ELEANOR HALL: Well News Corporation might be doing well but a media analyst in Australia is predicting that the days of reading printed newspapers are numbered.
Macquarie Group media analyst Alex Pollak told Alison Caldwell that the print editions of most Australian daily newspapers will soon be axed.
ALEX POLLAK: They’re considering the economics of the distribution of their content of The Age and the Sydney Morning Herald on a non-print platform predominantly.
So in other words taking, you know because what people want to read and what advertisers are trying to do is get to people on or through this content.
And so you know given that one half of the cost base of doing that is actually involved in the physical distribution of the print product.
ALISON CALDWELL: So half the cost of a newspaper business is actually printing and distributing the product.
ALEX POLLAK: Yes, not all newspaper businesses but when we’re thinking about the Sydney Morning Herald and The Age, that particular newspaper business, half the cost of it is in the simply getting the printed edition to you in your hands.
Whereas the cost of doing that same thing on an e-reader, and there will be a lot of them in people’s hands in the next 12 months globally, that’s moved the debate on a whole you know quantum step.
Same end product to the user but cheaper way of delivering it without the newsprint.
ALISON CALDWELL: Would News Corp be considering the same thing?
ALEX POLLAK: Again I don’t know as a matter of fact whether Fairfax is considering it. I believe they are. And I don’t know as a matter of fact whether News Corp is considering it. I believe they are. I believe they’re considering it very seriously. I believe that newspaper managements all over the world are considering this very seriously.
I mean Rupert Murdoch was quoted in a call only this call only this morning as saying that the iPad is a game changer. These are words that he uses every time he talks about these e-readers.
ALISON CALDWELL: Are Australian newspapers – and I mean we only have two proprietors really – are they really in that much trouble? Is it a liquidity problem? I mean why would they be even considering this?
ALEX POLLAK: No, Fairfax is not, it doesn’t have a liquidity issue. It’s not a solvency issue with respect to Fairfax. It’s a business model issue and it’s a return to shareholder issue.
And you know frankly in the end it’s kind of a, you know what they call an ESG, you know, environment governance issue as well.
I mean you know chopping down trees and running them through printing presses and throwing them over people’s fences and then for people not to read them and put them back out in the recycling bin, you know that’s all you know a bit of a to-do given that what people are actually trying to consume is some digital idea which is actually just some piece of writing or a piece of art work or whatever it may be.
ALISON CALDWELL: Is this something that would happen overnight?
ALEX POLLAK: No, no. No it can’t happen overnight because people can’t just wake up tomorrow morning, you know, and not get their papers. They have to become acclimatised to that idea.
And from a business sense it’s a bad idea as well because advertisers are paying a lot less for online advertising, which is the predominant source of funding for the Fairfax Herald and Age business. Advertisers are paying a lot less for advertising online relative to what they’re paying in print.
So the two critical things that have to happen are first of all you’ve got to get some agreement with the advertisers about how much the revenue base that they are paying now for the print product, how much would they be prepared to pay for the online product.
And then issue two – you need to get the in-store base of e-readers up. So and that will come as there’s more and more e-readers coming out.
ELEANOR HALL: That’s media analyst with Macquarie Group Alex Pollak speaking to Alison Caldwell.
Crikey:
Meanwhile, Fairfax insiders say senior management continues to digest last weeks’ devastating drop in The Age’s circulation. The following comparison is based on historic ABC Audit and Morgan Research data.
CIRCULATION
June 2007 June 2010
M-F 207,000 197,500 (down 9,500)
SAT 301,000 279,900 (down 20,100)
READERSHIP
June 2007 June 2010
M-F 749,000 655,000 (down 94,000)
SAT 954,000 877,000 (down 77,000)
The Age’s profit has crashed from around $90 million in 2007 to less than $45 million today, with board pressure on Age CEO Don Churchill said to be reaching a crescendo. — Andrew Crook
And,
He’s fixed his hair, but Rupert still stuck in black and white
by Michael Wolff of Newser
First, the really big news in the LA Times story about Rupert Murdoch’s plan to start an all new national newspaper for the iPad and mobile devices: The picture shows that he’s not dyeing his hair any more. The orange (or sometimes aubergine) is gone. One of the things Murdoch is said to have most disliked in my book about […]
Extract:
News Corp. plans national newspaper for tablet computers and cellphones
It’s the latest bid by a major media company to build readership using new devices such as the iPad. The new publication would offer short, snappy stories and operate under the auspices of the New York Post.
News Corp.
By Dawn C. Chmielewski, Los Angeles Times
August 13, 2010
News Corp. Chief Executive Rupert Murdoch is embarking on an ambitious plan for a new national digital newspaper to be distributed exclusively as paid content for tablet computers such as Apple Inc.’s iPad and mobile phones.
The initiative, which would directly compete with the New York Times, USA Today and other national publications, is the latest attempt by a major media organization to harness sexy new devices to reach readers who increasingly consume their news on the go. The development underscores how the iPad is transforming the reading habits of consumers much like the iPod changed how people listen to music.
“We’ll have young people reading newspapers,” the 79-year-old Murdoch said during the company’s Aug. 4 earnings call. “It’s a real game changer in the presentation of news.”
Unlike News Corp.’s business-centric Wall Street Journal, the new digital newspaper would target a more general readership, offering short, snappy stories that could be digested quickly. The newsroom would operate under the auspices of Murdoch’s New York Post and be overseen by its managing editor, Jesse Angelo. News Corp. has yet to set a launch date, although people familiar with the matter said the news organization would like it to debut by year’s end.
