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Issue for February 2011

The iPad Daily

Posted on Thursday, February 24, 2011 at 10:56 AM

How the iPad's daily newspaper is bringing the traditional newspaper into the Digital Age.

By Meredith L. Dias

Earlier this month, Rupert Murdoch's News Corp. launched The Daily, a daily newspaper for the Apple iPad. With this digital daily, News Corp. hopes to marry the traditional concept of the daily newspaper and tablet technology. Forrester Research has forecast that tablets will overtake desktop computing by 2013. News Corp. seems poised to take advantage of that trend.

The Daily is Murdoch's appeal to a new generation of readers. Will it become the gold standard for digital newspaper publishing? Will new readers latch on to Murdoch's vision? And just what subscription model is News Corp. going to use, anyway?

An App-based Subscription

Thanks to Verizon sponsorship, The Daily will be available to iPad users for a free two-week trial. Satisfied readers can subscribe for 99 cents per week or $39.95 per year through the iTunes App Store. There is a new issue each day, with periodic updates throughout the day for breaking news content.

There are, of course, limitations. Currently, the publication is iPad-only; not even iPhone users can access it. What this means for the ultimate success of The Daily, which just debuted on February 2, remains to be seen. While the iPad is certainly popular, it stands to reason that News Corp. would get more mileage (not to mention profit) out of the daily, which will cost an estimated $56 million to run in its first year, if it were at least available to the millions of iPhone users in the United States.

Publication Features

So what does a subscription to The Daily get you? "A newspaper that's both old-fashioned and cutting edge," says Peter Kafka of MediaMemo.com. Journalistic content is beefed up with photographs, 360-degree panoramic images, streaming HD video, and links. Users can share some content with their social networks, but other content remains behind a paywall.

Interactivity plays a role in The Daily's identity, too. Users can share certain articles with their social networks, and there are both text and audio comment options for readers to sound off about stories. They can also customize their reading experience with features like local weather data.

Some early adopters of the app describe their Daily experience as "more like reading a news magazine than a traditional newspaper." Others have dismissed the newspaper as tabloidesque. Still others have lauded Murdoch's incorporation of snazzy multimedia extras into news copy.

Advertisers

News Corp. hopes that, eventually, subscriptions and advertising will each account for half the publication's revenues. For the time being, the newspaper will rely primarily upon its subscribers to pay the bills. However, in a recent article on RedHerring.com, newspaper analyst Ken Doctor predicts that less than one percent of iPad users will buy subscriptions to The Daily, which would necessitate a less balanced, advertising-heavy revenue model.

For the time being, the newspaper remains in a foundational phase, developing relationships and name recognition with advertisers and readers alike. CNBC reports that HBO, Land Rover, Macy's, Paramount Pictures, Pepsi, Verizon, and Virgin Atlantic are among the first advertisers.

Can The Daily Go the Distance?

The Daily has one advantage over its competitors: It is brand new and, therefore, free to explore its own potential without the burden of heavy reader expectations. Unlike the New York Times or Time, this is a new brand. It has no print or digital predecessor and, therefore, can evolve with a freedom impossible for an established publishing brand. However, with its powerful Murdoch backing, The Daily has enough resources and name recognition to become a powerful contender if it employs sound strategic planning.

There are, as mentioned earlier, limitations. With several high-profile tablet models, not to mention the perpetually expanding crop of smartphone users, it would be wise for News Corp. to reconsider its iPad-only strategy. The iPad makes for a compelling test market, but with other tablets now on the market and several more due to hit stores this year, it seems unwise to remain iPad-exclusive for long. We can't know how popular The Daily will become, but if it does meet or exceed expectations, expanding beyond the iPad could mean the difference between 50,000 and 5,000,000 subscribers.

Meredith Dias is senior editor of STRAT.

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Posted in News (RSS), Online (RSS), Technology (RSS)

The Daily Quest for Online Profits

Posted on Thursday, February 24, 2011 at 10:55 AM

Part I. Magazine publishers have long lamented the absence of a successful model for online profits. Will the launch of The Daily show us the way?

By William Dunkerley

News Corporation's digital start-up, The Daily, is sure to be a model for the rest of us. What's unclear is whether it will be a model for what to do -- or what not to do!

The Daily promises readers an embarrassing richness of multimedia features: audio, video, enhanced photography. I've long advocated that publishers open up to the array of channels now available for bringing content to readers. The Daily certainly seems to share that advocacy. This start-up well could be a transformative publication in the evolution of our industry.

A lot will be riding on the implementation, however. Will the publication use the multimedia tools in a way that will enhance reader satisfaction? Will the enhancements help the reader to better understand the content? Will they intensify the reader's satisfaction with the publication? Or will the multimedia features be used simply gratuitously as bells and whistles? It's hard to tell at this early date in the life of the publication.

