Related post: At Almost 400,000 Digital Subscribers, Inside the New York Times Pay Strategy, Year 2

What’s your signature content?

Quick: If somebody buttonholed you in an elevator, a school play, or a bar, and said, “Why should I pay you for that?” — what do you tell them?

Each passing week, it seems we’re further into the age of signature content. That only makes sense: If the death of distance is now old news, if everything is available everywhere at the touch of button or the swipe of a finger, then what makes any news or entertainment brand stand out amid this plague of plenty?

Closed systems — from three or four TV networks to less than a dozen big movie studios to a half-dozen major magazine publishers to geographically dominant newspapers — made signature content less important. Sure, big shows and big names have always driven media to some extent, but now, media without big names or big shows are going to get lost in the ether. Take Hulu’s announcement last week about Hulu Originals. You do have to wonder if Hulu’s fictional 13-episode “Battleground,” about a dysfunctional political campaign, will be bested by the Republican reality show in progress when the show debuts next month. Hulu is also bringing a Morgan Spurlock series for a second run, and probably will feature one other new program. The Hulu announcement joins Netflix’s own foray into signature content. Three years ago, would the thought of Netflix signing up Little Steven to do an original comedy series have crossed anyone’s imagination?

Hulu and Netflix both need to distinguish themselves in the market — not only from each other, but from Comcast, DirecTV, and Time Warner, among others. They need to buy protection as supposed masses consider cutting the cord on packaged services, Roku-ing and Apple-enabling Internet video onto their living-room screens. In movies and TV, we’re quickly morphing from a world of news and entertainment anywhere — get all of these things, somewhat haphazardly (Comcast Xfinity, for instance) on all of our devices — to one in which consumers ask, “What special do you have for me, in addition to my all access? Yes, All-Access, the cool feature of 2011, will quickly graduate from a wow to an expectation.

Why as consumers should we pay $7.99 (down from an initial $9.99) to Hulu Plus, when the same stuff (kinda sorta) is available through Boxee, or Apple TV, or Netflix, if I can find it? Why am I paying $7.99 a month (apparently the magic price of the moment) to Netflix for a catalog of films that is both voluminous and too often lacking what I want? Consumers are going to be asking that question a lot more.

Publishers, distributors, aggregators, and networks all want more money, and they’ve seen — courtesy of tablets and All-Access — that consumers are now more ready to pay for digital content than ever before.

Forget “content wants to be free.” Now content wants a fee. And everyone from Time Inc to The New York Times to the Memphis Commercial Appeal to Hulu’s co-owners (Fox, Disney, and Comcast) see gold. They see another digital revenue stream, in addition to advertising or to cable subscription fees. Yet they are increasingly believing they’ve got to up the ante (and Hulu is raising new funds to buy original programming) to compete and to win those consumer dollars.

News companies — at least one in ten U.S. daily newspapers and many consumer magazines — are rapidly embracing digital circulation revenue and All-Access. Yet results have been quite uneven. That makes sense: Consumers will pay for digital news, feature, and entertainment content, but they don’t want to overpay, and they’ll increasingly be forced to make choices. Buy this; let that go.

Let’s be clear. Paid media is paid media, and the original-programming pushes of the video companies have great meaning for news and magazine companies, global to local. For them, the calculus is similar. News and magazine brands can launch new products, though that’s out-of-their-DNA-tough for many. So they’ve focused primarily on sub-brands, many of which are people. These are the faces of news and magazines; many of these have become hot commodities over the last several years (“The Newsonomics of Journalistic Star Power“) as companies try to distinguish themselves — and give readers and viewers a reason to pick them out of the crowd.

How, though, can media companies afford to pay a premium for branded, promotable talent, talent that may open consumers’ pocketbooks? That’s easy: spend less on other content. So we’ve got the rise of user-generated content, obtainable free or cheap, and all kinds of new syndicate action from Demand Media to startup Ebyline (and maybe NewsRight), all trying to make it cheap and easy to get more medium- and higher-quality content more cheaply. What’s old is new again — as a young features editor, I got regular visits from syndicate and wire salesman, ranging from high-quality to the Copley News Service, that sold its stuff by the pound.

Another prominent model no news or magazine company can afford to ignore: The Huffington Post. Back to the early days when Betsy Morgan first teamed up with Arianna, HuffPost has worked this evolving content pyramid. At the top, a few highly paid site faces, many opinionated faces (some paid, most not), and then low-cost aggregation, much of it AP, headlined with the site’s recognizable swagger.

Then, of course, there’s the old standby: staff cutting. We’ve seen lots of staff cutting. In fact, these days, while we see some announcements like Media General’s big Tampa cut, most of the bloodletting is less public, but no less real. If you need to pay more to stars, and ad revenues are still declining, staff cuts of less than premium content (and those that produce it) make economic sense (“The Newsonomics of the New News Cost Pyramid“). It’s the new news math.

These newsonomics of signature content are getting clearer. Netflix is planning to spend 5 percent of its expenses — or $100 million a year — on original, Netflix-defining content. Hulu is spending about a quarter what Netflix’s total, or $500 million in total, on all content licensing this year. We don’t know how much of that is for original content, but observers believe “Battleground” will cost $15-20 million for its 13 episodes. With its other forays, it will probably spend closer to 10 percent of its content budget on original content.

Curiously, many newspaper newsrooms constitute only 10-20 percent of the overall expenses of a daily newspaper company. So we’re starting to see some new, and old, arithmetic play out here.

Simply, Andy Forssell, Hulu’s SVP of content, explained the cost/benefit ratio to Variety: “…having an original scripted series that hasn’t been seen anywhere else yet is considered the best tool for standing out with either advertisers or viewers.”

As usual, we see the bifurcation of the bigger national brands — those with more audience to gain and more money to spend — and local news brands. While many local newspapers have cut to the bone, with too much of the tissue in the form of experienced, name-brand metro and sports columnists cajoled or drummed into “early retirement,” we see increased branding of stars at places like Time, The New York Times, Fox News, and ESPN. The sports network may be the classic business model of our age, and in its anchors and top analysts — many initially lured from daily newspapers — it has shown the way for many years now.

At the Times, consider business editor Larry Ingrassia’s build-up of business columnists, from veterans Gretchen Morgenson and Floyd Norris to new(er)bies Andrew Ross Sorkin, Brian Stelter, David Carr, Ron Lieber, and David Pogue. And the Times more recently picked up James Stewart from archrival Dow Jones.

At Fox News, Roger Ailes has cannily built the most successful cable news operation not on the interchangeable blondes that provide so much fodder for Jon Stewart and Stephen Colbert, but on O’Reilly and Hannity.

At NBC, the news franchise is so built around Brian Williams that his well-received newsmagazine “Rock Center with Brian Williams” is synonymous with its host.

