Monday, December 3, 2012

the Daily goes down

It's true.

1. Restricting your potential customer base to people who own a particular, proprietary device that is practically restricted to the affluent might not, perhaps, be the best idea, in an industry that depends on scale. Digital media, whether ad-based or subscription, is based on many transactions of very low cost. Luckily for companies in the digital world, it costs you essentially nothing to dramatically upscale the number of those transactions. Why on earth would you lock your content down to a particular, ludicrously expensive device?

2. Why would people think that you could have a viable media business model while catering only to people who own iPads? Because our media world is made up of people from a particular social and cultural class. Broadly speaking, they're a myopic and provincial bunch, and so when they look around at their peers and social cohort, they see that everybody owns an iPad and assume that's true of the world at large. You're sure to see tons of analysis of this story in the usual places in the coming hours-- The Atlantic, Slate-- and it'll be written by people from the same narrow group that worked at The Daily in the first place. As such, they'll be lacking an important perspective, which is what the world looks like outside of the narrow slice of educated digitally-connected strivers who write the Internet. It's the most consistent and determinative aspect of our media: it's a homogenous group that fancies itself diverse and thus cannot see how incredibly out of touch it is with how most people live. I invite reporters to come here to Lafayette Indiana and ask around at the Village Pantry about the demise of The Daily.

3. I've said it before: the amount of people who are employed in digital media seems completely unsustainable, to my amateur eyes. So many people are willing to do it for free, and we've inculcated an expectation that paywalls and subscriptions are inherently stupid, and meanwhile online ad pricing is driven down by the immense supply of places looking for advertisers. I think the whole industry is kept afloat by investment money, and sooner or later, the check is coming due. Good was a sign, and The Daily is a sign, and I think a lot of people who live very comfortable and secure lives are going to get less comfortable and less secure in a hurry.

28 comments:

bcg said...

Restricting your potential customer base to people who own a particular, proprietary device that is practically restricted to the affluent might not, perhaps, be the best idea, in an industry that depends on scale.

This was the biggest and most obvious risk to its existence. It didn't overcome the risk. They'd win if the dice came up a 1 or 2, they rolled a 4, you're saying "It's not a good idea to bet against a 3, 4, 5, or 6."

You're sure to see tons of analysis of this story in the usual places in the coming hours-- The Atlantic, Slate-- and it'll be written by people from the same narrow group that worked at The Daily in the first place. As such, they'll be lacking an important perspective...

Where else would it come from, though? Presumably the people who would care about the failure of such a venture are the readers of those publications. You said above that the reason the venture failed was the most obvious and biggest risk, and thus (from an outside perspective) the closing is entirely predictable and not noteworthy. In that case, don't you need an insider's perspective to make it relevant to a broader sphere?

Freddie said...

That's a good point. I suppose what I'm saying is that the politics and culture media business writ large is currently pandering to a small customer base that looks quite large to the people who write that media, because it's the group that they are a part of. Does that make sense?

Freddie said...

More specifically here, I just mean that "only sell to people with iPads" sounds like a better bet when everyone you know has an iPad. But most people don't have iPads. Most people will never have iPads. (That's part of why iPads are popular with the people they're popular with.)

Brendan said...

Hardly anyone actually thought The Daily was viable, even when it started.

See: http://gawker.com/5697754/why-the-ipad-newspaper-is-doomed and the many skeptical takes linked therein.

Also, whether or not media people are myopic and provincial in the way you say is beside the point here, because Murdoch was never counting on this reaching a huge audience. He was counting on it reaching about 5% of tablet owners. Even tablet-owning media bubble people were able to see this would never work because they thought to themselves: I own a tablet and read the news obsessively, and I would never buy this.

The problem with The Daily wasn't that it was a luxury product. Luxury products can be extremely profitable. The problem is that it was useless product to its targeted luxury consumers.

cian said...

I really don't buy your argument here Freddie.

