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The Daily Quest for Online Profits

Posted on Monday, March 21, 2011 at 5:30 PM

Part II. Success of The Daily launch is in question. The publisher is mum. Who knows if the start-up is a hit or a flop?

By William Dunkerley

The Daily, the new iPad-based multimedia publication of News Corp., is off to a quixotic start. In Part I, we covered the February 2 launch and focused on a number of possible pitfalls ahead. Now, as the publication is about to enter its third month of operation, there is very little to indicate that things are going well.

First, a free two-week trial period was extended to almost 7 weeks. PC Magazine indicated that the extension was issued as a result of "some stability issues and bugs." The original trial was credited to the sponsorship of Verizon. There's been no word on who's footing the bill for the extension.

Despite the extensively extended free trial, News Corp. has been evasive about the extent of readership. Publisher Greg Clayman told The Independent, "We're not disclosing the exact numbers (of downloads) but it's in the hundreds of thousands." He also declined telling exactly how many paid subscribers there are, except to say there are "more than one and less than 1 billion." Cute.

However, The Guardian reported "Although the Daily has been free so far, it is understood that a few thousand people have already signed up to the year-long subscription. News Corp has not released any numbers, but it is estimated that the figure is in the region of 5,000."

Meanwhile, AFP, the French news agency, reported that The Daily "has tallied hundreds of thousands of downloads since its launch a month ago its publisher has said." Beyond the ambiguous claim of "hundreds of thousands of downloads," there doesn't seem to be consistent and reliable information about readership.

It's hard to imagine that The Daily would be so tight-lipped about its audience size if the news were good. It's also hard to understand how it can be conducting a credible advertising sales effort while keeping the audience size a virtual secret.

In other advertising-related news is the puzzling absence of any information on the publication's website on how to advertise. There is no link to an advertising contact. There is no link to a media kit. Not even a rate card. It seems like quite a strange advertising sales strategy.

"Strange" may indeed be the byword for the orchestration of this launch. In addition to all the aforementioned concerns, there is the matter of what devices The Daily will work on. PC Magazine claims they were told that an application will be released for Android-based tablets within months. However, The Daily's own website claims that the publication is intended exclusively for the iPad. More apparent confusion.

Is It Even Legal?

The Daily uses the highly-controversial new Apple subscription system. It's touted as being as convenient as buying a song on iTunes. The Federal Trade Commission and the Department of Justice, however, are looking into the subscription scheme, according to Information Week. There has been a lot of speculation that it is basically unfair, if not even illegal. The Wall Street Journal ran the headline "Apple's Subscription Rules Raise Possible Antitrust Issues." What's more, Apple's demand for a 30 percent cut of revenue from subscribers who are new to the publication has raised a lot of eyebrows. Legal analysts seem to believe that the final result will depend on whether Apple is deemed to have a dominant position in the marketplace.

As a publishing issue, the 30 percent doesn't really seem problematic. Publishers are used to new subscriber costs often running several times that. What's more, Apple claims that if the publisher recruits a new subscriber, Apple will process the order at no charge. (At least that's what Apple seems to be saying.) But if Apple and the publisher are both out there selling subscriptions, that makes them competitors in that activity. And if competitors are conspiring on the subscription price, is that price fixing? Perhaps the legal analysts should be looking into that angle.

But It May Be a Moot Point

All this worry over whether The Daily's subscription arrangement with Apple is legal may be for naught. It won't really matter if the publication does not survive. Despite all the hype that the iPad is the up and coming substrate for magazines, some preliminary figures speak otherwise. They seem to be saying that the hype is -- well, just hype.

Media Post reports that, in 2010, "sales of digital magazines on the tablet computer have fallen significantly." Data cited indicates that Wired magazine's digital copies went from over 100,000 for the first iPad issue to 23,000 copies just 5 months later. Vanity Fair took a dive from selling 10,500 digital magazines down to 8,700.

While the numbers were tanking for these and other publications, the total sales of iPads jumped 565 percent through the end of the year.

I don't know what people are doing with all those iPads, but it doesn't seem to be reading magazines. Indeed, there is quite a dearth of objective data available about what iPads are really being used for. There's a lot of hype about what they might be used for. But not much hard data on actual usage.

Nonetheless, The Daily remains a pioneering effort in multimedia publishing, one worthy of our continued interest. News Corporation's Rupert Murdoch says he believes The Daily "will be the model for how stories are told and consumed in this digital age." Indeed, it may become that. But, for now, it seems to be hitting snag after snag. Unless things change, it may be the model for how not to orchestrate an innovative launch!