At Time Warner’s CNN and Time, we see the building of a worldly franchise on Fareed Zakaria’s clear-eyed, no-nonsense view of our times.

And then there’s the more local and regional press. Newspapers have long believed that it wasn’t any one or a half-dozen names that sold the paper. They’ve believed the news itself was the star, and the daily information report was the brand. That may be still be true of the Times, the Journal, the Financial Times, the Guardian, and a handful of other national/global news organizations — all of which have substantial, multi-hundred newsrooms that produce branded, unique products. It’s less true of regional and local dailies, many of which still present too much commoditized news in national, business, entertainment, and sports coverage, and have bid goodbye to many faces familiar to readers. Those that have retained familiar faces must do what they can to keep them; all need to recruiting more.

Then they may have a good answer to the question, in one form or another, consumers and advertisers will increasingly ask: What’s your signature content?

2. Didn’t CNN’s coverage of the Iowa Caucuses illustrate our screens future? John King has been the King of the Screens, and we can remember when his magic-touch screen seemed wildly innovative. Now in the touch-screen era, it was all screens all night — save Wolf Blitzer’s classic utterance of “OMG” in seeing Romney go up by a single vote — and CNN newbie Erin Burnett brought the right slapstick spirit to the uncertain screencraft. She whooshed one image off one screen on to the next one, sometimes successfully. CNN’s use of data, even as limited as it was for this election, showed how much we’ve moved beyond the world of still print infographics. The marriage of analytics and screens from tablets to livingroom monitors is forever changing how we take in information.

3. If AOL crumbles in one direction or another, what’s the future for smart cookie Arianna Huffington, who has parlayed personality and business model into an enviable perch in American journalism? Who might pick up HuffPo, one of the easiest-to-define business lines in journalism? How much will its relatively low rate of ad return (“The Newsonomics of ARPU” deter buyers? With the emergence of a broad international strategy (10 new editions) – “We’re now re-expanding back into a list of countries”, said CEO Tim Armstrong Tuesday – it becomes a more interesting play.

4. With Alibaba hot on the Yahoo tail, how much should we wonder about the future of big aggregators stocking up on a professional journalists? AJR estimated that Yahoo has hired about 200 journalists and AOL 250 (not counting the Patchers). Those hundreds have produced some pretty good journalism, particularly with sports scoops, and have proven that the term “as first reported by Yahoo,” isn’t a joke. The question of Chinese ownership is a knotty one (interesting Fortune take on American hypocrisy, here), but we have to ask questions about how free a journalistic corps would be under Jack Ma leadership. It might be well and good to uncover U.S. football corruption, and that’s a growth sport itself, but what about wider public policy coverage? For AOL journalists, the questions are even gauzier. With AOL’s deepening financial questions and investor pressure to cut back on non-profit-producing business lines, how long will there jobs be maintained, under current or potential new management/ownership?

5. Won’t be 2012 be the age of All-Access perfecting? Time Inc is among those getting its tablet act together well, with Time Magazine a fairly slick tablet app. In December, the company made a foray at convincing print subscribers that connecting the print sub with digital access is a good idea. The sign-on process is fairly straightforward, and seems to hold session to session, unlike some others. Yet, subscribing to more than one Time Inc. product — Time Magazine and Sunset, for instance — has to be done twice. Expect that kind of obstacle to be eliminated going forward. All-Access will be real all access, made easier for consumers. And All-Access is even trickling down very local as the Monterey (Ca.) County Weekly heralds its all-access availability through public radio sponsorship. Getting All-Access right — pricing, real tablet- and smartphone-appropriate apps, customer ease, giving subscribers cross-title benefits — is one of the biggest tasks for news and magazine publishers this year.

6. How could a single person be empowered to send a message on behalf of the New York Times to eight million people? The Times’ your subscription-is-ending embarrassment email showed the company at its worst in detecting and handling a crisis. My larger question is how, in any scenario, a single person has the unchecked power to send a message to eight million people on behalf of a big brand? The culture of checking and doublechecking (yes, the sorry Judith Miller tragedy aside) is so deeply ingrained in Times’ DNA. Why isn’t it part of the wider culture, especially in the one-click age?

7. What’s more local than language? The Times profiled Wordnik Sunday. It’s an innovative modern language company making the most of digital technology to surface new and real meaning of our living language in this fast-changing age. Noted in the story is that the Times and News Corp’s Smart Money are using Wordnik for glossaries? As local media look for ways to really be more local, knowing and presenting more about place is essential. So what about using something like Wordnik to create local language guides? It’s a small idea, perhaps, but one showing how even local media need to make more use of digital tools if they are to make future claims of relevance to local audiences.

8.Hasn’t Gail Collins turned out to be a just-right-for-the-times replacement for Frank Rich? Rich’s rich prose and panoramic view often left us breathless in its sweep, and well deserved a Pulitzer. Yet Collins — a New Yorker who recently pointed out that “John McCain came in fourth in 2008, with the support of 15,500 Iowans. This is approximately the number of people who live on my block” – has brought a Hee-Haw sensibility perfectly suited to the Wonderlandia of the Republican primary scene.

9. With a call-out to Ken Kesey, isn’t 2012 the year when you’re either on the cloud … of off it?

There’s an algorithm out there, we can be sure. It’s got all the components of business success for news-creating companies, each value carefully computed and relational to the others. Yet, approaching 2012, the algorithm hasn’t been found. We have but shreds of numbers, beacons of numerals that portend models, but can’t prove them out.

2011 has been a remarkable year. We can point to three major phenomena that profoundly changed the news landscape this year. Each offers up its own half-formed metrics for that magic formula in process, and each has dramatically changed the possibilities of news, each largely positive:

• The transcendant transformative age of the tablet: The first real replacement device for print swept aside doubters, netbooks, and much conventional wisdom before its second birthday. More than one in 10 American adults owns one, with that number likely to more than double in the next two years. Those owners are readers, spending lots of time with news, single brands, and longer stories.  (“The Newsonomics of the Missing Link“)
• The dawn of digital circulation: Forget “paid content.” Forget “paywalls.” It’s the back-to-the future age of circulation: paying for news and magazines that we depend on, no matter how they are delivered to us. All-Access reinforces our relationship with news and magazine brands we like; ubiquitous access (print, online, tablet, smartphone, soon connected TV) allows us to justify paying for convenience as much as the content itself. Publishers are still experimenting with how to get the paid proposition right, but those that do now have a potent second digital revenue source — and that’s a business advantage digital-only competitors lack.
• Social curation joins editorial curation: We knew that Facebook, in particular, and “social” more generally — including Twitter, LinkedIn, most-emailed lists and our own individual sharings — were changing how we all decided what to read. Now, though, social curation is being built into the best publishing models. Why should each of our own personal quests be a virgin start-from-scratch idea when many consumers/searchers/researchers/shoppers (some of them people like us) have tread there before? So social intelligence, gleaned from mountains of data, is becoming a required part of the companies’ product development and consumer experience. Facebook is in the catbird’s seat as that world develops.

