How the iPad *might* Save Journalism

A bit of departure from philosophy, but wait for it, I’ll squeeze in some game theory at some point, as I do with most conversations. You should see me order coffee.

There’s wailing and gnashing of teeth about the future of journalism. I hear it. Being a journalist myself, I have occasionally wailed and gnashed along with the chorus. Then there’s the ‘iPad will save journalism’ rally, led by ex-Australian News Ltd. Grand Moff, Rupert Murdoch. And in response, there’s the ‘no, the iPad won’t save journalism’ gang. It’s all happening.

What surprises me is the lack of sophistication in much of the commentary about this issue. Don’t get me wrong – it’s complicated and the media faces an unpredictable future – but there are some important elements that seem to be frequently overlooked, particularly when discussing the curly issue of charging for content. When these are factored in, charging for content, particularly on tablets and the iPad, becomes a much more viable prospect.

Unsustainable

First, why would anyone want to charge for digital content? Well, simply because today’s business model for many newspapers and magazines that have accompanying websites is unsustainable.

Print media traditionally has a mix of three main sources of revenue: copy sales (paid directly by the reader); advertising (paid for by third-party organisations); and classifieds (paid by sellers of goods). Some, such as low-volume specialist magazines, emphasise copy sales and advertising targeted at a select audience – trade magazines (like my own) even forgo copy sales to focus exclusively on advertising revenue. Some, such as high-volume mainstream magazines, emphasise advertising targeted at a broad audience, and use that revenue to subsidise cover price. Some, such as newspapers, have all three, with classifieds providing a big chunk of money.

There have been two seismic shifts in the past 15 years. One is the movement of classifieds to online, a clearly superior medium for such content. The other is the posting online of content that once was exclusive to print. This has radically changed the revenue landscape. Classified revenue in print has plummeted. So has copy sales, as people have less need to buy print products to get the information they want. As a result, advertising has followed those eyeballs online – although there’s some evidence that online ROI is weaker than print ROI for some products.

So, what we now have are very expensive media institutions that were shaped by the pre-internet high-revenue landscape now trying to do the same job with dramatically lower revenues. And they’re giving away much of their expensive journalism free online. There was hope online advertising would bring in enough revenue to even things out, but it hasn’t. Basically, a revenue model with no print classifieds, reduced copy sales, reduced print ad revenue and marginal online ad revenue doesn’t pay the salaries of dozens, if not hundreds, of journalists, designers and management.

SEO and the Race to the Bottom

The cost that we, the reader, have had to pay is reduced quality of journalism. One need only browse the Sydney Morning Herald website (I won’t link to it – I don’t want to inflate their hits and have them assume people actually like their work) to see how far online news had gone in the race to the bottom; the SMH page above the fold is typically dominated by celebrity gossip, emotional button pushing, outrage, sex, scandal and other vacuous tabloid news. Scroll down and there’s substance, but the overwhelming contempt I feel forces me to close the page before I get that far.

There’s a good reason this trash is making headline news – SEO, or search engine optimisation. SEO is basically journalism in reverse. Instead of looking for a story that is of significance to your readers, you look at what they’re searching for, then feed them more of that. So if people are searching for “Tiger Woods”, do more stories with “Tiger Woods” in the headline. Google will reward you. But if there’s news happening outside of Tiger’s pants, and no-one is searching for it, it’ll be buried, if it’s even reported at all.

SEO is feeding us trash – and we’re to blame. It’s a vicious circle that is destroying the quality of many online news outlets – but they have no choice but to peddle this crap because advertisers aren’t intelligent/discriminatory enough to ask about anything more than page views and unique browsers – they don’t care who is looking at their ads, as long as there are more of them looking.

No surprise Rupert wants to charge for content online. But – and here’s the game theory – it’s like a game of chicken: whoever starts charging for content first, loses. They lose because readers can access similar content free on other sites, so the paywall site gets no readers, no online subscription revenue and no ad revenue. That’s why people thing it’s insane for Rupert to charge, particularly if he charges first. But, the current model is unsustainable. So, if no-one charges first, they’ll all eventually fail. Hence, chicken.

iPad assumptions

Enter the iPad and tablets. They provide an opportunity to charge for something that isn’t just the same old content that one can find on thousands of sites online. For one, tablets allow the content to be properly designed, giving a better reading experience. They also allow for serendipity – the discovery of new and unexpected content that is to one’s liking.

Serendipity is a crucial feature of print – you come for the cover story, you stay for the other articles you didn’t even know were in there when you bought it. Hey, that’s what editors do – we anticipate what the reader wants to read before the reader even knows it themselves. SEO murders serendipity. Tablets bring it back. And with it, something worth paying for.

Note that the web isn’t going anywhere. And, largely, it’ll still be free. But tablets give an outlet for paid content, with an effortless purchasing method (which is crucial, and is Apple’s biggest trump card via iTunes and the App Store), and it doesn’t succumb to the SEO race to the bottom.

The big unanswered question is: what are people willing to pay for e-magazines and e-newspapers? A lot of the speculation going around at the moment hinges on the answer to this question. And some speculation just gets it plain wrong. This piece of dubious research makes the following assumptions:

iPad owners are early-adopters that consume a lot of content so let’s say 50% of them subscribe to two iPad magazines each.

Magazine subscriptions on the iPad are higher than print subscriptions (most magazines plan to charge more initially), so assume an average $15 per monthly subscription.

As a result of these assumptions, they conclude that the iPad won’t save magazines:

Even if iPad sales soar past expectations and reach, say, 16 million units over the next two years total magazine subscription revenue would equal about $2.8 billion per year under the above case scenario.  That’s less than 30% of annual circulation revenue for the entire magazine industry and only about 10% of overall industry revenue (circulation + advertising).

But the assumptions are deeply dubious. That magazine subscriptions are higher than print subscriptions today is an anomaly – an unsustainable artefact of the strange times in which we live. Print is hurting, so publishers lower the subscription fees to get more eyeballs and lure in more advertisers. Far from ideal, and probably unsustainable for many publishers. iPad subscriptions are high because the iPad is new and early adopters might fork out a premium to see what it can do. When tablets go mainstream, prices will come down. They must.

Trivial purchases

So, change the assumptions – maybe to be more in line with the music industry’s experience with iTunes, or the games industry’s experience with Steam and other online outlets – and things change. If tablet subscriptions are cheaper than print, people will buy more. At some point there is a threshold where the increased number of sales means greater revenue. And I believe that threshold can be reached.

The key is making the product inexpensive enough that it becomes a trivial purchase, like many of the discounted games from online games outlets. Make six month mag subscription >$5 and many people may pay even if they think they might never read it. It’s so cheap, it’s just easier to buy it on a whim and have it there for good. And they might subscribe to 5 or 10 or 20 magazines this way. That changes things.

And it might even save journalism. Hey, we’ll likely never go back to the pre-internet high revenue days. But there will be enough revenue to pay for writers to produce quality content, designers to make it look good and we can just forget about print and distribution costs. It’s crazy enough that I think it just might work.