[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

So the newspaper business is now figuring out how to deal with a new middleman, Apple. The last decade has been about moaning and groaning about The Google, how it has become the mass medium, leaving newspapers in the niche, and how it has gotten the big share of digital ad revenue as an aggregator while news creators have gotten the short end of the hockey stick. The new decade looks like it’s bringing up a suite of similar questions, with Apple first in focus (and maybe Facebook coming next).

Just when newspaper companies thought they’d seen a big, new opportunity to establish strong new reader revenue lines on the tablet, their dreams have hit the pause button. Apple says it wants 30 percent of that emerging reader revenue — including ongoing digital subscription streams — telling publishers that they, like everyone else, have to go through the App Store to do the transaction, giving Apple its due cut. Publishers are now figuring out how to respond, and as they do, let’s look, briefly, at four sets of numbers that tell us why this Apple/newspaper company tiff matters so much. Within those four sets, we can see the emerging newsonomics of tablet reader revenue.

• Let’s start with a global number: $34 billion. That’s the amount of circulation revenue — almost all of it print-based — that newspaper companies around the world took in last year, according to research I do annually for Outsell. That number is about 34 percent of total newspaper company revenue, which came in at $99.8 billion. So if it is newspapers’ strategy to transition paying readers to digital devices, charging them along the way, some part of that $34 billion will move to tablets, ereaders, iPads, Streaks, and whatever the next generation of devices are called. If Apple snapped its fingers and transformed the print industry tomorrow, its 30-percent take would be $10.2 billion. That’s a fantastical number, of course: No fingers can be snapped, not all print readers will transition, pricing will change, and so on. But we can see globally how much money may be in play over time.
• Let’s move to a real-life example, The Wall Street Journal’s $17.29 monthly iPad subscription rate. It’s reportedly sold well, though we don’t have good numbers on it. It’s the major standalone, separately priced news app, and that got it a lot of attention when it was announced. While we can debate the merits of standalone iPad pricing vs. bundling the price with print/web/smartphone access, the pricing itself is of interest. The Journal understands that some readers will abandon print for the iPad. When they do, the Journal doesn’t want to exchange print circulation dollars for iPad pennies. An annual iPad subscription costs $207.48. That compares to $249 for the print edition, although the Journal’s been doing a lot of heavy discounting of its flagship paper. The Journal’s iPad pricing, which itself can be discounted over time as print is, is intended to ease that circulation revenue transition. At $208 a year, Apple would presumably take $62. Overall, the Journal counts more than 2 million in circulation, with more than 400,000 of those online-only and Kindle subs. Pricing will change over time, but just take those 400,000. If they all wanted tablet access, that could amount to $24.8 million a year for Apple.
• Let’s move on to the New York Times, the company that is going “paid” early next year, and has the best chance of any U.S. general (non-financial) newspaper to pull it off. For the first six months of the year, the Times itself (not the other newspapers the company owns) took in $346 million in circulation revenue. Currently, its web content is free. Let’s say that it prices in a similar fashion to the Journal, keeping about the same amount of revenue as it goes digital and that 10 percent of its sales are on an Apple tablet a couple of years from now. That would mean about $35 million in iPad circulation revenue for a half a year, or $70 million for a full year. Apple’s take of that: $21 million.
• Finally, let’s look at Apple and the music industry. Today, Apple’s iTunes pulls in about 28 percent of all music sales in the U.S., or seven-tenths of the total 40 percent of U.S. music sales that are now digital. It took Apple seven years to get there, from a dead start. Of course, the music and news businesses are completely different, right? We can name the differences, but let’s concentrate on the main thing they have in common: Many consumers love digital delivery. So that migration — from analog medium (CD, newspaper) to a suitable, finally-it’s-arrived digital device (iPod, iPhone, tablet) — may be another guide that’s useful.

Those 40 percent (of total U.S. music sales) and 28 percent (Apple’s share of overall music sales) numbers are ones to note. If they held true for news reading, then by 2017, we can be assured of one thing: Apple’s share of news “circulation” revenue would be mind-bending.