Those three game-changing phenomena offer major drivers of change — but not models. For publishers, the near-term is just getting harder and harder; witness Media General’s major cuts of this week in Tampa (16 percent workforce reduction) and elsewhere. Major cuts are happening this month and into January, as publishers gird for another 5-12 percent decline in ad revenues. Continuing profitability can only be achieved by cutting.

Publishers, publicly or not, are embracing the Digital First mantra of John Paton and Clark Gilbert, the industry’s dynamic duo, who put on another show at BIA/Kelsey this week. Everyone’s into the deconstruction/reconstruction of their companies; some are faster, more adroit, and more public about it.

As that reconstruction moves forward, the new magic formula may seem simple: reconfigure costs and revenues. Yet, working the in-between — most publishers still depend on print for 80 percent of their revenues — is hardly formulaic. Building the new cost structure and the new revenue structure, in tandem, with changing audiences and advertising spending habits, is the fixing-the-moving-car-at-65 MPH scenario publishers face.

With that speeding car in mind, let’s look at some of the numbers that will go into that magic formula, when it’s finally perfected. Mix, match, blend, and extrapolate:

5-15 percent: That’s the percentage of many news sites monthly unique visitors that drive half or more of their pageviews. That’s a jaw-dropping number, and one that news companies are just beginning to acknowledge — privately. Why be quiet about it? Look at the annual reports and quarterly financial disclosures of the public companies; they trumpet uniques and pageviews. Yet in the age of news ubiquity, we’ve reached near-infinity in pageviews and of ad inventory. Is there much meaning left to one random web visitor hitting one random web page, courtesy of Google or Facebook, some time in any given month? Not much. Yet, that’s what most people still point to publicly. Privately, the question is the 5-15 percent. These are your customers. How much will they pay for access? How much more valuable are they to targeting advertisers, given you know much more about their reading and shopping habits? The metric needed: How much does a core customer yield annually, and in a lifetime? Then: How do I most efficiently find and convert more of them?

35 percent: That’s the percentage of print readers who will transition to tablet-only by 2014, believes one prominent news company, which is using that forecast in its business planning. High? Low? What’s your number?

$544 a year: That’s a Newspaper Association of America number (from 2009) for the revenue value per unit of Sunday circulation. What will a tablet customer be worth, combining subscriber and ad value? Get that answer right and you can try to accelerate, or slow down, your readers’ embrace of the tablet.

10-20 percent: That’s how much of national news company traffic now comes from mobile; Facebook already says that 35 percent of its use comes from mobile. Yet, in the U.S., only three percent of digital revenue comes from mobile. That’s a huge gap — the audience is way ahead of the money — and it will be closed over the next several years. In fact, in the age of expected anywhere access, “mobile” will disappear as a category. Big issues for publishers: dividing what kinds of revenues can be wrung from tablet (now lumped into “mobile”) and from the brain extensions in our pockets and pocketbooks, the smartphone.

One billion: That’s one estimate of how many smartphones will be shipped worldwide in 2016. It’s a continuing curve upward from the almost half-billion shipped this year. U.S. smartphone penetration is about a third of cellphone owners; so there is lots of headroom for growth. (Singapore’s the first to cross the 50 percent threshold.) Big challenge for news and magazine companies: coming to terms with how to make money on that little screen: advertising, sponsorship, All-Access subs, and more.

63 million: That’s the number of smart TVs that will be shipped in 2011, up from 43.6 million in 2010. 2016 forecast: 153 million. Smart TV is just the next screen, joining the tablet and the smartphone, providing us ubiquity. When WSJ Live (“The Newsonomics of WSJ Live“) — the company’s model-breaking tablet product launched this fall — it included launch partners Samsung and Vizio, leading smart TV makers. This is the beginning of the next wave.

$2.75: That’s the average ad CPM, or cost-per-thousand rate gotten, at one top 15 news sites. Average rates have been going down and are likely to continue doing so. High-targeted and high-branded (combine the two, and you’ve got the best of both worlds) audiences continue to outpace average sites and average inventory. It’s less and less good to be average.

22 percent: That’s the third-quarter increase in U.S. digital ad revenue. Digital ad growth accelerates as print declines more rapidly; in the U.S., it is now surpassing newspapers to become second only to TV. Worldwide, expect the industry to hit $80 billion this year. Within that ad spend, publishers have access to less than half: Paid search continues to be about half the market, with publishers getting only a tiny slice of it. Display/banner ads — publishers’ strongest suit — account for 23 percent of the total. Video is growing 42 percent a year. Performance-based business models (as opposed to selling impressions) now command 64 percent of the market. (Most data from IAB.) So, in all the areas of growth, news and magazine publishers are weakest. Despite uneven digital ad results reported by newspaper and magazine companies, it’s not that the money isn’t there — they just haven’t transitioned their businesses enough to compete for it.

$13 billion: That’s the amount of retail ad revenue the newspaper industry in the U.S. took in for all of 2010, and it’s down this year. Retail makes up roughly half of all newspaper companies’ ad revenue. In a new, circle-the-wagons attempt to hold on to it, ShopCo, a consortium of eight of the large newspaper companies, is building out a new local shopping portal. FindnSave, tested first by McClatchy, should be up in 250 larger markets by the middle of next year. Will it be good enough and big enough, to satisfy both consumers and merchants? (“The Newsonomics of Google’s retail push“)

25 percent: So if a reader drops print and embraces the tablet, and digital access overall, how much savings can a news company achieve? It no longer has to print and deliver a paper, but it still has the costs of maintaining a staff, maintaining distribution, and maintaining a plant. So maybe it costs 25 percent less to fulfill that customer’s access? In this long interim with hybrid digital and print reading, how much of their production costs can companies cut out? The long-term question: At what point can the news industry make a major shift, as most reading becomes digital and a minority of it in print?

56.7 percent: That’s the percentage of downloaders of the Guardian’s new Facebook app who are under 24, with 16.7 percent 17 or younger. For a news industry decrying the lack of young readers and focused on aging baby boomers as the core audience, the Guardian’s early experience is phenomenal. It’s well and good to sell All-Access to long-time print readers; it’s essential to bring in new ones, and Facebook looks like a great bet.

7: Daily means seven days a week for newspapers, right? MediaNews is dropping Monday printing at some Northern California papers. Michigan remains the epicenter of the non-daily daily. Following the 2009 cuts in metro Detroit, Advance is now going digital-first with smaller papers there, with several becoming three- and four-day print “dailies.” The idea: keep 85 percent of print ad money and radically reduce print costs. Publishers take a very deep breath and hope they aren’t cutting the print cord too soon. Expect to see more of such day cuts in 2012 and beyond. It’s a hybrid strategy, and as we see its impacts — on print ad revenue and on digital reader and ad transition — we’ll have new numbers to plug into the model.

