Monday, July 16, 2012

The closing of News Corp.'s The Daily (if it happens) will mean far less than many will claim; the economy, politics, scandal all have weighed on the first tablet newspaper

At an event at the Guggenheim in February of last year, Rupert Murdoch launched his digital daily newspaper for tablets, The Daily. Now, thanks to a piece that ran last week in The New York Observer, media observers are beginning to count down to a possible closing of the first real attempt at creating a digital newspaper exclusively for tablets.

The first thing that should be said about this talk of The Daily's demise is that it is probably still very premature. The economics of the launch of The Daily never made much sense to begin with. With its costs said to be running at $500,000 per week, at least initially, The Daily always had too much overhead to break even within the first couple years. But once launched, it is easy to see that a bit of overhead control could lower this number.

It should be remembered that the story that started this talk was really about the end of Newscore, the internal newswire created to fill the content needs of News Corp. properties, and to lower external news wire costs. The hope at the company was that other news organizations would sign on to Newscore, though the combination of light news content combined with the stench that comes with any news content originating from News Corp. was enough to kill off that venture.

But The Daily is a special case. The Daily has had the full support of both Rupert Murdoch – to the tune of at least $30 million per year – and Apple. Eddy Cue, Apple's VP of Internet Services, attended the launch event in 2011, filling in for Steve Jobs who had just announced his second leave due to his health. Since its launch, The Daily has been actively promoted by Apple within the App Store, and the result has been over 100,000 subscribers.

At 100k in subscribers, the financial model of The Daily becomes pretty simply to understand. 100K times $39.99, minus Apple's take adds up to just under $2.8 million in revenue – far below what would be necessary to survive. Single copy sales, which are priced at $0.99 per issue, might double this number. But total revenue from circulation would be between $5 and $7 million – max.

I doubt the original P&L drawn up by News Corp. counted on this level of readership, nor would they have believed that advertising would make up the difference. My own guess is that the executives working on this project would have hoped for far higher readership, this in turn would have driven better advertising results, as well.
The audience for The Daily was always limited simply because the editors forced it so. Right from the beginning the editors, who came over from the Post, tried to duplicate the Fox News approach to news. One of the first major news stories that filled the digital pages of The Daily involved the battle in Wisconsin over union busting. The Daily did not try and play in down the middle, but immediately backed Governor Scott Walker, while at the same time demonizing teachers and fire fighters alike.

For me, this appeared to signal that The Daily was less about trying to figure out the dynamics of tablet publishing as much as it was an attempt to create an extension of Murdoch's political influence.

Today, reviews inside the App Store are all one-star and five-star, depending on your political point of view. For every five-star review there is one that claims that The Daily is part of "the Republican noise machine."

Launching a digital newspaper is a daunting enough task, but limiting one's audience was hardly a brilliant move.

Adding to the woes of The Daily is the slow pace of growth both of the economy, in general, and digital advertising. The past two years have seen growth slow to a trickle. On top of this, Apple's iAds efforts have been poor.

Then there is the issue of News Corp.: the company has now been split following the News of the World debacle. With publishing on one side, and entertainment on the other, there will be increased pressure to trim costs and maximize investments on the publishing side. Some think this will lead to a rethinking of properties after the November election.

All these factors lessen the lessons that can be learned from the launch of The Daily.