We're almost there folks.
The days of the subsidized Kindle -- perhaps even down to zero -- may be on the way.
The beefed-up royalty kicks in next month, and publishers have to allow their online publications to be made available across all Kindle platforms and in all geographical regions. It's a fair compromise, given that Amazon made a similar offer to book publishers earlier this year. We've come a long way from the Kindle's early days when it was Amazon collecting the lion's share of the resulting revenue.
This doesn't mean that a $100 annual subscription will net a newspaper $70. The delivery costs will add up. Amazon's FAQ for publishers explains how the delivery costs -- currently $0.15 per megabyte -- will play out.
For example, the delivery cost of a newspaper that delivers 9.0MB/month via paid delivery methods is $1.35. If the publication costs $9.99/month, then a publisher would earn $6.05 for each subscription.
Obviously the breadth of different publications will vary, but if the example is close to the average, a royalty cut of 60.5% is still generous.
It's about Times
The top-selling newspaper on Kindle's digital storefront right now is The New York Times'
Now let's tackle the subsidization model. AT&T
Over the course of two years, The New York Times would receive $313.20 in royalties. Is it that outlandish to offer a $139 Wi-Fi-based Kindle -- or perhaps even the more accessible $189 3G model -- for free?
The next two best-sellers -- News Corp.'s
Print circulation rates continue to shrink. Why not be the first newspaper company to blow this model wide open by subsidizing Kindles or perhaps even Barnes & Noble's
If the math makes sense -- and keep in mind that many subscribers will likely continue to stick around after the two years of contractual obligations -- the time to act is now, just in time for the holidays.
If The New York Times were to offer two years of prepaid service with a free Kindle included, wouldn't it take e-readers to a whole new level? I think so.
One thing for sure is that this is the kind of math that will never work on Apple's
The Kindle isn't a razor, but if they play their hands just right, the newspaper companies may be trading in their printing presses for blade factories.
Why do you think newspapers or costly magazines aren't subsidizing the Kindle? Share your thoughts in the comment box below.
Apple and Amazon.com are Motley Fool Stock Advisor picks. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
Longtime Fool contributor Rick Munarriz owns a Kindle and an iPad, but he uses his iPad a lot more. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
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