> 1 percent: Google now makes 54 percent of its revenue outside the U.S., as does Apple. Such international orientation is a major differentiator in the economy of the day, and not in the publishing and digital industries. Even The New York Times, with impressive global reach, gets only a percent or two of its revenue internationally. In the last year, we’ve seen The Independent (through Press+) selling U.S. access, PBS launching a British channel, and the Guardian relaunching an American foray. Digital media knows no national bounds, but monetizing outside home countries has been difficult. Breaking through this barrier could create significant upside for top publishers.

Membership ain’t what it used to be.

Two years ago, I signed up for Amazon’s Prime program. $79 a year for unlimited two-day shipping. It was a tailor-made program for someone like me who bought everything from printer paper to lawnmowers online. (Really — a nifty all-electric model, delivered to within three feet of my door, requiring just two bolts to be attached before it was ready to roll.)

Some financial analysts decried the program, limiting themselves, as they often do, to the math. And the math said Prime could be a losing proposition, with customers costing Amazon more in shipping costs than the $79 they paid. It was short-sighted. Amazon CEO Jeff Bezos was, and is, all about building market share.

As a consumer and a media analyst, I understood immediately what Bezos was up to: make it easy for me to buy, save me some money on shipping, deliver my stuff quickly (whether I needed quickly or not) — and I’d buy more stuff from Amazon. It’s worked.

As Amazon expands Prime, and rolls out Kindle Fire, it’s time we looked at the Prime moves as a quasi-subscription product, something news and magazine companies know a lot about it. Let’s take a quick look at the relative newsonomics of what Amazon is up to, and how it compares to the business publishers know well.

For Amazon, giving me “free” shipping for a capped annual price is certainly about volume of sales. Estimates are that Prime members — about 10 million in total — up about 40 percent of Amazon’s U.S. sales, each member buying around $1,500 worth of stuff a year.

These are core customers, the same sort of core customers that is driving digital subscription sales for newspapers and magazines. We were either already core when we saw the Prime offer or became core because of it. Simply, Prime is all about relationship. In fact, “free two-day shipping” turned out to be — was it Bezos’ plan from the beginning, or a happy stumble? — a backdoor to relationship building.

Bezos took a retail business without much loyalty and is turning it into a loyalty business.

Then, in February, Amazon extended Prime benefits to free instant streaming of videos, as its on-demand service (13,000 movies so far) got off the ground. Then, two weeks ago, it announced a “free” book lending service (5,000 books so far) for Prime members. These are just fledgling steps in turning Prime customers into media-swilling Amazon members. It’s an old-fashioned, co-op-like membership meme, offered from one of the world’s great progenitors of digital age capitalism. (Here’s a good Prime primer by Brad Tuttle at Time’s Moneyland, and here’s a good rundown on the business end from the Journal’s Stu Woo.)

Consider these numbers offered up by Piper Jaffray analyst Gene Munster in the Journal story:

• Amazon currently incurs about $90 a year in cost for each Prime customer, losing $11 annually per subscriber, off its $79 single price point. (The more you buy, the more you save!)
• Of the $90, $55 is due to shipping costs and $35 is driven by acquiring digital video content. Now, related book-lending services costs will be added, driving up the loss for this leader.

So investors were a tad concerned recently when this trajectory of cost reduced Amazon’s overall operating margin shrank to 0.7 percent in the third quarter from 3.5 percent a year earlier.

Munster smartly juxtaposes the increased loyalty and sales volume against that loss — or against that investment.

Now let’s turn the news and magazine industry, and ask a few questions:

• What’s the difference between a shipping fee and a subscription? They seem quite different historically, but Amazon is building a bridge between the two.
• What’s the difference between a buyer and a reader? Shopping and reading always coexisted in newspapers and magazines; Amazon just offers a new twist here, starting with buying and then moving to reading.
• What’s the difference between a newspaper subscription and a membership that gets you “free” media? Amazon pushes us back into the mindset that soft goods — digital books, digital music, digital movies — are worth less than hard stuff that it ships us, the office supplies and lawnmowers. That’s a bit depressing. Wouldn’t it be a wonderful world in which the soft stuff that provides enjoyment, entertainment and learning were more the real value, and garden and office tools the freebies?

In the world as it is, though, news and entertainment media are countering with the All-Access value model. Take all our content — and be excited about all the ways we now bring it to you. Netflix, Comcast, HBO, The New York Times, and the Wall Street Journal are selling convenience, immediate gratification, and mobility — all great if often short-sighted American virtues. “Sell the sizzle, not the steak” is as good a Mad Men tenet of faith as any.

“Smart is the new sexy,” the Newspaper Association of America’s most recent effort to reassert the value of news media, probably misses the sizzle we’re seeing offered by others. Everyone knows it’s easier to buy a smart pair of eyeglasses to achieve the sexy look than read a paper (or site) every day.

A few more things for news and magazine media to think about here:

• Newspapers have been rightly concerned about losing a direct customer relationship as digital subscribers become Apple or Amazon customers rather their own. The Prime move sheds new light on this question: If the world’s premier online seller becomes a media hub, the question of who owns the customer gets even bigger. It’s a growing Goliath vs. a shrinking David here; Amazon just will continue to add more and more media (and other goods and services) to its Prime membership base.
• Amazon’s 10 million Prime members compares well against individual media. Among U.S. newspapers, the Wall Street Journal leads with about million sales. AARP puts its magazine number at 22 million — a number boosted by a model framed around membership — while Meredith’s Better Home and Gardens comes in at 7 million. Maybe more apt “media” comparisons may be Netflix at 22 million or ATT Wireless’ more than 100 million. The key questions here: What is membership, what is subscription and what is media?
• This is about much more than a $79 offer; it’s about deep and building customer knowledge. Amazon’s “Recommendations” have long been talked about, but its mastery of customer analytics is the big story here. That’s what any competitor to Amazon must contend with. It’s noteworthy that companies as small as The Day in Connecticut  (“The Newsonomics of 100% Reach“) and as global as the Financial Times (“The Newsonomics of the FT as an Internet Retailer“) ) are taking similar analytics-driven approaches to their businesses. If you are in the media business and behind on the analytics curve, Prime is a new caution in how your franchise could crumble in the age of Big, Actionable Data.
• So what are news and magazine companies’ propositions here? Is All-Access to the news or magazine titles just a foundation? If Amazon, a former hard book seller, can reinvent itself as a media company, which media might become wider media centers, essentially re-selling the movies, music and books streamed by others (including Amazon)? If this is about customer relationship, it’s probably either an upward or downward spiral. Keep the customers you have by offering them more, or risk losing those primary relationships to others (Kindle Newsstand, Apple Newsstand, plus, plus, plus). That’s a sobering, but likely, scenario.