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

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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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Is Wikileaks Relevant to Us?

Posted on Tuesday, January 25, 2011 at 11:25 AM

The process of publishing may never have come under such intense scrutiny before.

By William Dunkerley

For most publishers, the dilemmas faced by Wikileaks publisher Julian Assange probably seem quite remote. Certainly Assange himself is a controversial figure. Opinions of him range from criminal to hero. But a number of publishing-related concepts have come up in coverage of the scandal that deserve analysis and clarification.

If some kind of counterpart situation had arisen in your field of publication, how do you think your editor would have handled it? Editors Only conducted an anecdotal survey posing the situation, "Let's say someone approached you with content that's sure to interest your readers. But it was leaked and a foreign government considers it to be confidential." The survey then asked the question, "What would be your editorial decision?"

Of the survey respondents, about half said they would publish the information. Around one-quarter said they wouldn't, and the remainder were uncertain.

Some respondents believe it would be their duty to publish, while others consider publication irresponsible. One publishing expert took a pragmatic view: "I'd bring in a lawyer or two to tell me what kind of consequences publication would have. If it is not going to be a criminal offense in my country, and if I have proof that papers are not faked, forged, or the like, I'd publish them. Definitely. Keeping a foreign country's state secrets is none of my business."

According to Columbia Journalism Review, twenty faculty members of the Columbia University graduate school of journalism wrote to President Obama and Attorney General Holder about Wikileaks. They warned that prosecuting Wikileaks would establish a dangerous precedent. Their view is that Wikileaks is engaging in a journalistic activity that is entitled to First Amendment protection.

At the same time, the Pentagon was asking news organizations not to publish the questionable information carried by Wikileaks. According to the Associated Press, Pentagon spokesman Dave Lappen warned against disseminating Wikileaks' "stolen" information, even if already published elsewhere.

CNN further editorialized on the matter. National political correspondent Jessica Yellin said, "We would draw a distinction between publishing information that comes to you by, [sic] and publishing information that is stolen by somebody." CNN national security contributor Frances Townsend disparagingly commented, "Is [Assange] profiting from the commission of a crime? And the answer to that is yes."

In December, I attended a World Affairs Council public discussion of the Wikileaks scandal held in Hartford, Connecticut. As you can imagine, there were comments both pro and con. But, what I found most interesting is that in the audience of around 30 people, there were two FBI agents who so identified themselves. They actively participated in the discussion. Among their comments were the suggestions that (a) one can't trust the Wikileaks information since the chain of custody is unclear, (b) China is somehow involved, and (c) decoupling the databases of the various US intelligence agencies could help avert future leaks. After the meeting, I asked a World Affairs Council official what the story was behind the attendance of the FBI agents, and was told that "they came because they were interested in the program."

Here are a few takeaway points from the Wikileaks scandal:

1. It is abundantly clear that when considering the publication of something as controversial as the leaked cables, it is worth doing a risk/benefit analysis. Would you really want to subject yourself to possible criminal prosecution (even if you believe it would be unfounded), and to a powerful government dispatching security agents into the field to speak out against you?

2. The claim by CNN's Jessica Yellin and the Pentagon's Dave Lapan that the Wikileaks information was stolen appears to be specious. For something to be stolen, there must be someone who has property rights to that which is stolen. Copyright law is the mechanism that establishes property rights for content such as the allegedly-stolen cables. However, according to my layman's understanding of US copyright law, the federal government is explicitly excluded from eligibility for copyright protection for its own work. That would mean that anything authored by an employee of the federal government is essentially "unowned," and thus unable to be stolen. The actions of the US Army intelligence analyst who was Wikileaks' source are another story, however. He has been charged with unauthorized disclosure of US classified information, which is not directly a publishing matter.

3. Similarly, CNN's Frances Townsend's comment about "profiting from the commission of a crime" seems off-base. Perhaps Townsend is thinking of the "Son of Sam" laws. They are intended to prevent a convicted criminal from profiting from his or her own crime. Why, if Townsend's apparent contention were true, the authors of books about the JFK assassination would be guilty, since they presumably profited from Oswald's commission of a crime!

4. A participant at the WAC discussion reasoned that if someone received a stolen television and then sold it, that person would be guilty of trafficking in stolen merchandise. He asked why wouldn't the same concept apply to Wikileaks. However, as pointed out above, the cables in question do not appear to be stolen property.

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

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