Are Australian newspaper executives guilty of magical thinking? Believing that a new delivery mechanism will miraculously enable them to keep on keeping on in the same old way?

In recent times both of our major newspaper publishers have been hanging their hopes for a revival of news business models on the phenomenal uptake of e-readers and the accompanying apps.

The excitement is understandable. Up to 80% of costs in the newspaper business come from printing and distribution — the trucking of bits of dead tree from the press to newsagents and subscribers.

The thinking is that if people can be persuaded to download news apps, then not only might these costs be saved, but also the industry might be able to recover from the great error of the ’90s, which was making news content available online for free. Given that people pay for apps of all kinds perhaps online newspaper audiences will pay for digital  subscriptions so long as the content is delivered to a mobile device.

Thus we have Murdoch’s new digital-only paper The Daily. Closer to home, we have plans for a paywall around News Limited publications. The revivalist thinking has taken its strongest grip at Fairfax, which has a new long-term strategy of winding down the print runs and migrating readers online, something I have written about at greater length here.

There have been hopeful signs. At the investor briefing Fairfax held last November, the Fairfax CEO du jour, Brian McCarthy, proclaimed impressive figures for the download of The Sydney Morning Herald app, and early iPad subscription figures have also fuelled the hope. And there are some signs that advertisers might pay real money for app-delivered content, instead of the peanuts charged for advertising real estate on the web.

So it all seems to make sense, or at least provide room for hope. 
But perhaps not. I am just concluding a research trip to the US, and found that media thinkers there were somewhere between amused and dismayed to hear that Australian publishers are looking to the new delivery mechanism for salvation.

They, too, had toyed with this chimera of hope, but in the past six months the gloss has gone off media apps.

The problem is the churn rate. New iPad owners download all kinds of apps in the first fine flush of ownership particularly if they are free, as most newspaper apps are for a trial period.

But the customer loyalty doesn’t exist. They move on. Subscriptions are not renewed at healthy rates.

The Monday Note publication recently reported plummeting figures for magazine apps: Wired Magazine — an essential publication for the tech savvy — has one of the snazziest apps in the world. It was downloaded 100,000 times last June, but only 22,500  times in October and November, down 78%. Vanity Fair had 10,500 downloads in August, and only 8700 in November — down 17%. All this as the number of iPads in the market continues to soar.

Monday Note concluded:

“Six months after the initial excitement, the mood has turned turned sour … iPad downloads are in sharp decline everywhere.”

The smart people in the US think that while it is essential to have a mobile device-friendly website, and apps are part of the future, to see what is merely a new means of delivery as transformative is indeed magical thinking.

“We all want to believe we can continue to do what we have always done. That something will rescue us. But the changes are deeper than that,” said one newspaper executive who has been down the app-inspired road of hope, only to end up rather washed up.

Now, this isn’t an entirely bleak picture.

Things are changing fast, and the game may soon change yet again. Possibly Apple’s anticipated new service offering subscriptions to content from within iTunes will change things … although Apple is also reported to be moving to prohibit the free newspaper app downloads.

And the Android Google devices are only just getting off the starting blocks. Google’s open-source approach to app developers may make it, rather than Apple, the dominant player in the future.

I think most of us will eventually own a tablet reader of some kind, possibly bundled with our phone plan, so only a small percentage of us will have to subscribe to news content to make online provision profitable.

But if the stockmarket is expecting iPad apps to return old media news businesses to the profit growth levels of yore, then it would seem they’re dreamin’.

There will be so many new players competing in the space, many of them more nimble than the traditional media.

A more sober view is that iPads and other tablets will be a big part of the future. Some readers presently accessing content for free will pay for the apps. Some readers who presently don’t read newspapers at all may do so on a mobile device. And to the extent that print readers migrate to mobile devices, costs will be able to be wound down.

But at the same time, new players will be entering the market, and news will be available from many more places.

Old media salvation? A return to the high levels of profit growth in days of yore?

That IS magical thinking.

The future is different.

More on what I saw in the US — what is and isn’t working in digital news content and new ways of doing journalism — in future articles.

Peter Fray

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