Apple 2.0

Covering the business that Steve Jobs built

Time Magazine on iPad now 28 cents

May 2, 2011: 7:28 AM ET

Apple and Time Inc. struck a deal, and the per-issue price fell from $4.99 overnight

Here's a window into the economics of magazine publishing.

Monday's Wall Street Journal reports that Time Inc. (TWX) and Apple (AAPL) have reached an agreement to allow subscribers of Time, Fortune and Sports Illustrated to get digital versions of their magazines on the iPad for free.

The deal breaks an impasse that dates back to high-level meetings Steve Jobs had with publishers back in February 2010. It also means that thanks to the special Senior Citizen Offer I received in the mail last week, I can read Time Magazine -- a  publication on which I labored for 27 years -- for $0.283 an issue on a free iPad app, down from the $4.99 Time Inc. was charging me the day before. And I get a free Ultronic Multi-Functional Global Clock Radio in the bargain.

What's the catch?

To get the Senior Citizen rate -- and my clock radio -- I had to give Time Inc. my name, address and credit card number and agree to let the company re-up my subscription a year from now "at the low rate then in effect," whatever that might be.  (Unless I exercise my right to cancel.)

That's what magazine publishers call the "automatic renewal feature," and its the deal-breaking reason many of them resisted for so long Apple's offer to help them sell their wares to the 20 million potential subscribers who already own iPads and the tens of millions more who will buy one this year.

You see, Apple is also in the business of collecting the names, addresses and credit card numbers of its customers. And under the terms of the subscription policy the company announced last February, Apple would retain that information -- as well as 30% of the subscription price -- unless subscribers explicitly agreed to let them share it with the publisher.

The exception: Subscribers that the publishers recruits on their own. Subscribers like me, tempted by a $15/year offer and a multi-functional clock radio.

Disclosure: Time Inc. publishes Fortune, which publishes this blog.

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[Follow Philip Elmer-DeWitt on Twitter @philiped]

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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