Those Pew research numbers — 11 percent of U.S. adults owning a tablet, tablet news-reading numbers off the charts — make everybody even hungrier.

Yahoo is the latest to try to get in on the growing banquet of reading riches, with its long-awaited Livestand tablet news product launch Wednesday. It joins the summer-launched AOL Editions news aggregator and sets up the next one to join the dinner party, Google Propeller.

It will take awhile to plumb around Livestand and figure out what’s what, what’s where, who’s in the product and who’s not. And yes, it earns the sobriquet of would-be Flipboard-killer, with a lot “less” — less busyness (which some readers will like), less elegance, less apparent news variety and fewer flips — than the market leader.

As a tablet news aggregation product from the No. 2 U.S. web property, it demands to be taken seriously. In addition, we’ve got to place it into some kind of context among Flipboard, Pulse, Ongo, Editions, and coming Google products, as well as the dominant single-brand news sites that have enjoyed fledgling tablet success.

With the launch of Livestand, we see the beginning of Aggregator Wars 2.0, to be fought on a tablet near you.

Livestand pushes the question: How are we going to receive news and features via the tablet, through individual apps (paid or free) or through an aggregator? And how are publishers going to monetize their content and audiences, as those audiences move dramatically from newspaper, magazine and broadcast to the tablet? A Pew data point: “A majority, say the tablet takes the place of what they used to get from a print newspaper or magazine (59 percent) or as a substitute for television news (57 percent).” (See “The Newsonomics of the Missing Link,”)  So let’s look at the Newsonomics of Livestand.

We start with this proposition: The app world Steve Jobs bequeathed us broke the old web paradigm. Where most news sites have seen no more than 35 percent of their traffic coming direct (the majority coming from Google, Facebook, Twitter, and the rest of the sideways web), apps reasserted singular brand access. The Digital Dozen — the leading global and national news brands — quickly took Apple’s early invitation and have building out news products ever since. They love the fact that readers come directly to them; those that are charging for digital access find tablets (and smartphones) tailor-made for single-brand, All-Access subscription plans.

On the other hand, the Livestand proposition says: You want more, and we’ll provide it. That aggregator’s creed has been enormously successful on the web — five aggregators take in 67.7 percent of the U.S.’s digital ad revenue — and they’d like extend that winning formula to the tablet. Alas, the tablet is not the same as desktop or laptop web (or the smartphone), so how easy or hard will the aggregators’ extension attempt be? Here’s what I’ll be watching for as the tablet aggregators go forth:

How high — or low — will the walls go?

These early tablet aggregators are walled gardens, to borrow a portal metaphor from the pre-Google web. Yahoo says it has assembled about 100 content sources (it’s unclear if that number includes Yahoo-owned brands) that provide whole content for the company to host within its HTML5-driven app. They range from Consumer Reports and Forbes to Scientific American, the NFL, and Surfer, a magazine that may have benefited most from the launch PR. For national and global news, you’ve got AP, Reuters, and Yahoo’s new top partner, ABC, along with a few others. There are some link-offs, but not too many, with the product strongly advantaging Yahoo’s own content and that of its third-party partners. Of course, Yahoo is a significant content producers, given the hundreds of content creators it employs, and sports a mind-boggling array of sites.

Flipboard, too, is a walled garden, but looks to have — it’s hard to measure — more wildflowers among its partners. That $60 million venture startup now has 50 content partners, with more diverse global/national news (The Economist, USA Today, The Guardian, BBC, The Daily Beast, and lots more) than Livestand, and seems to offer more links to non-partners as well. For instance, News Corp.’s All Things D (a free site) is a partner, with full content on Flipboard. The Wall Street Journal (a mostly paid site), which is not a partner, can still be found if you troll through the business section. Flipboard, of course, can lay claim to another overused portal metaphor of the ’90s: “We’re Switzerland.” That’s true to an extent; it doesn’t create its own content, and says it can therefore better aim at just pleasing readers. Yet, it, too, must find a business model to survive.

Right now, Flipboard looks stronger in news, with a good set of feature content. Yahoo looks like it covers the major bases in news — through wires and ABC — and is heavier on feature sites.

Raise the content wall, and you can provide a more, whole (no need to link off) experience, with better benefits to key partners, but create a more limited experience for readers. Lower the wall and provide more content, and you will need to link off more and have a harder time showcasing partners and building a business model.

Who will figure out the ad model?

Tablet aggregator news products are, by their nature, dependent on advertising to be successful. Livestand enjoys the advantage of being part of Yahoo, with the country’s second-highest levels of digital ad revenue, though its sales are in decline. Just this week, it bought ad-matching company Interclick for $270 million to bolster its arsenal. In addition to display, one big hope with Livestand is video ads, a significant growth sector. It seems to have launched with fairly little ad support, a surprise for a product long-planned and backed by Yahoo. Flipboard, too, is hoping to break the code, or more precisely, to have its content partners do it. Surprisingly, though, only about a half dozen of its 50 content partners are actively selling ads on the site. Yes, tablet advertising is fetching ad rates 5-10x higher than online ads at single-branded sites, but they are a work-in-progress at Flipboard, despite the interstitial beauty of the ads. Publishers says they need more audience volume before they start selling in earnest. That points to an early challenge: Publishers may enjoy the relative non-competitiveness of Flipboard, as compared to Yahoo, but they see Flipboard as an experiment, one to help gather data on reader usage — and maybe a long-term revenue play.

In the end, publishers’ direct participation in these products — and they are being cautious now — will directly depend on how well they can monetize their audiences on aggregator sites compared to on their own sites. Their analytics are much better now than they were five years ago. They’re experimenting with Facebook sites and Apple’s Newsstand and seeing if the new Kindle catches Fire. If aggregator-related ad revenue is good, they’ll play. If not, the aggregators will be left with uneven, feature content, or their products will be composed of a lot of link-offs — not an experience that makes use of what the tablet does best.

Where’s local?

Yahoo is quite strong in local news aggregation, given its five-year-old partnership with more than half the industry through the Newspaper Consortium. It has pitched partners on joining Livestand — I’ve heard of one near-comic presentation that turned off newspaper publishers — but I don’t see much local in the product. That’s probably due to publisher wariness — why cede audience to aggregators or to Yahoo’s product development timetable? Local would be a great differentiator for Livestand — especially given its deeper relationships with newspaper companies. It could also be valuable whenever AOL’s Editions patches its local Patchs into its mix. An aggregation that reaches from global to local makes reader sense; who will deliver it?

