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Cutting out the Middleman: Digital Publications, Ads and TV

Daniel Jalkut has some interesting follow up to Marco Arment’s thoughts on digital publishing and advertising:

Is there something wrong with paying $5 for a digital copy of a magazine only to be subjected to ads? I don’t know. It may be necessary. It may be fair. But it felt wrong to Marco, and it feels wrong to me.

I think, at least partially, the psychology of this problem is based in how the disintermediation is perceived. In the printed magazine model, we have had the choice to pay $5 to the newsstand to purchase a copy of a magazine, which is full of ads. We have also been able to enter a subscription agreement with the publisher of the magazines we want to read regularly, and in return for agreeing to buy every issue we get a significantly reduced price, maybe $1-2/issue – but still get all the ads.

In the case where you purchase off the newsstand, the “feeling” is that your $5 went to the newsstand/bookstore/etc. You stood there and handed your $5 to someone that doesn’t represent the publisher of the magazine. Obviously, in reality a portion of that money goes to the publisher, but it doesn’t “feel” like you are paying it to The New Yorker (or whomever) directly.

By cutting out the newsstand and purchasing a subscription, you do feel like you are giving the money directly to the publisher, but it’s a significantly reduced price, so the ads still “feel” OK.

When you go the App store and buy The New Yorker, however, you feel like you are giving that full amount to the publisher. There is no middleman, so I think that is the root of the sense of injustice felt by Marco and Daniel. Of course Apple is a middleman and takes 30% – but that doesn’t seem as tangible in the digital realm. An intelligent buyer expects that if they “cut out the middleman”, they should expect to be getting a better deal – instead if seems like you have cut out the middleman, and are still paying the same price. That’s how the subscription model worked. You cut out the Newsstand, and got the publication for $1 instead of $5.

What’s interesting about this to me is that I think we will be facing the same issue in the TV marketplace. Consider John Gruber’s take on a potential Apple TV:

Why not the same thing for TV channels? We’re seeing the beginnings of this, with iPhone and iPad apps like [HBO Go], Watch ESPN, and the aforementioned Bloomberg TV . Letting each TV network do their own app allows them the flexibility that writing software provides. News networks can combined their written and video news into an integrated layout. Networks with contractual obligations to cable operators, like HBO and ESPN, can write code that requires users to log in to verify their status as an eligible subscriber.

I agree that this is the direction things are going to head, but I wonder what happens when you cut out the middleman, and ABC wants to charge me directly to watch ad-laden shows? In this case, the current middleman is the cable/satellite provider. I think I’m going to “feel” the same way Marco and Daniel (and myself) feel about the ads in the digital magazine. I cut out the middleman, but where’s the benefit?

Clearly, not all of these “feelings” are based on rational decision-making, but it is what it is.