Newspapers and Tablets, Horses and Carts
First published at Outsell, Feb. 23, 2010
Important Details: Apple’s market release of its iPad is still six weeks or so away, and almost a dozen iPad alternatives are already in production, poised to fight for web attention and electronics store shelf space. Tablet devices have been hailed as a potential business model changer for the news industry, with their advertising and long-form reading potential. The main conversation, though, in the news world, is around pricing, control and data. As Ken Li reported in the Financial Times:
“Customer data is everything,” said one magazine publisher. “We have for many years relied on subscriptions to be able to communicate with our readers,” said Sara Öhrvall, senior vicepresident of research at Swedish publisher Bonnier. “It is absolutely crucial to keep the data. That’s something that our advertisers need. It is something that we need.” Without the ability to identify customers on different digital platforms, publishers would be unable to offer print subscribers discounts or free access to new digital versions. Customers “will be really upset if we try to charge [them] again”, Ms Öhrvall says. Whether it’s an Apple device or another device, “it’s a deal killer”.
The big issues that have arisen, so far, include:
- Customer data: Who gets to see how customers actually use the devices and the content on it, what kind of content, when and at what frequency?
- Customer relationship: Who can talk to the customer? If newspapers and magazines have a subscription relationship with a tablet user, will they be able to keep it, or will the appliance manufacturer or some other third-party claim that relationship?
- Who Gets What: Everyone’s talking about revenue shares. Kindle started the ball rolling the wrong way here, claiming 70% of subscription/single copy prices, with only 30% going to content creators. Apple’s model looks like it is the reverse of that.
- Pricing: Reports indicate a healthy discussion within the New York Times, with print people reportedly wanting to charge more print-like prices of $30 a month for tablet access, with digital business people advocating a $10 price point.
Implications: Outsell believes that the industry and individual publishers should calibrate their concerns and their tablet planning. News Corp’s Rupert Murdoch was one of the first publishers to call Kindle’s revenue share outrageous. He was right, although it’s only outrageous if you can’t get away with it. Now with many competitors, and especially Apple, emerging, it looks like we can call it outrageous. Publishers are right to push for a fairer share of revenue derived from products that are rooted in high-quality, expensive-to-produce content. Equally, it’s good to see their concern for data; it is a lifeblood of publishing going forward. The best and fairest solution here would be share it; both parties have interests in it.
What’s absent from the conversation may be as noteworthy.
The big question, Outsell believes, is not the price you charge (and there are many nuances to pricing, including how to treat print and/or smartphone bundling, and how to build niche products at higher price points into the equation), but what you charge the price for.
The tablet shouldn’t be mistaken for a newspaper made of pixels. Sure, it can receive repurposed newspaper (or online) content. However, with its next-generation, multi-touch interactivity, ability to combine text, photo, video and social elements, it offers news publishers the possibility of creating whole new categories of news- and features-based products. There are products that go beyond repurposing one single title’s work, and aggregate content with a niche reader in mind. Figure out the kind of products that customers will love to use — and then let the pricing follow accordingly. It’s a tough lesson for companies that have long prided themselves on pricing acumen, but it’s a lesson they can have learned from the first couple of rounds of internet innovation. Create state-of-the-art audience-pleasing products, creating new value — and then harvest it.
