For a typical daily newspaper, only about 15 per cent of the total budget is spent on producing content. Distribution and printing account for at least 60 per cent of the cost of a daily newspaper.
So if media companies could find cheaper and simpler ways to distribute their content, more money could be spent on content.
Enter the e-reader. It is a mobile reading device designed primarily for storing and displaying digital documents. The best-known e-reader devices in 2009 were the Amazon Kindle, the iRex iLiad and the Sony Reader. They are used mostly for reading books, though some daily newspapers are available on them. Most are only available in the US and Europe.
Perhaps one third of one percent of the reading population of the United States owns an e-reader. Newspapers could provide each of their readers who had subscribed for more than two years an e-reader as recognition of loyalty. The e-reader could become a status symbol. Readers could keep the device while they continue to subscribe. This would reduce distribution and printing costs, though managers would need to do the sums to calculate when this approach became financially viable. A newspaper could negotiate a good price by buying e-readers in bulk.
The world’s largest newspaper printing plant, owned by News Corporation, started production in March 2008. Based in Broxbourne, north of London, it is larger than 20 football fields and can produce 3.2 million newspapers a night. That plant cost $US 917 million.
The cost of a printing press tends to be amortized over 30 years, so that means News Corporation will spend about $30.5 million a year on printing. By comparison, the cost of hosting a major web site that transfers several hundred gigabytes of data a day is negligible. Amazon’s huge server farms cost about $35,000 a year. Compared with printing on paper, distribution costs for online editions of newspapers are almost zero.
Analysts estimate it costs about $650 million a year to print and deliver The New York Times. As of April 2009 about 830,000 people had subscribed to the paper for more than two years. To give an e-reader to each of those subscribers, at $400 per device, would cost the Times about $332 million. These numbers are simplistic and it would cost money to close down the printing presses and dispose of the fleets of trucks and other distribution tools.
But for a media organization starting fresh, or looking for new business models, e-readers offer an option.
Early in 2009 the Hearst Corporation announced it would release an e-reader for newspapers some time in 2010. It would be American letter in size and weigh less than half a pound. In April 2009 News Corp chief executive Rupert Murdoch said his company was investing in a mobile device for reading newspapers on a screen. The project was in its early software development stages, and he provided few details.
In March 2009 Plastic Logic said it planned to release an un-named e-reader in January 2010. The Plastic Logic product will have a screen 10.7 inches diagonally (about 27cm) compared with the 6-inch (15cm) display of the Kindle. The Plastic Logic device would weigh about the same as the Kindle (10.3 ounces or 292 grams) because it will be made from plastic rather than glass and silicon. It will also be more robust and durable.
The e-readers on the market in 2009 were compact and personal, like a mobile phone, while the Hearst, News Corp and Plastic Logic versions are intended for newspapers. They are potentially attractive to audiences if newspapers can get the content and business model right. Hearst and its partners plan to sell the e-readers to publishers and take a cut of the revenue derived from selling magazines and newspapers on these devices. The publishers will develop their own branding and payment models.
The devices have other selling points. They are perceived as being greener than newsprint. Don Carli, executive vice president of SustainCommWorld, and senior research fellow with the Institute for Sustainable Communication, said print had come to be seen as a wasteful and environmentally destructive “despite the fact that much of print media is based on comparatively benign and renewable materials”.
Companies like Kodak had faced the same challenge as newspapers in trying to decouple the business of capturing and preserving memories from the business of selling analog film photography and photo-finishing systems. Newspapers were likely to face similar problems trying to decouple newsgathering, journalism and advertising from production and delivery in print to delivery via e-readers, Carli said.
“The carbon cost of print will no longer be swept under the rug. It will soon have to appear on the balance sheets of advertisers, publishers and retailers. It will also appear in the price tags of goods and services. Business models that fail to recognize full lifecycle cost and value will be unlikely to succeed going forward. As we exit the global recession we will simultaneously be transitioning to a low carbon global economy that will change the meaning and value of waste and inefficiency,” Carli said.
Categories: business models, media technologies, newspapers, Not home
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