Ironically, local should be a green field for the tablet news aggregators. While the big national and global news sites have established powerful app platforms, most local news publishers are way behind the curve, and falling farther behind every day. Yes, sites from The San Francisco Chronicle to The Dallas Morning News to the Memphis Commercial Appeal to The Boston Globe have put up live (non-replica or replica-plus) tablet sites, but they are in the minority. By the count of the Newspaper Association of America, there are only 87 U.S. daily newspaper apps in the iTunes store, and many of those are replicas.

If aggregators can aggregate local on the tablet faster than local publishers claim their own tablet turf, they’ll be a long way down the road in the battle for local digital ad dollars, a battle coming to the tablet in 2013.

Who will provide the best routes to digital subscriptions?

With more than 150 news titles and dozens of consumer magazine titles going digital-paid, figuring out the link between free aggregated content and paid, full digital access is a must. If the aggregators can feed the paid digital access business, publishers are more likely to buy in and provide more content. Flipboard’s Economist partnership, with its lead-out to Economist products, services, and games, is the model to watch. Could aggregators work with publishers to jointly authenticate paid customers? Sure, they could, but it’s a significant tech challenge.

Where does Ongo fit in this?

It’s easy to forget Ongo, which seems to have gotten little traction in the popular mind, or in audience or revenue. A consortium put together by Gannett, The New York Times Co., and The Washington Post Co., it suffers from at least two on-the-surface issues. Number one: It charges $5.99 a month for some subset of news company content, with upcharges from 99 cents to $9.99 for each local title, many of which don’t even have digital paywalls of their own. Number two: While it’s improved its poor launch design, it’s still nowhere as flippin’ cool as either Flipboard, Pulse, or Livestand.

Who or what are our gatekeepers?

So how do these companies decide what to show us? That’s a fundamental question we don’t have to answer when we open up The New York Times, Financial Times, or BBC. We know editors have used their judgment to decide what to include and how to play it. On the tablet, especially, it’s a witch’s algorithmic brew of editorial, business, and social curation. Business considerations — what do we own? — color Livestand and AOL’s Editions. There’s some traditional editorial curation going on at all the aggregator sites, but it’s hard to see or navigate. What’s being picked by editors, driven by business deals or by our social graph, when we sign in with Facebook or add our Twitter list to filter the news? We don’t know at this point, and we don’t have handy levers to adjust the mix.

The wizard behind the curtain appears to be in charge of our news experience. That’s both pleasing and anxiety-making: Am I missing something? Just how did this page get in front of me? Those questions will color the single brand vs. aggregator experience on the tablet. I may be willing to trade single-brand certainty of news judgment for some aggregating algorithm, or I may not. Down the line, we’ll end up with much more knowable and personalizable systems that let us harness both editorial and social intelligence, but we’re not there yet.

Will Livestand work? I think the answer is that it will take all of 2012, at least, for news consumers to sort out the competition. The big issue Yahoo faces is habit. It would love to translate the Yahoo News web habit to the tablet, but it’s clearly not a one-to-one transfer, as Google News will find. As The Daily (80,000 paid circ or so) has found, it’s really hard to change or establish new reading habits. There, incumbents like the Times, Journal, the BBC and Guardian have built strong one-click news habits, verified by the Pew study that found that “90% of app users went directly to the app of a specific news organization, compared with 36% that went to some sort of aggregator app like Pulse.” Those early habits will get harder and harder to displace. My guess: We’ll each pick a single news aggregator to complement our top two to three top single brand choices. Those will be the buttons, the apps, on the first page of our iPads — and the second page won’t matter much.

Give the Financial Times credit, of course. Surely, the Apple rethinking — it released new guidelines, reversing course, allowing publishers to offer differing prices and products inside and outside the Apple store — was underway before the FT grandly announced on Tuesday that it was embracing web apps, and downplaying iOS apps, as its product and market strategy. Certainly, though, the FT’s trailblazing move –in part under consideration at other major publishers — tipped the balance. What Apple has been risking with its our-way-or-the-Android-highway stubbornness has been in central place in mobile news and feature reading. With a 80% plus market share in tablets, and proof positive that even a great product, the iPhone, can be surpassed in the marketplace by an almost-as-good Android-powered set of products, it, in Peter Kafka’s words, blinked.

Far more important for Apple to maintain the iPad as the best, most complete way to do our digital reading. Readers don’t care about the tiffs between Apple and publishers; we all just want everything in one orderly place (nothing hurts like an incomplete Newsstand). Yes, Apple will go some potential revenue, by giving up the attempt to choke off 30% of publisher sub revenue ’til the end of time. Its gains, though, may be impressive:

• It still maintains huge market dominance with the iPad, as the onslaught of Android-, HP-, Microsoft- and RIM-powered products hit the market. With its ahead-of-the-pack product development, it may better retain that lead for the tablet, as it has been unable to do with smartphones.
• It can still gain substantial subscription revenue shares. As I suggested as this imbroglio began, taking 30% for a brand-new sub isn’t totally unreasonable. With now 225 million iTunes customers (most presumably still alive), it can offer impressive lead generation. What’s unreasonable is to take that 30% forever. As I pointed out in a post last night — and I know that Apple execs have become aware of this crack in their system — publishers can sell through iTunes and then market “All-Access” wider subscriptions directly to the people who are reading their products every day. So better for Apple to take some money up front, work out a fair business development relationship and move on.
• Still getting too little attention is the potential for Apple to make a huge amount of money with iAds. It controls the ad serving technology, which offers dazzling interactivity. I’ve heard that it has kept its iAds partnerships separate from its subscription store relationships. That makes little sense if Apple wants full-throated business deals with major publishers. It can, uniquely, offer new ad revenue and access to potential subscribers. Major publishers antes up huge, often-affluent target audiences. Why not make better deals?

For now, hubris has taken a short vacation. Let’s celebrate for a day, and then we’ll see what tumbles out of it.

The FT move this week to make Apple just one other distribution channel should be a wake-up call for publishers of all kinds. When FT.com managing director Rob Grimshaw told me –”We don’t want to be seen as squaring off against Apple” — he means it (“The FT Declares Independence (from Apple) Day“). The FT would no more want to take on Apple than Google or Facebook. All supply lots of potential new customers to the FT. They pour new traffic into the wide top of the FT’s audience funnel. While the great majority read a linked story or two and are unlikely to ever become a paying customers, the FT is getting better and better at working the funnel’s sieve. We’ve focused on the number of paying FT digital subscribers, now up to 224,000. Consider, though, another important number: 3.5 million. That’s the number of registered FT users. That number is up about 40% year over year. That’s the prime group that the FT can induce to become paying customers. They are found in the middle of that FT funnel, and some will drop to the bottom line.

So the FT will continue to use the marvelous platform Apple has created, and others are adapting. In its web app approach, it is making a minor gamble that customers will find and use the FT just as effectively — and for as long session times — as they do with the iOS app. Currently, it is finding that just 15% of its new subscribers sign up through mobile devices, though most of those do come through Apple. If the FT finds its strategic jump is costing it business, it can readjust and quickly re-develop, and quickly, for iOS and other platforms.

