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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