Nine Questions on the Tablet and the News Industry Future

The countdown clocks are winding down. The iPad is almost here. THE big question: Can news companies rise to this occasion, taking advantage of the new platform that will plainly be popular with audiences trained by the iPhone, their appetites whetted. The iPad, and its clones to come, offer the news industry a do-over. Can they apply all they’ve learned – from failure and success – with this new opportunity? Nine questions as we count down, part one of a three-part Newsonomics tablet series.

1. Is it coincidental that the iPad is a launching in The Year of Paid Content experimentation? Yes, it is. Go back to January, 2009, to the very depth of the dark recession (Newspaper Association of America, January, 2009, San Diego).  Leading publishers including Rupert Murdoch and Dean Singleton were laying down the new conventional wisdom that advertising would no longer be the strong support to news publishing it long has been. They challenged Google directly and the movement toward “paid content” started gaining steam. Then, through the year, Journalism Online’s Steve Brill and Gordon Crovitz went out on the road, building toward testing what is now known as Press+. Kindles provided nice new revenue streams to a few publishers, the Sony Reader emerged and then….Apple Mania was loosed. Now the two – the news industry impact of the iPad launch and “paid content”  – will converge in unknowable ways. We may see reverse engineering of a sort, with iPad paid experimentation re-opening publishers’ ideas of what’s possible both with product innovation and business model.

2. Will the iPad also launch a new digital “circulation” business model? Apple is going to pay a 30% 70% sales share to news companies, for sales of their Apps, which could be single copies (mostly in the case of magazines), one-time-sale apps allowing news access, and subscriptions to newspapers. That 30/70 is the inverse of Amazon’s standard Kindle deal, and one far more palatable to news companies. It almost seems fair.

The Apple model, in a sense, just sets a new cost-of-distribution. While web distribution has been free-plus, the cost of Apple distribution – if you charge for news products – is a predictable, and seemingly stable 30%. Just give me 30% off the top, says Steve Jobs. Ironically, that 30% is just a little higher than the costs of physical distribution for newspapers or the percentage that magazine publishers pay to get physical products to readers.

It’s rational, and knowable. And it just might lay a baseline as news companies try to rescale the news supplier/distributor relationship with Google, Yahoo, MSN, Comcast, AT&T, Verizon, Amazon and the pipes of the future. Of course, that means creating products that readers will pay for, the big hurdle.  But if you build it, Apple will distribute it for you to the hordes and let you keep 70%.

If the 30% solution proves stable, it provides a new building block for digital business models, a critical piece of those new Newsonomics.

3. Who owns the customer? With the launch just a few days away, it’s apparently not completely resolved.  For newspaper companies, their direct access to customers, and their data, is a must-have. You can’t offer readers “all-access” subscriptions, saving their settings and preferences – offering them a singular customer experience – without such data. Does Steve Jobs get this; does he care? 

I hear a couple of answers. Yes, he’s listening, but he may not get it. The newspaper (and magazine, to a lesser extent) /customer relationship is different than that of music labels or film studios or TV networks. They sell one-offs, and don’t have direct, continuing relationships with their customers. Publishers seem to believe they can resolve this issue – and if they do, the resolution allows them to array and price their digital products, along with the print newspaper, sensibly for customers who care about their brands. The key: knowing the unique identity of the iPad customer and matching that with customers on other platforms, including print.

4. Will the iPad create a new Digital Divide? Remember the fears of the first Digital Divide, rich and poor, urban and rural? We hear less about that these days, though new FCC Chairman Julius Genachowski is going full-steam ahead with a near-universal broadband plan.  

This new Digital Divide may be along the lines of the big and small news media. I’ve called the 12-15 national/global news companies the Digital Dozen, the ones that see target audiences among the 900,000 900 million English-speaking people around the globe. They are also the ones with big staffs and generally deeper pockets. Tablet development – and more particularly daily production – requires an investment in a combo of newly skilled staff and ongoing training.

The tablet product – especially ones that will be popular with readers and attractive to advertisers – can’t be just re-purposed web ones. Fewer local news chains have the skills and wherewithal to compete, though a select few are poised to give it a try. AP’s son-of-AP Mobile Gateway push may help here, though I think we’re as likely to see more strongly local products come out of the Yelps, Yahoo Locals and broadcasters, as we are to see them competitively produced by the just-head-above-water newspaper companies.

5. Are we going to see largely re-purposed products at launch? For news companies, largely, yes. We’ll see a few touches that take direct advantage of the seductive, immersive qualities of the platform.

Two issues loom though, familiar ones: time and money. There’s simply not been enough time to build robust products that take fuller advantage of touch/video/social capabilities. Second, while development of those will take some investment, the larger financial outlay is in operationalizing daily production of a tablet-friendly product.

Magazines will there first, and look for other companies to start producing niche tablet products – especially for the higher-end business user – soon.

6. How will the iPad affect the New York Times’ plans to launch “metering”? The Times’ plans to launch its metering approach next January and February continue, uninterrupted.

Yet, clearly, the learnings of the iPad environment will come in handy. Look for a light NYT iPad product, without subscription fee, at launch, while the archenemy Wall Street Journal is going for a $17.99/month price point. From there, the Times has a lot of figuring out to do. Pre-iPad, the question was how to set the metering dials to nab the subscription revenue from the top 5-10% of readers, while monetizing the other 90%-plus, without interruption, while staying a good citizen of the “free web,” part of the civic conversation. That was a tough, enough balancing act; the work of the Times this year is aimed at getting the equation right.

