257-News Corp Responds to the Market for “Free”
The newspaper industry has faced a mighty challenge over the last few years. There is so much “free” content to complete with them. Newspaper revenue continues to plummet. Internet users are reluctant to pay for content. All the free content, supported by advertising revenue, has decimated the newspaper industry. The industry’s cousin, the magazine industry, is not far behind.
This trend can’t continue forever. Already, many people are asking themselves how much they can trust the information on the internet. The need for Reliability drives the demand for Snopes.com. How many “free” web sites can earn enough from advertising to pay all their bills? An effective industry answer to “free” may be forthcoming in the News Corp online newspaper called “The Daily.” The Daily will cover general news, sports, arts and opinion in a format dedicated to the Apple iPad. In addition to the written content, the product will carry high definition video and 360 degree photos. The same product will be available in a few months for the Android-based tablet computers.
The Daily will sell for $.99 a week, or $39.99 a year, a very low price compared to newspapers. With this model, the product receives revenues both from the subscribers and from advertisers. Subscribers have the Reliability benefit of knowing that the content producer cares about facts, accuracy and readable writing style. Advertisers pay for eyeballs that follow a Reliable product.
The Daily is what we call a Next Leader product. This is a product that offers much better than industry standard performance for a low price to a specific subset of industry customers. The Next Leader can offer the very low price because it has a much lower cost structure than is typical in the industry. There are two basic types of Next Leaders. The first are Reformer products. This type of Next Leader product reduces the benefits for the user (usually Function benefits) while increasing the benefits for the buyer (usually Reliability and Convenience benefits) compared to the industry Standard Leader product. The second of the two types of Next Leader products are Transformer products. These products increase the benefits of the user but offer, at least initially, fewer benefits to the buyer than the Standard Leader product offers. The Daily is a Reformer product. It offers the Convenience of formatting fit for a tablet computer so it provides easier access for a segment of the industry’s customers. Its low cost structure results from its elimination of printing presses and distribution costs.
If this new tablet-based product offers a quality read, it will hasten the day when virtually every newspaper and magazine is offered first online and only secondarily in hard copy. The online versions will come at a fraction of the cost of the hard copy versions. Readership is certain to grow.
The Daily was the world’s first fully online newspaper. It launched in January 2011. It gathered a paid subscriber audience of 100,000 but closed in December 2012. The venture was losing $30 million a year at its closing.
The rest of the newspaper industry has done only marginally better. Readership and ad revenues have taken a drastic fall with the advent of the Internet with its search engines, blogs, many sources of free content and sites like Craigslist. Since 2005, the US has lost at least 25% of its newspapers. Those who have survived have cut their costs, especially journalists, drastically. This has created a vicious circle of a decline in quality leading to further fall off in subscriptions.
The industry has responded to the challenge of the Internet by creating online versions of print publications. Most newspapers now have online editions. Subscription models have included print-only, digital-only and print-digital combinations. But these new revenue streams are often only 5-10% of the sales generated by the previous advertisement and circulation-driven revenue streams. The industry has yet to find a solution to this very long-term problem.
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