In fact, there is a lot about the publication that is hard to discern presently. News Corp. has put out a lot of very limited information on its newborn. And, some of the early media discussion of the product contains various takes on it that don't entirely agree. We've tried to sort through those for you in our reporting, but must admit that we're dealing with a market entry that does not seem to be entirely understood by anybody.

Device Specificity

The Daily is device-specific. It's an iPad publication. It may be available on other devices in the future. But, replicating The Daily's features on other devices will likely require an additional app or program for each device. This aspect of device specificity is one of two problems that should be high on any publisher's list of things to consider before jumping in.

There are other publications that are already available as iPad apps. They range from Marvel Comics to The Wall Street Journal. These apps, however, are likewise device specific. The prospects of making your magazine available for additional devices can be daunting. According to Richard Pradley, managing director of Semantico, an online services provider, "As yet no publishing infrastructure exists that can take a given work and repurpose it automatically for all available delivery platforms and operating systems." It takes a lot of expensive human intervention, he explains.

Bob Cohn of Bonnier, a large multinational publishing group, recently told Folio magazine, "We want to be on as many devices as we can logically handle." That may be fine for gigantic operations like Bonnier. For smaller magazine publishers, the budget needed for all that development may be elusive.

The second consideration related to device specificity falls in the category of industry modus operandi. A publisher that goes device-specific is stepping into the world of computer software and hardware. There, planned obsolescence is a way of life.

As publishers, we make our money by having ever-changing content in our publications. That's what keeps customers coming back. Paper has been the stable substrate for publication content for centuries. The iPad and other PDRs (portable digital readers) represent in effect new substrates born of the computer industry. Continued sales in the computer field is different in nature from that in publishing. It comes from new models, new versions. A lot of that is driven by the development of new technologies. Some of it seems to be marketing-driven, i.e., planned obsolescence.

With that in mind, what are the chances the iPad will still be around in 10 years? In 5 years? What's more, a newer technology may come to entirely replace the entire tablet computer category. Of course, publications will need to adapt to all these new developments. My point here is just that it is in our interests that our multimedia publications be developed in a way that does not leave us at the mercy of software developers and computer manufacturers whose own interests may be at variance with ours.

Who's in Control?

That leads to the question of who is the customer and who is the vendor in this equation.

If you look for parallels back in the print-only days, publishers had basically the printer and the Postal Service to work with. The constraints they imposed on how publishers did business and what they published were relatively minimal. Where limitations did exist, alternatives were available, albeit usually at higher prices. Many will argue that the Postal Service did little to ingratiate itself with publishers. The printers certainly did a lot. They each tried to out-do each other in serving publisher needs. I guess that's the difference between dealing with a monopoly vs. competitive entities.

But even the Postal Service didn't say that if you set a price for subscriptions delivered by them, you couldn't price the subs differently for alternative delivery. But that in effect is what many allege Apple's policy on subscription apps amounts to. It's hard to know all the ramifications with certainty. As Bob Cohn remarked about Apple, "...they haven't been too transparent."

Even with fledgling competition from Google, and from others on the horizon, Apple seems to have assumed the posture of a monopoly. The fact that The Daily seems to have kowtowed to that sets a bad precedent for our whole industry. Apple is certainly not coming across as a vendor wishing to court the favor of its publisher customers and prospects.

A lot of noise has been made about Apple's demand for 30 percent of the revenue from each subscriber that it brings to the publisher. But that doesn't sound like a bad deal to me. Many publishers are glad to spend 100 percent of the first year revenue acquired from a new subscriber just to get him or her. Profits come from renewals. Traditionally the cost for getting the renewals is very low. It's not clear how Apple would handle renewals, other than taking another 30 percent each time. That would mean after a few years the publisher starts to come up on the losing side when using Apple as a new subscriber source.

That's not the worse part, though. In publishing, selling subscriptions is not at all like selling music singles (which is where much of Apple's App Store experience lies). If they sell a single, it little matters whether the buyer is in New York or LA. But, if the App Store is selling subscriptions for a New York–centered magazine with New York–based local advertisers, it certainly does matter. The advertisers won't want to pay to have their ads downloaded all over LA for viewing by people who are not likely to become customers. This concept doesn't just apply to geographic considerations. It's relevant to things like age, gender, profession, interests, etc. Certainly the magazine's title, cover, and description may ward off some of the mis-fit subscription sales. But if something in your New York magazine somehow goes viral, you suddenly could be big in LA!

Plunging iPad Magazine Sales, and More

There are a lot of other issues raised by the advent of The Daily. One is the apparent nosedive in subscription sales for iPad magazines right at the time The Daily is being promoted. What's that all about? And recently, there are a lot of questions about whether Apple's iPad subscription program is even legal! We'll cover those issues and more in Part II of our business analysis of what The Daily means to magazine publishers.

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com.

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Posted in Advertising (RSS), Audience (RSS), Content (RSS), News (RSS), Online (RSS), Technology (RSS)

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