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Although it would draw the reporting resources of the Post and Dow Jones, Murdoch could potentially invest millions of dollars to staff the operation and charge a yet-to-be determined subscription fee. One person familiar with the plan said News Corp. envisions a staff of several dozen reporters and editors and that the budget has not yet been determined.
The digital publication would be available as an application for the iPad and other devices.
As print advertising flees to the Web, news organizations are scrambling to prop up their bottom lines with new sources of revenue.
“Newspapers are looking at this as another lifeline to survive,” said Edward J. Atorino, a media analyst with the Benchmark Co.
Murdoch has been increasingly focused on building readership and revenue on digital platforms, erecting a pay wall around the Times of London and announcing plans to charge for access to News Corp.’s other newspaper websites. The media giant offers the Wall Street Journal on the iPad for a $4 weekly subscription fee.
The iPad launched in April with a built-in reading application that connects to Apple’s electronic bookstore, which contains tens of thousands of titles from five major book publishers. A handful of newspapers and magazines — including Wired, Popular Science and the New York Times — had iPad-ready apps waiting when the device hit shelves. Since then, those tablet-based editions have been widely praised for their readability — and have attracted the attention of advertisers who are increasingly looking to digital devices as the number of print readers wanes.
The initial success of the iPad has attracted other hardware makers hoping to capture a piece of the tablet market, which San Jose technology research firm Gartner Inc. believes could lead to the sales of 10.5 million devices by the end of this year.
The New York Times said its free, advertising-supported application for the iPad has been downloaded more than 400,000 times. The newspaper is preparing to introduce a paid version as it moves forward with plans to charge for online access to its news next year. Growth in digital revenue has helped offset a decline in traditional print advertising, the newspaper said during last month’s earnings call.
And, Business Spectator:
Can Murdoch make iPads pay?
Ben Shepherd
There was interesting news out of the US last week: News Corp has announced plans to launch a paid-subscription newspaper that is exclusive to tablets devices and mobile phone.
A Los Angeles Times’ report says the outlet will have its own editorial and production resources and staff. In other words, it will be staffed like any other self-sufficient newspaper like the New York Post or the Herald Sun. The paper would also take stories from News’ other publications around the globe.
Murdoch is pumped. During the News Corp conference call on August 4 he said: “We’ll have young people reading newspapers. It’s a real game changer in the presentation of news.”
It seems that Murdoch is trying to reach two highly significant goals. The first is to make money on the internet, which is something he has not done and few have been able to do. The second to get younger people to read newspapers or newspaper-like content – and pay for it.
The first issue is one Murdoch needs to fix for his own well being. His web properties do not make money. One in particular – MySpace – has sustained massive losses, while CareerOne somehow managed to lose $17.5 million in the last financial year. Fifteen years since the internet really ‘happened’, News is still struggling to find its feet. At the same time, and despite pronouncements of the death of the medium, its cable television businesses remain highly profitable and are seeing healthy revenues from subscriptions and advertising.
Murdoch feels pay walls and subscription services are possible solutions, as these work well in the cable television businesses. But so far the results are lukewarm.
The Australian’s iPad app has had about 8,000 downloads so far. This is about $40,000 gross revenue based on a price of $4.95 for the app. Take out Apple’s cut and it’s more like $28,000. I would be surprised If this covers any more than 1 per cent to 2 per cent of the costs incurred so far in developing and executing the app. In short, it’s just another large strain on Murdoch’s finances.
Regardless of this, it seems pretty clear that in starting a tablet-only newspaper in the US, News is developing something they are likely to do here.
It has moved Richard Freudenstein into a wider role in the company, recently appointing him CEO of News Limited’s digital business, News Digital Media and The Australian. They’ve recruited Ant Hearne from Virgin Mobile for a role that revolves around paid services. Selected people within News Digital Media are starting to incorporate the words ‘paid content’ into their job titles.
My guess is that News will need to create a new brand if they want to tackle the second burning issue – getting young people reading newspapers.
They can make native apps for The Australian, Herald Sunand Daily Telegraph, but the likely outcome is that they will only transfer the existing – and older – print readers to the digital medium. Ultimately, there’s no real gain there. I can’t see a 21-year-old suddenly thinking the Herald Sun is more relevant because it’s on an Apple device, but I can see a 45-year-old regular Herald Sun reader opting to trial the newspaper on the a tablet device.
My gut instinct tells me if that Murdoch wants to attract young people to his ‘word-based’ content he will need to buy companies that have already have built trust with – and therefore have access to – this audience. He tried this before with MySpace, but he would have learnt some valuable lessons from the journey so far (we will see how well MySpace can relaunch again in November). While the MySpace mistakes have been costly, they could ultimately help turn the brand around.
In addition, Murdoch needs to stick to companies that have similar traits to his already-successful brands – ones that are short, sharp, punchy and broad. But News should also be companies that play well in the areas in which it punches softly, such as music, entertainment, technology, lifestyle and fashion. There are at least 20 to 30 businesses that fit these criteria in Australia and abroad. A business like Gawker in the US springs to mind, or one like Mashable. Even something like the Huffington Post or Kidspot would work well. These types of organisations are already successful, operationally lean and cash positive web businesses with the potential to expand into other areas, such as tablets, mobile apps, events and print.
You would have to assume that given its movements to date, News is planning more for tablet apps in Australia than The Australian and other native apps for their classifieds and newspaper brands. It’s likely something a lot bolder and bigger. But what? And how?
And while it might seem that News is a bit directionless when it comes to digital, Murdoch’s track record and understanding of media make him foolish to dismiss – even if it seems that this latest experiment is beyond ambitious.
Radio National Breakfast: Newspapers to disappear in a decade?