Now, it will have additional input, seeing other publishers’ experience in selling apps, selling subscriptions and connecting up their print/web/smartphone/tablet customers and business models.

7. Is the Guardian’s success with the sale of its app the wave of the future? Probably not for the biggest news companies. They look at the Guardian – more than 100,000 apps sold at about $3.75 each – and say, “That’s nice change, but we want recurring revenue streams.” Look for a combination of iPad subscription products, over time, with numerous one-off apps to be tested as well.

8. Who will produce the first successful aggregated products? Those who have played with the iPad in development say it’s a great web browsing experience, much better, of course, than the tiny iPhone.

So will the aggregators who rule the Top 10 traffic roost port that dominance to the iPad? Or will more tablet-first, tablet-friendly news aggregations soon see the light of day?

Google’s FastFlip could have been a contender, but it doesn’t seem to have caught on. Of course, we’ve got some new, intriguing aggregation points here: 1) some news companies will follow News Corp’s lead (WSJ, Times Online) and keep their content somewhat off the free web.  If more follow that line of “paid”, aggregations will be less valuable; and 2) the iPad seems tailor-made to new aggregations, after all doesn’t “iTunes for News” make sense on an Apple product?

The potential contenders to bring together diverse news content, with packaged content pricing, would include the AP Gateway initiative, Press+ and, of course, Apple itself.

9. Can the iPad feed a Slow Journalism movement? Slow Food’s caught on, amid a mapcap moving society.

The web’s always been about quick news reads. Perhaps, the tablet can recreate the pleasure of long-form journalism reading.  My guess: it depends on the journalism. Graydon Carter makes the good point that storytelling endures, online and off. Maybe the tablet newly nourishes it.

Tomorrow: Paid Content’s New Five-Finger Exercise

1. 

   Jeff Norris says:

   March 31, 2010 at 8:16 am

   I love Ken Doctor and think he is spot on. However, Apple is keeping 30 percent and giving publishers 70 percent. Unless I read it wrong, there is a typo here. Also, there are more than 900,000 English speaking people in the world.
2. 

   Muttley says:

   March 31, 2010 at 10:02 am

   No it will not save the MSM becasue the vast majority of us have already tuned them out. We will continue to go to reliable Internet based news sources that remain open and free of the paywall crap Murdock and the NYT are pulling.
3. 

   Tom says:

   April 1, 2010 at 6:34 am

   We’re discussing exactly this at the upcoming TABLET SUMMIT in May on Oxford. Hosted by the Reuters Institute for the Study of Journalism and organized by the International Newsmedia Marketing Association together with Innovation Media Consulting group.

   http://www.inma.org/tabletsummit

   Hope to see you there! Best regards, Tom
4. 

   Henhousefox58 says:

   April 1, 2010 at 6:42 am

   Jobs is too far left for me to buy any of his Apple products. I really don’t see the need to own one either.
5. 

   Doug Petrosky says:

   April 1, 2010 at 6:55 am

   You say that Apple’s 30% of the top of $18/month is similar to the physical distribution costs of the WSJ but you ignore the advertising benefits the iTMS provides and the payment costs that Apple takes care of for WSJ. But even bigger that ether of those things there is a HUGE difference! That $5/month cost of physical distribution is a fixed cost. They sell 100,000 or 100,000,000, distribution costs is $5 per person per month. But with electronic distribution if they cut the cost of the journal in half, they cut their distribution costs as well. So their is a huge ability to maximize profits and distribution.

   I can hear the doubters saying if you sold the WSJ for $2/month to 10 times the people, WSJ gets the same amount of money so where is the win. Well, it is likely that there is a sweet spot where cutting the cost in half will tripple sales or cutting it to 1/4 will give 6 fold increase in distribution, but even if it were half the price twice the subscribers, WSJ makes money on Ad’s too. And the more people who read WSJ the more relevant it is.

   Bottom line, Electronic distribution at 70/30 split, with the benefits of payment processing, advertising and distribution all taken care, is a huge win for content providers.
6. 

   Ken Doctor says:

   April 1, 2010 at 12:45 pm

   Jeff: Thanks for pointing out two dumb typos, now corrected. I blame the cold that came on yesterday.
7. 

   Ken Doctor says:

   April 1, 2010 at 1:10 pm

   Doug; Thanks for the thoughtful analysis. I understand that with IT Managed Services, the news companies don’t have to go to the expense of authentication and e-commerce; are those the additional savings you speak about? Given that news companies still want to make sense of the user data, coming out of the transaction, they’ll still have IT costs (different from the legacy world) related to the “new” reader.

   On physical distribution, I believe those are variable costs, essentially paper by paper on a printing and payment to carrier/distributor, but I think your point holds.

   One thing I’m not following: “But with electronic distribution if they cut the cost of the journal in half, they cut their distribution costs as well. So their is a huge ability to maximize profits and distribution”. When you say “cut the cost of the journal in half”, what are you referring to?

   thanks. Ken
8. 

   vox-popPRcareers says:

   April 23, 2010 at 4:27 am

   This was a good post.

   I particularly like the point you made about slow journalism. However, the price of the iPad is bad enough. It won’t hit the young crowd because it is too expensive.
9. 

   Bottle Cap Chokers says:

   June 9, 2011 at 12:10 pm

   Thanks for posting. Much appreciated!