Photo courtesy of Wired

It was unofficially announced that the cost for subscription to The Wall Street Journal on Apple’s new “must have” device, the iPad, will run a news hound $18/month. This produced an immediate gasp in the media world as to whether this is too much money for an app, when you consider that a subscription for the print version is only $9.

Still, the argument in favor of the premium price is that this is, after all, The Wall Street Journal – not just “any” news app. Another, is that online version promises to have far more features than found in the print version, Also, it will be the very first newspaper app on the iPad and counts for something.

Whereby at first glance the $18 price tag seems over the top – double, when compared with the print version, I began to wonder what should the cost of newspaper apps be on the iPad, how is it formulated and what will the market bear?

Thinking about the standard price formula, I translated some of the costs involved. If we already know that pricing is generally based upon the sum of variable costs, fixed costs, and profit, then without a degree in Business Economics, I may be able to figure this out.

We can assume that WSJ has priced their print to include all of their costs for producing content and that it costs the WSJ less than $9.92 per month to produce it and still make a profit. So, let’s focus then on the costs involved on an app.

Not really knowing as yet the average costs for developing apps on the iPad, it is safe to assume that it will be similar to developing one for an iPhone. According to this discussion, it takes 200 hours at $50/hour on average to produce an app for the iPhone. If I assume that WSJ hires someone at $50/hour to do this, than one only needs to add the application license fee from Apple of $399.  As to downloads, iPhone applications, on average, are downloaded 25,000 times per year. It is therefore safe to assume that the WSJ iPad application will follow this pattern and be downloaded that many times.

So here is the formula that will figure out the WSJ app’s ideal price:

(Development Hours X Hourly Rate) + License Fee/Average Number of Downloads = Price (Apple’s Commission) + Print Subscription Price

Or, shortened:

If we follow this formula, it will cost The Wall Street Journal $10,399 to produce the app, including the license. If they fall into the average, then approximately 2,083 will be downloaded every month. The total cost then per download is $4.99. When you add Apple’s commission, the cost becomes $6.49. Next, when you add in the current price of the print subscription (which theoretically includes the cost of producing content), the price according to our formula should be $16.41.

If you consider the “prestige” category and that and the fact that the app will contain added features, then $18/month makes perfect sense. Also, if WSJ continues to support and develop the app throughout the year, then the costs would stay relatively the same monthly.

Does that mean the market will bear that price? Time will tell but the sticker price is no longer so shocking.

What a week!  Apple finally raised the curtain on its greatly anticipated new tablet, the iPad, sending the Internet aglow for 24 hours, only to have some public nonsense erupt about the use of the word “pad,” which could easily have been but a nonsensical blip, had it not made the front page of The New York Times on January 29; President Obama delivered a much anticipated State of the Union, which instantly flared national emotions, from pride to fury; an American icon turned up as Italian; a German car company unleashed a storm through its Green Police ad campaign; and finally, Toyota delivered an expensive “Mea Culpa.”

1 Blip: Could anyone ever have thought that the name of the new Apple tablet, iPad, would evoke awkward associations with feminine hygiene products? According to Michael Cronan, a naming consultant in Berkeley, Calif., whose company has helped come up with brand names like TiVo and Kindle, “many naming experiments show that women tend to reflexively relate words like “pad” and “flow” to bodily concerns.”

C’mon.  Apple’s marketing team must be incredulous.  Happily their response was no comment.

2 Blunders: McItaly and Green Police.  An American export icon turns Italian, and a German company brings up reminders of the Third Reich.  Unreal.  Along with apple pie, the golden arches of McDonalds are recognized internationally as very American indeed.  And, along comes McItaly, so named because it apparently will use only Italian ingredients.  When McDonalds showed up in Moscow in the early ’90, the company also used only Russian ingredients but it did not become McRussia.  Speaking of diluting what a brand stands for…. According to The Guardian’s Word of Mouth foodblog, Matthew Fort, the burgers are a “monstrous act of national betrayal.” Couldn’t agree more.

Audi’s misstep in picking an environmentally friendly name for their Super Bowl social media campaign, as in “Green Police,” without first checking it out, was a huge marketing blunder. Readily available research would have revealed that the name was used in Nazi Germany to refer to the German Order Police.  Whether or not consumers will know their history enough to connect the dots, does not justify such oversight. An apology is in order.  And also maybe a new marketing team that gets that research can forestall damage to a company’s image.

1 Headache: the $550 million operating cost headache for Toyota, as it recalled 5.6 million vehicles in the United States alone, swallowed production shutdowns and searched for fixes to have the problem go away, sooner than later.  However, much like the Johnson & Johnson Tylenol recall of the ‘80s, which left the company unscathed because of its strong and open responses, Toyota is doing what is right in an effort to keep the public trust. Its president has issued a Mea Culpa apology and company communiqués continue to update the public.

And finally the one word that is rarely heard, if at all, in political speeches — Decency. President Obama used this word in his State of the Union address, citing the, “fundamental decency that has always been at the core of the American people, that lives on.”  A word to be remembered…

Thank God it’s almost — Monday.

When Amazon’s Kindle DX, a multi-purpose version of its digital eBook reader was unveiled in late Spring ‘09, I wrote in a blog dated May 7, that the debut of that device could very well be the “knight in shining armor” that would save the beleaguered newspaper industry.  It didn’t, as yet, but it certainly is on its way to boost the book publishing industry.  Most newspapers can still be had for free.

Now, just six months later, publishers are making big plans for another potential savior, one that has yet to hit the marketplace.

Rumor has it that the much speculated and anticipated Tablet due to be created by Apple (who has yet to confirm that it is even being worked on) has publishers salivating at the opportunity for salvation. Publishers are in the throes of making big plans and spending big money for a device that has yet to come to market.

First it was Condé Nast, who announced they are preparing a digital version of Wired magazine for the Apple Tablet by the middle of next year, followed by its other 18 titles. And now it’s Time Inc. that has just released a video demonstration of a “tabletized” Sports Illustrated.

Magazine reading will now be as much about watching and browsing and choosing video elements, as reading, in essence delivering information and the interactive experience that is already available on the Internet, but within a new portable format.

It’s not clear how the Apple Tablet would be publishers’ salvation as yet.  Just as newspapers’ continue their struggle to monetize their content when it can be had for free on the Web, why would a magazine thrive on a tablet, when it too can be had for free?

Digital magazines are not the same as books, read Amazon’s Kindle or music, read iTunes, — neither of which offers content that can be had for free elsewhere.  If digital magazines will not be totally supported by advertising, as I suspect they won’t, then clearly they will need to seek subscribers for their digital versions and charge, as Amazon does per book, per magazine.  And what would be the lure to spend for what can be had free?

The only answer that seems plausible today is that it becomes a lifestyle choice, as in convenience when traveling or on the go — a take-along choice, with 30 or so, favorite titles, on one tablet.  In that sense it would simulate Amazon’s Kindle, which is also a lifestyle choice, with the difference that lifestyle choice or not, the books are not free.

Still, Apple may have something else in mind helping publishers monetize as they did for music publishers and developers in the app store.

Watch them swoop in, as anticipated, and grab the publishing world by storm, much like they did the music world.