Erick Schonfeld at TechCrunch has the skinny on why magazine publishers are pushing for a “Hulu for magazines” to get magazines on the iPhone:
Why are these print publishers reinventing the digital wheel? A popular app store already exists. It’s called iTunes. And people don’t mind paying for apps there. By creating their own app store, the magazine publishers can avoid paying Apple its 30 percent cut of sales. But that’s not the real reason.
The real reason they want their own store is the customer data. Magazine companies may look like paper companies, with a little art direction thrown in. But at their core, magazine companies are database companies. The way they make money is by knowing who their readers are and marketing to them by where they live and who they are. For nearly every subscriber, they have a credit card number. And they have whole departments which do nothing but massage the data to figure out who to target for advertising purposes and where the profits are. I’ve seen this machine in action. The database people hold the secret levers of power inside magazine companies.
This shouldn’t be a revelation, but it feels like one: nobody working in print media makes money by selling print media. Newspapers sell advertising, bookstores sell coffee and calendars, popular novelists sell movie options, less-popular novelists sell creative writing classes, popular nonfiction writers sell lecture appearances, less-popular nonfiction writers sell humanities seminars, Ben Franklin sold bookplates, and magazines sell subscriber data. It all makes the movie industry’s reliance on box office and DVD sales seem downright purist, even after you consider product placement and crossover merchandizing.
Also worth noting: the fact that magazines’ core business lies in massaging and selling subscriber data makes them pretty good candidates to thrive on the web, once they get their s— together. That’s where the real money and potential for growth is on the internet, too.