Tablets Are Great, But Will They Kill Print?

Philip M. Stone November 17, 2010 Follow on Twitter

Rupert Murdoch says he absolutely believes that tablets are the media’s future, but now James, his son who runs the News Corp. business empire in Europe and Asia, has told a media conference that the success of newspapers on tablets will hurt the print newspaper business.

James comes from a digital background, but he does have responsibility for the company’s newspapers in Europe and Asia so while no doubt he believes digital is the future he still has a big print business to protect.

James put it bluntly at a media conference in Monaco when he said, “The problem with (tablet) apps is that they are much more cannibalistic of print products than the Web site. …People interact with (tablets) much more than they do with the traditional product.”

So that sounds like he believes as tablets become more prevalent many of those who now read a newspaper in print will convert to tablets; in other words tablets will become the substitute for print whereas the ideal would be for print and tablet to live side-by-side with print readers adding the tablet for its interactivity. If James is right and the tablet in many cases substitutes for print then could that speed along print’s demise.

Although much is made of soaring tablet sales – some 7.5 million have been sold since April meaning about 4% of US households -- there is still a long way to go for meaningful penetration. Market research firm Gartner says that global tablet sales this year will reach near 20 million, and by the end of next year will be close to 55 million. And while this year North America will have some 60% of those sales, the rest of the world is expected to be in the majority by 2014 with some 57% of all global sales.

And the reason the tablet is considered more important to the media than the Web is because tablet readers seem prepared to pay for information. Not so on the Web where once one has had free access it is extremely difficult to convert to paying. A recent Nielsen survey of 5,000 tablet users showed that 91% have downloaded an app and more than half have paid for content, but so far it seems publishers still can’t get  their pricing models right. Wired, for instance, had around 100,000 downloads for its first app issue in June, but by September the monthly downloads were off by 67%.

Part of the problem stems from publishers trying to charge the same price for tablet delivery as they do for a printed copy on the newsstand.  While tablet readers are ready to pay, they’re not stupid – they know there are big savings for tablet delivery because publishers aren’t paying for newsprint, ink and distribution, etc. -- and readers expect to share in those savings.

Publishers counter that now they are giving 30% of their tablet revenue to such vendors as iPad and Kindle and there are difficulties in selling subscriptions. Apple, for instance, insists it collects all the money and then doles out the 70% or so to the publisher and it will not share subscriber proprietary information, so publishers can’t piggyback any of their own marketing on top. There had been all sorts of stories a couple of months back that Apple and publishers were close to a compromise but suddenly all has fallen silent.

Some newspapers are offering their information for free on tablets – will they never learn? The Washington Post, for instance, just this week released its free app (free, at least until early 2011) and that is the same strategy of the New York Times. Both newspapers have video in their tablet version – that kind of beats print hands-down – but when both newspapers start charging will people pay for the interactivity, for the video when they once had it for free?

James told his Monaco audience that publishers are not going to make money online if the product is given away. In other words, the advertising alone model is out. But there do seem to be bad repercussions for print when its web site goes behind a pay wall. Much has been made that The Times of London has been behind a pay wall since May, and that lack of online access may be having an effect on the print newspaper readership. In May the newspaper had a daily average circulation of 515,379 but by last month it was down to 479,107. Sure, newspaper circulation is dropping everywhere, but 9% in just  five months is huge.

It brings to mind what Jimmy Wales, founder of Wikipedia, said a few months back, calling the Times pay wall a “foolish experiment” mainly because the online readership had dropped so dramatically that it diminished the newspaper’s influence in today’s social media digital world.

He said that in the midst of the BP Gulf crisis he saw former BP chairman Lord Browne at an event and he asked him whether he would have handled the oil spill any differently to current management and The Times picked up on the question. So an excited Wales later Twittered, “The Times of London is reporting my question to former BP CEO Lord Browne” and he expected the digital world to light up. But lo and behold nothing really happened because when his followers tried to access the story in The Times the pay wall blocked them, and they weren’t about to pay for the privilege. That had Wales raging, “The Times has made itself irrelevant. It could not be tweeted and it could not be picked up by the blogs. No one is talking about it (The Times). I don’t think it will work.” His absolute conclusion: “The Times pay wall is anti social-media.”

And further evidence that out-of-sight can mean out-of-mind came also in the summer when The Times had an exclusive by its crime reporter who was the only print journalist on a plane returning a big-name fugitive businessman to London from the Turkish enclave on Cyprus. Yet no search engine picked up on the pay wall exclusive and so on the Internet it was really the competition that got the glory via their follow-up stories hours later on a story the Times had owned.

The elder Murdoch is launching by year-end at $1 a week The Daily, a tablet-only tabloid newspaper, and Murdoch says he will need 800,000 paying customers to make it financially successful.

It’s a considerable gamble. Total staff numbers are said to be near 150 and the budget for the first year is around $30 million, according to those on the Web who claim they know these thing. The big question is how much time Murdoch will give The Daily to prove that tablets can support such an operation, especially since right now only about 4% of US households own tablets. In the past, he has shown patience with new projects and now that News Corp earnings are coming out of recession (Q1 earnings up 36%) it probably means he can afford to be more generous in giving that time.

But he must also know deep down, as his son has now publicly said, that the rise of the tablet platform could well diminish his beloved print even more.

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