For other publishers — those without the FT’s (and WSJ’s) substantial infrastructure (of authentication, e-commerce, customer and content management and platform development), the working relationship with Apple is more nuanced. (See my Thursday Nieman Lab post for more on “The Newsonomics of defense and offense.”)

Take the New York Times. The Times is in the midst of a critical year, climbing a hill of customer change, as it tries to convince one percent (or 300,000) of its unique visitors that the Times is worth paying for on digital devices. We’re only a half-year into the test — which I hear is going well, and on a successful ramp  – and that Times needs every new customer it can get. It has innovated new subscription-related marketing programs, such as its Lincoln “sponsorship,” which it recently updated (“Inside the NYT Lincoln Deal: It’s About Dollars, Traffic and Conversion“). Now, it plans to harvest as many new subscribers from Apple’s customer base, through the new Newsstand, as it can. That makes sense for the Times, and for others just building their digital subscription businesses.

In fact, I think the Times and other publishers have the ability to use Apple, just as Apple has smartly used publishers (and music labels and games creators) to build its hardware and app income business. Publishers can turn what may seem like a lemon of a deal — giving away the 30%, having restricted access to customers — to lemonade.

Here’s how: What consumers love about the internet is choice and flexibility.  That enduring quality provides publishers a couple of new marketing opportunities:

• Publishers can tout through their own digital and print products that they offer the widest choice to consumers. While Apple offers only digital subscriptions — not print ones — and only iOS-based subscriptions, top publishers have smartly embraced the All-Access, “have it your way” approach, easy to grasp by consumers. It’s a “more is more” pitch. Customers want to access the news from four or five different devices, no problem. A publisher can provide that, as they have begun to do, at a single price. That compares to a single price for a single application bought through Apple. Further, newspapers can borrow a page from telephone/wireless customers – old “media” that have found a better transitional path forward than newspapers – and offer family plans. Why limit all-access to an individual? Multiply devices by the number of family members, and the simplified selling plans can be winners, as they have been for the telcos.
• Inevitably, many consumers will buy subscriptions through Apple. That’s a good thing – and a lead list for newspaper companies. Let Apple sign up new subscribers, happily providing the 30% commission. Even if the publisher doesn’t get much customer data (about 50% are withholding it, given the Apple-offered opportunity to opt out), the publisher retains an enviable relationship to that reader. It’s called the daily product. Each day, readers get the news products, and they can receive “all-access” offers. To Rob Grimshaw’s point, these offers don’t need to be seen as anti-Apple offers. They simply offer readers more choice, and who could argue with that?

He’s now poking the edges of publishing. After 13 bestsellers, manufactured and sold through the traditional industry, he’s causing quite a stir in the book world, publishing his new book — “Poke the Box” — through The Domino Project. If you haven’t heard much about Domino yet, you soon will. Domino marries Godin’s marketing star power (76,000 followers of his blog just through Twitter) with the book marketing heft of a little company called Amazon. The Domino Project is powered by Amazon, as it moves deeper into the world of becoming a publisher itself, building on its CreateSpace do-it-yourself publishing initiative and its two imprints launched last year, Amazon Encore (reprints of previously self-published books) and Amazon Crossing (translations).

Domino is, aspirationally, higher profile. Snagging a bestseller author like Godin to head the project signals that Amazon is no longer just working the edges of new publishing, but aiming to turn old business models on their heads. The Domino Pitch: Publish quickly (in as little as six weeks) in multiple (e-book, hardcover, audio) forms, pricing the books in bulk (from five-packs and up), spreading word of their arrival virally — and use Amazon’s vast digital book presence with possible exposure of up to 75 million monthly uniques (the ultimate digital endcap) to promote and market. There are lots of individual newer ideas there, and Godin’s push is to bring them together in one initiative, saying goodbye to the old publishing houses. It’s author direct-to-customer marketing — one to one — multiplied exponentially by Amazon’s reach. (His list of Domino’s principles is noteworthy, and worth studying.)

The Domino Project is also a good distillation of the challenges faced by the legacy book industry. As long-form writing, call it narrative, call it journalism, call it whatever you want, morphs and redefines itself in the flexible digital age, the digital handwriting is on the wall for the book industry. That scrawl can be read as easily as a challenge — and opportunity — for legacy news publishers. Much of what Domino is doing in upending models of traditional manufacturing, marketing, distribution and sales bears directly on how news publishers and news creators reach their own audiences.

I caught up with Godin this week, talking to him for my Nieman Lab post, “The Newsonomics of the Digital Cafeteria,” about how news publishers are moving into e-books and tablet products of all kinds. Out of the conversation, here’s my second installment of Six Lessons for News Publishers (the first: “Six Lessons for the Newspaper Industry from Reed Hastings“).

The six:

Sell silver, not paper: Godin remembers when the Annenbergs owned the failing paper in Philadelphia. “Then they offered sterling silver teaspoons,” as a premium, targeting female subscribers. “That made them the #1 paper.” The lesson: what you do and what you sell may be two different. My sense is that we’re newly into that era as paid content plans sell convenience and delight — all access wherever you are are — rather than “content.”

Treat News ADD: In a world of plenty, really infinities of news, opinion and information, it’s not how much content you can push to the market, it’s how much reader attention you can earn and depend on. In describing Domino, Godin says, “The only asset we care about is attention.” You’ve got to ask, he says, “What are you doing with the attention you have?” That’s a highly relevant question. In print, news publishers used to engage lots of reader attention, gaining four hours or more per month of attention (reading time) of 40%-plus of the households in their markets. Online, most news sites have gotten 10-15 minutes per month of reader engagement, reader attention. The tablet, and e-readers, offer new opportunities in treating this attention deficit disorder, with the early signs showing more attention spent. Innovative approaches to publishing — what you offer, how you offer, how you package, how you engage readers — can be the best medicine. “It’s a huge opportunity for journalists. They can be the “concierge of attention,” he says, as editors point to the best, most useful content, their own or others.

Turn strangers into friends: “I paid Time Inc. $2 to read about the causes of the Civil War,” says Godin. “There was no invitation to join a community or join a discussion. I’m a stranger again.” Godin’s point is that each reading experience is a potential beginning of a relationship, of engagement, of asking for — and sometimes getting — more attention. Ironically, Time, Inc. and other publishers have been highly vocal about getting customer data and retaining the customer relationship, as they create sellable products for Apple’s iPads. Yet, gaining data on subscribers is one thing, but one thing only; there are many ways to engage readers, developing and nurturing relationships that could mean lots of sales in months and years ahead.

