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Beecher: The iPad won’t save newspapers

Like almost everyone else who works in the journalism industry, I desperately hope the iPad and similar devices will save newspapers from economic irrelevance. I really hope stories like the one blazed across The Australian’s media section today — “Hype is justified as a new media model emerges” — are right.

But how could they be right? Where is there even a hint of a viable business model for funding large-scale journalism in such a device, or indeed in moving to a paywall model on the internet?

Here are the simple facts:

  • Publishers will save the cost of printing and trucking printed newspapers — maybe 30 or 40 cents per copy printed. Virtually all other costs remain the same.
  • There will be no saving at the retail end — Apple and other tech companies will replace the newsagent on a similar commission basis.
  • There will be a dramatic decline in revenue from readers. Currently they pay around $12 a week for printed newspapers — that will probably halve or more when they buy apps or pay-per-view. And how many buyers of the newspaper will convert to a paid digital option when there is so much free content available elsewhere? Maybe half, or a quarter, or less?
  • There will be a dramatic decline in revenue from advertisers. First, they will be reaching a much smaller number of eyeballs. Second, there will be almost no pass-on readership — the readership figure, which is currently two to four times higher than the circulation figure and is used as a metric by advertisers to caculate ad rates, will collapse
  • So the net result is a small saving in printing and trucking, no saving in retail commission and — if the digital platform ever becomes the major or only platform — huge declines in both circulation and advertising revenues.

None of which is to refute the idea that the iPad isn’t a wonderful device that will bring joy and utility to millions of people. It just won’t — and can’t — save the economic fate of journalism.

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  • 1
    Posted Monday, 12 April 2010 at 2:39 pm | Permalink

    Beecher is right to say that the iPad alone can’t save journalism, but only because he presumes that it’s a platform for publishers to churn out the same old dross they always have and expect to be paid for it the same way they always have.

    What will save journalism is if publications evolve into a product that people are willing to pay for, with rich, authoritative content wrapped in a compelling, engaging user experience that exceeds what is available on the web. The iPad and similar devices provide a platform for that to happen. The next step is for the publishers to take.

  • 2
    James de Vries
    Posted Monday, 12 April 2010 at 2:40 pm | Permalink

    Also, Can’t forget the increased labour cost of producing rich material for a product like the iPad that demands more than a website, including enhanced interactivity, infographics that move, video, audio etc.

  • 3
    Scott
    Posted Monday, 12 April 2010 at 2:45 pm | Permalink

    I disagree Eric. I think the iPad will open up readership quite dramatically to a world-wide audience. When you look at the people reading online vs paper circulation figures, more people use the web. More readers usually means more revenue (especially if it goes to pay per view model). People pay for Crikey. There is no reason to suggest they won’t pay for the SMH/the Australian either.
    On-line (or in article) advertising will replace the printed advertising so I don’t forsee a great deal of reduction in advertising revenues.
    Also once one major newspaper goes to a paywall/micropay model, they will all follow. They can’t afford not too. Newspapers are running at a loss. Fairfax for example lost millions last year. Printing and distribution made up 26% of the total costs for Fairfax in 2009. To reduce those costs would be a huge improvement to the bottom line. There will also be a reduction of workers (as switching to a digital model will reduce the need for printing staff) which will reduce the human resources expense. Also companies will be able to sell off printing presses and reduce the working capital (inventory is no longer needed). All this will help the cost of capital and the economic profits.

  • 4
    ggm
    Posted Monday, 12 April 2010 at 2:51 pm | Permalink

    The money flow offshore increases. Balance-of-payments wise, this might be interesting. Presumably some amount of the woodchip used to print papers is export from this country, so we might loose two passes through the national economy, once for the raw product and once again for the printed paper.

    Newsagents lose income, and so we see a decline in local outlets, money in the local economy, loss of jobs.

    The knock on to publishers who can’t secure favourable deals will reduce competition in the magazine marketplace overall. as you say, and I agree, In all likelihood the measure of eyeballs will have to move (as it has for OzTAM and PVRs) which will doubtless destablize the market in ad revenues even more

    Ads money flows to the owner of the eyeball distribution mechanism looks inevitable. So rather than small agencies dealing with editors and doing targetted placement, we will have a few mega-agencies channelling ads to what they believe is the right eyeball. Quite why I am judged to be interested in both weightloss and reunion with old high school friends is beyond me, but it looks like I am going to see a lot more of those ads no matter what.

    Who will the feds give the money to, to get the ALR published? Why would that continue to be News Ltd and not Apple direct?

  • 5
    green-orange
    Posted Monday, 12 April 2010 at 2:54 pm | Permalink

    The costs are irrelevant - they are simply added to the price.

    Revenue from readers is irrelevant.
    The profit after cost is HIGHER so profit will not decline, even if revenue does.

    Free content - what content ?
    Once Fairfax and News Ltd go behind a paywall the only free content will be headlines produced for television (where each story must fit in 90 seconds), and opinion sites like this.
    There will be NO local news, NO car accidents, NO court reporting, NO anything that people want in a newspaper.

    The readership figure is garbage. No advertiser takes any notice of the readership figure, this is just a sop to shareholders. The only figure that matters is CIRCULATION.

  • 6
    cosmicharade
    Posted Monday, 12 April 2010 at 3:49 pm | Permalink

    What interests me is that often talk of ‘jobs’ and ‘industries’ seems to centre around this nasty thing called ‘change’ as though it’s a threat to our wellbeing. We also have this concept called ‘consumer choice’, so jobs can not be lost, until consumer ‘choose’ to spend their money elsewhere due to a superior offering (unless something is legislated or distorted by government policy). So if this article is correct, it assumes that electronic distribution is superior to printed. If so, why? What are newspapers currently not offering? And if journalism does fall in to a hole, this leaves a market gap for authoritative comment - who will fill that? As information overload becomes more of a problem, won’t that *increase* the demand for authoritative and edited content?

    We already pay for Crikey..

  • 7
    sean diggins
    Posted Monday, 12 April 2010 at 5:52 pm | Permalink

    I’ll be very happy to keep paying my Crikey sub. Eric should give thanks he’s not a musican trying to make a living in the Binary (nee Brave) New World. We reap what our technology sows - adjust or perish. Everything else is merely conversation.

  • 8
    Smithee
    Posted Monday, 12 April 2010 at 7:33 pm | Permalink

    News Ltd are hilarious. Here’s the timeline:

    2006: They redesign all their online news sites to maximise exposure to Google and use Google-sourced traffic as a specific metric to judge success

    2009: They declare Google to be the enemy and attack it as a parasite and freeloader

    2010: They declare the iPad is the saviour and announce their online news sites will tailor apps for the iPad

    2012: ?? A denouncement of Apple and the iPad as “freeloaders” and “parasites” as the old-world news model sinks further into the red

  • 9
    Kevin Cox
    Posted Sunday, 18 April 2010 at 1:48 pm | Permalink

    It is interesting that the publisher of a successful electronic news journal says that journalism is dead. Crikey is proof that it isn’t.

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