The iPad has sold 33m in the US, largely to affluent consumers. In comparison the NYT and Economist both sell 1.5 million copies. Get 5% of that audience, an audience which is growing rapidly, and you're doing very well indeed. Given that this is an audience of affluent, educated people - ideal for both advertising and selling upmarket media - this should be possible for somebody to manage. Even if it isn't, its hardly as difficult as you're suggesting.

That Murdoch, a purveyer of bad newspapers, failed to manage it is hardly surprising. Doubly so when you consider that he tried to shoehorn an old technology (the daily newspaper) into a new medium. It didn't really work, and nobody really wanted it. Well they didn't want the Apple Lisa either, but we still have the modern computer.

ryan said...

bcg, I think you're missing Freddie's point.

Apple has made a shit ton of money selling iPads, i.e., a high ticket, high margin item. They've sold about a hundred million of the things as of October. That's billions and billions of dollars. But Apple would have made money even if they'd only sold a tenth that many, because, again, iPads are a high ticket, high margin item. They'd be, say, Samsung instead of Apple, i.e., a decently profitable company, but not a stupidly profitable company.

Newspapers are not iPads. The Daily is targeted, 100%, at Apple customers. But you can't sell a newspaper the same way you sell an iPad, because newspapers are a low ticket, low margin item that absolutely depends upon volume in ways that the business model for iPads does not.

So a business model predicated on an unrealistic percentage of subscribers from amongst iPad owners was always going to be problematic. If Brendan is right and the Daily needed to reach 5% of iPad owners, that's paradoxically far too many and not nearly enough. It's far too many in the sense that they were never likely to get 5% of iPad owners to do anything other than perhaps the Kindle app--which is free. But it's far too few in the sense that they're trying to get their 5 million users from too small a user base. If they'd been available on all tablets, they'd have doubled their potential market, so they'd only need to reach like 2.5% of users. By putting a cap on their potential user base, they shot themselves in the foot.

"But what about all those other profitable apps that are iOS exclusive?!" Most of those apps aren't newspapers. They're mostly once-and-done deals, finished products. They don't need a payroll. So they can be sold once and for all, or even given away. Two guys can make an award-winning app in six months, but then they're finished with it and can move on to other things. The Daily was going to require constant inputs. So just like newspapers aren't iPads, newspapers aren't iOS apps either. Even the ones that are!

cian said...

Oh, and I agree with your larger point about bloggers to some degree. However I think there will always be a place for the paid propogandist/courtier. Ross Douthat is not going to be picking up food stamps, sadly. Though it may be harder for opinion mongerers to disguise themselves as 'journalists'.

cian said...

But you can't sell a newspaper the same way you sell an iPad, because newspapers are a low ticket, low margin item that absolutely depends upon volume in ways that the business model for iPads does not.

Well yes and no. A major reason for this is that newspapers (in the US) have been regional, and the capital is very very expensive (printing presses, distribution, paper, etc). This isn't really true to the same degree with online news.

In an online world there is no reason that newspapers need to remain regional. In Britain newspapers compete on other things - politics, style, tradition, demographic, etc. There is no reason why an upmarket newspaper (or two) couldn't survive by targeting affluent consumers exclusively. The economist has done very well out of this.

The other problem newspapers have is that they have a lot of fixed costs in the way of filler. Lifestyle news, color supplements, etc, that nobody really wants online. Newspapers are 'bloated' in an online world, and this may make it difficult for existing newspapers to survive the transition. You need it for the print copies, but it raises the costs for the online version...

Corey said...

A quarter of American adults own a tablet, Freddie.

This weird, "come to the Lafayette, Indiana diner" thing is super-condescending; a significant number of your neighbors likely owns an iPad.

Doesn't make the rest of your points wrong, but the notion of having a separate media channel for a (very popular) medium isn't absurd on its face or anything.

Freddie said...

Even if I take your statistic at face value, tablets != iPads, and a quarter owning tablets means that three quarters do not. Also, sure, some of my neighbors own tablets. But are you really suggesting that the percentage of them that do own tablets is not lower than the percentage of people living in New York and Washington DC's media scene? Come on. Assuming that the people who operate in elite media are exposed to more people who own pricey electronics isn't condescension; it's reality.