Let others bring good things to life: Domino’s second book is “Do the Work,” by Steven Pressfield. The price to readers: free. The book is sponsored by GE, in a new twist on an old sponsorship model. GE gets its brand associated with the work, and the work gets paid for a different way. In the iPad/Kindle era, we’re seeing sponsorship re-emerge as a potent source of funding. There’s something about whole products — as opposed to website bits and pieces — that attracts sponsorship. What does sponsorship mean as to what the content actually says?; that’s an ancient conundrum to worked out anew, with reasonable boundaries to be set, especially for journalistic works.

Don’t let the trucks drive you into oblivion: “The reason why the Inquirer is in Philadelphia is the trucks.” That’s a reminder that while the “death of distance” is over-heralded — reporting and sales feet on the street still retain lots of value — trucks no longer define the business. Distribution by truck and by carrier used to be a formidable barrier to entry, and indeed the daily “monopolies and oligopolies,” as described by Godin, were as much defined by distribution as by local content. Swapping out the focus on trucks for a focus on attention is easier said than done, an abstraction that makes sense, but has proven incredibly hard for legacy businesses.

There’s no whining in publishing: “Journalists need to stop whining. There is a new economy, and you have to recognize this and move on.” Fifteen years into the digital news revolution, the lamentations are receding, but I still heard some of them — more wistful than mournful — in the halls of both the Newspaper Association of America publishers’ conference and the American Society of News Editors top daily editors’ conference. Frankly, in a time of such change — and such opportunity — there’s no time for whining.

Overall, there’s little surprising in the Apple announcement. After all, what it said publicly is what it has said privately to news and magazine companies for months. Your old business is still your business, but the new business — when we help you get it — is our business, too. For Apple, that’s a logical position, and the logic is backed up by a big number: 160 million. That’s the approximate number of iTunes account holders, a number 40 times bigger than the largest newspapers in the U.S. and Europe. You want access to our customers, Apple says, pay us.

Digital circulation money, though it may the highest profile part of this story, isn’t the most curious issue involved here. There are at least three big issues for media companies — and you can put Netflix, Hulu and Rhapsody in the mix here — surfacing here:

• Selling a customer across all media types, including print, with the new all-access media consumer promise — a cornerstone of many next-generation business models. (“The Newsonomics of News Anywhere“)
• Unifying the customer experience as we digidextrous readers (and listeners and watchers) move from desktop to smartphone to tablet and back and forth over the course of our days.
• Sophisticated ad targeting. Yes, new digital circulation money — has it finally arrived? — seems like a godsend, but it’s a small godsend compared to the amount of digital advertising spending to be available to media over the next five years.

First, though, let’s take a quick look at what the policy does tell us about circulation pricing. Essentially, it sets a new circulation cost structure for publishers. They’ve got all the old metrics from the print side, and have been raising print subscription and single-copy prices a lot over the last four years, even as the print volume ebbs away. Now, they can say, okay, we can look at digital circulation pricing three ways:

1. We can use Apple to get new, standalone, digital subscribers for iPads and iPhones, and we’ll just give Apple 30% to be our digital delivery boy. It’s more than we’d like to spend, but at least it’s a known expense, and we can factor that into our pricing.
2. We can use Journalism Online’s Press+ to get new digital subscribers, and work with that company to connect our print subscribers and digital ones. That will cost us 20-25% of the digital income, a little lower than Apple’s take, but we’ve got a chance to offer a print/digital bundle.
3. We can build out our own authentication/e-commerce systems (what Press+ does) at a larger cost — a quarter million dollars and up for a metro title — and devote operational money to running it. That’s a bet that they’ll be lots of money in digital circulation and the investment/ongoing staffing is worth it. That’s a classic build/buy decision, one with lots of unproven revenue assumptions.

From a pure financial point of view, Apple’s announced deal gives structure to news and media strategy. For newspaper companies, it also offers the outline of a  two-market strategy. Yes, they can — through their own systems or Press+ — transition their readers to All-Access, as they increasingly use tablets to replace print. The core of print newspaper readers — largely older — is hugely valuable in this tablet transition, and that remains intact. The second market — largely younger — is made up of heavy news users who aren’t print subscribers. Now, through Apple, newspaper companies have access to many non-print customers, who, at the touch of a click can buy. That buying could include subscriptions certainly, but also an endless potential of special products (Egypt special sections, personal finance for new couples, baseball season previews+++; “The Newsonomics of Kindle Singles“). Apple just says: we brought you that customer and we’ll take 30% of the price you set.

So far, not bad.

Back to the rubs, all of which can be massaged out, but haven’t yet, as publishers and Apple both get their heads around how to play the new ecosystem.

The rubs all start with data, the real new currency in digital business. Apple has chosen an opt-in policy. When we consumers sign up for a subscription, we can choose to offer our names, e-mail addresses and zip codes. Given a choice, lots of consumers will say “no” or “what’s in it for me”? So, lots of basic information will never be captured. That basic info, to the extent it is captured (or publishers figure out how to incentivize us to give it to them), could be used to match up the Apple customer with the print or online (desktop, laptop) customer, though the match is easier said than done.

But, wait, that’s not the data that matters most. The most vital data is what tablet news readers are reading, how long they are reading what and their ad-clicking behavior — basically all the tracking breadcrumbs allowing marketers to better target and customize their messages and offers. Targeted ad selling will produce lots more money over time than the digital subscription revenue, and it appears that news and media publishers won’t have much (any?) access to it. What is a customer doing on the tablet — with one news or media brand, and overall, in aggregated usage form — is a big question. For Apple, building out its iAds business, the data can be a goldmine, allowing it to hypertarget advertising, and taking its additional 30% there, as it offers publishers iAd advertising on their tablet products. If that’s true, the whole digital circulation policy may be just a Trojan Horse to get to the real iAds riches.

Beyond the ad revenue, publishers need to be able to see their customers — and what they are doing — across all possible platforms (as much as print allows, of course) if they can best serve them. For instance, if I can start reading a story on the iPad and want to pick it up on the home desktop, can I do that, another way of asking whether the systems will know I’m the same reader. If you are the Journal, the Times or the FT, further, and Apple sells a digital bundle to your content (part of the policy is that Apple must be able to offer a similar product at a similar price), then how do I know that customer may also be my own print customer. The mixing and matching questions here go on and on.

Yet, they can be worked out. They can be massaged, as Apple learns both the ad business and sees a greater potential in partnering with publishers on these knotty issues. If the IPad operates too much like an island — disconnected from other non-Apple digital reading and media consumption — that could hurt Apple is a world of increasing connected expectation.

Overall, today’s news will push publishers strongly in the All-Access direction, a route some has charted and most have surveyed. Well-executed, it offers the chance, a new one by the pre-tablet standards of two years ago, to move print customers to paid digital reading experience — and get into play for a new audience (How they make that play — the product — of course is the big question.) Expect a lot of harrumphing around the announcement, but then more behind-the-scenes tackling of the tougher ad and data integration issues.