Monday, May 11, 2009

Kindle & Newspapers

Perhaps most appealing about this new class of reading gadgets is the opportunity they offer publishers to rethink their strategy in a rapidly evolving digital world. The move by newspapers and magazines to make their material freely available on the Web is now viewed by many as a critical blunder that encouraged readers to stop paying for the print versions. And publishers have found that they were not prepared to deal with the recent rapid decline of print advertising revenue.

Publishers could possibly use these new mobile reading devices to hit the reset button and return in some form to their original business model: selling subscriptions, and supporting their articles with ads.

Subscribers get updates once a day over a cellular network. Amazon and other participating publishers say they are satisfied with the results, although they have not
released data on the number of subscriptions that have been sold.

The screens, which are currently in the Kindle and Sony Reader, display no color or video and update images at a slower rate than traditional computer screens. That has some people in the magazine industry, in particular, keeping their hopes in check until E Ink evolves.

Another hitch is that some makers of reading devices, like Amazon, want to set their own subscription prices for publications and control the relationship with the subscriber — something media companies like Condé Nast object to. Plastic Logic and Hearst have said publicly that they will take a more open approach and let media companies deal directly with readers and set their own prices.

Then there is the looming presence of Apple, which seems likely to introduce a multipurpose tablet computer later this year, according to rumor and speculation by Apple observers. Such a device, with a screen that is said to be about three or four times as large as the iPhone’s, would have an LCD screen capable of showing rich color and video, and people could use it to browse the Web.

James Moroney, CEO and Publisher of the Dallas Morning News, who would like to see a limited anti-trust exemption so publishers can talk about pricing, thinks that would help when it comes to negotiating with a company the size of Amazon. He told the Senate: 'The Kindle, which I think is a marvelous device, the best deal Amazon will give the Dallas Morning News—and we’ve negotiated this up to the last two weeks—they want 70 percent of the subscriptions revenue. I get 30 percent, they get 70 percent. On top of that they have said we get the right to republish your intellectual property to any portable device. Now is that a business model that is going to work for newspapers? I get 30 percent and they get the right to license my content to any portable device—not just ones made by Amazon? That, to me, is not a model. Maybe what Plastic Logic comes up with or what Hearst comes up with, might provide a good model but today Kindles are less than 1 percent penetration in the U.S. market. They’re not a platform that’s going to save newspapers in the near term.'

Arthur Sulzburger Jr., publisher of the New York Times, came out to do a song and dance about how the Kindle is an exciting new opportunity for journalism at the recent pres conference debut of the Kindle DX. The New York Times, Boston Globe, and Washington Post all signed up for pilot programs to subsidize the cost of a DX if the buyer agrees to a fixed-length subscription and lives ‘outside the delivery area of the paper. (Since I get the NYT delivered to my home, I’m probably out; the details of this deal are, frustratingly, being withheld until this summer.) The last Kindle handled papers just fine with 6 inches. So why start touting newspapers now with the DX?

Advertising. After the press conference, a reporter asked an Amazon rep whether there's any advertising that accompanies the newspaper content. After a pregnant pause, she said there wasn't but that she wouldn't rule it out in the future.

Now the big screen starts to make sense; the more real estate for text, the more real estate for ads. The DX appears to be a sleeper agent, waiting to be activated to fight the good fight for the future of journalism. As of now, Kindle users pay a subscription fee to get the newspapers delivered, but they're ad-free. At some point soon, I suspect we'll see ads—possibly even interactive ones—running alongside the content. When that happens, the newspaper content will have about as much room left as on a 6-incher.

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