Why subsidizing tablets for newspaper subscribers, in Philly & elsewhere, makes sense

Poynter reporting:

Philadelphia Media Network’s plan to subsidize tablet computers for thousands of subscribers makes a lot of sense, and they deserve credit for leading the industry in a new approach. But the impact it will have for the owner of the Inquirer and the Daily News is still an open question.
Philadelphia Media CEO Greg Osberg announced Monday the plan to subsidize the cost of Android-powered tablet computers for people willing to also buy one- or two-year newspaper subscriptions at a discount. The tablet would come pre-loaded with apps to read replicas of the print paper, as well as an additional Inquirer app and a shortcut to Philly.com.
Why this is a good tactic. People want tablets. They’re fun, useful and just plain desirable. They already have reached 8 to 12 percent of U.S. adults and that number will keep growing in coming years.
Philadelphia Media is sure to earn some basic good will and loyalty from the people who receive new gadgets to play with. It’s the age-adjusted equivalent of luring college students to do anything for free pizza. For adults, you just have to step it up a little.
Of course, giving away free stuff always creates interest. But the real question for a news organization is: Does the giveaway create enough value to offset the substantial costs? Fortunately, newspapers have some history in this area to guide them.
Even in print, the cost of acquiring and serving subscribers is a loss-leader to enable greater advertising revenue. Earlier Poynter posts calculated the average print newspaper subscriber produces direct revenue of $400 over two years, while it costs the publisher $450 to acquire the subscriber then produce and deliver the paper over that time.
Advertising traditionally makes up the difference, and then some. So Philadelphia Media will have to earn enough mobile ad revenue from these subscribers to cover whatever costs their subscription payments don’t. (Since this is a relatively small pilot project, however, it may be less important to make money than to prove the concept could work on a larger scale. Osberg told Poynter’s Rick Edmonds he expects profitability by 2012.)
Giving subscribers subsidized tablets also is a good marketing tactic...
http://www.poynter.org/latest-news/media-lab/mobile-media/138835/why-subsidizing-tablets-for-newspaper-subscribers-in-philly-elsewhere-makes-sense