your 30% and thank them for only creating the best platform ever! 2) Adobe. I’ll be honest – I think their prices are high. At $.30 / download, you’re losing another 30% of your income to them. Don’t get me wrong – I think they deserve a cut, but I think they need to be a little more startup-friendly, especially as that’s how they’re selling this.
One question I’ve been towing with – is there a way for you to use the Adobe products to create the content, then manage the subscription end and uploading new issues to Apple on your own? I’m not sure. This could provide a solution to save you that 30% Adobe cost – but might be a lot of work. If we know enough information or have a solid readership, we can easily drop that to the 22% price-point (25k downloads). Anything above that is a pretty big risk for a small company. I also wonder about how you can manage subscription pricing – if you can adjust on the fly or on a by-issue basis.
Well, there we have it. I’m not planning on starting a magazine anytime soon, but I am keeping my eyes on this one. I’m hoping the pricing improves over the next 3-6 months. The Digital Publishing Suite isn’t on the shelves yet – and no clear ETA on when that will hit. I assume they’ll keep this pricing structure around until a bit after launch and see how the market reacts.
What do you think? You gonna give it a go with Adobe’s latest and greatest? Wait the pricing out a bit?
I’m Matthew VB. VB is short for my very long Dutch last name Vanden Boogart (try learning to spell that as a kid, right?) – and was a nickname for a while in college. Matthew, well, that’s my first name – you can call me Matt if you want.