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Apr 12, 2010

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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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