Brett said...

@Freddie
So many people are willing to do it for free, and we've inculcated an expectation that paywalls and subscriptions are inherently stupid, and meanwhile online ad pricing is driven down by the immense supply of places looking for advertisers. I think the whole industry is kept afloat by investment money, and sooner or later, the check is coming due.

I think we're starting to see some of the bloggers who generate a lot of traffic get "bought out" by bigger sites, be they aggregators like HuffPo or Gawker, or mainstream news (such as Nate Silver and the NYT). Those papers, in turn, are moving behind paywalls - again, the NYT. I'd argue the check is already coming due.

Personally, I always thought a special iPad-only news source was stupid. Why didn't Murdoch just create a good Wall Street Journal application for the iPad? At least that would have had a name brand to sell.

cian said...

Even if I take your statistic at face value, tablets != iPads, and a quarter owning tablets means that three quarters do not.

When it was launched, Android tablets were deeply mediocre, and the platform was moving rapidly. While there were problems with their business strategy, this really wasn't one of them.

The mistake that people make here is to assume that the current model of newspapers must be replicated in a digital medium. Or rather that the current model of regional US newspapers. A small portion of a regional market is a disaster. A smart portion of a national (or international market, as with the Guardian or Economist) can be very lucrative.

The problem for newsmedia is how you differentiate yourself, when basic reporting is a commodity. Murdoch never really bothered to address that.

Brett said...

Honestly, I've never understood the appeal of tablets, aside from e-ink readers like my Kindle. What can you do with them that you can't do with a small laptop and paid-for mobile broadband connection?

Corey said...

"Assuming that the people who operate in elite media are exposed to more people who own pricey electronics isn't condescension; it's reality."

Maybe, maybe not. But you really think a product like The Daily - a multimillion dollar investment - was launched without market research outside elite DC-NY media circles?

I'm just saying, your insistence on fitting this into your anti-elite media hobbyhorse might not be the most appropriate thing.

Nick said...

Re: Brett

Internet while pooping

Freddie said...

I'm just saying, your insistence on fitting this into your anti-elite media hobbyhorse might not be the most appropriate thing.

Fair enough, although I think you're taking my critique to be more emotional than a genuine structural observation. By that I mean I'm not looking for a reason to complain about our media; I'm simply saying that I think our media lacks insight into how a lot of people live, and that has an impact on analysis and the businesses that depend on it.

Neil said...

I agree with Corey's second comment here. You say in response to him that "I'm simply saying that I think our media lacks insight into how a lot of people live, and that has an impact on analysis and the businesses that depend on it," but in the piece you write as if media businesses are run on a whim:

"Broadly speaking, they're a myopic and provincial bunch, and so when they look around at their peers and social cohort, they see that everybody owns an iPad and assume that's true of the world at large."

I'd certainly bet they were well aware of actual iPad ownership and had no ambitions to be the NY Times. I also think the whole tone matters, since to these eyes this ties in with your whole "DC/NY scene is totally insular and everyone there's delusional" hobbyhorse that Corey refers to.

Freddie said...

Well, boys, I believe your wrong. Discussion of tone is usually indicative of an inability to find textual content to disagree with. I never said that The Daily was planned on a whim; I said that structural, material conditions may have distorted their perception of their potential business. You're free to disagree with that, but you don't need to express your disagreement by telling me how I feel about the argument that I'm making. I'm making an argument. If you can't disagree with it without dreaming up a particular emotional state of mine, then perhaps it's not worth commenting at all.

Freddie said...

And I don't mean to scold you in particular. It's just that I've been doing this a long time, and I've often had to listen to arguments that are based on irrelevant or unprovable assertions about my mental state, and I think that they arise because of certain realities of the criticisms I make. Even if you were right, I don't know what good it would do for anyone. I think what I write.

Anonymous said...

Why would people think that you could have a viable media business model while catering only to people who own iPads? Because our media world is made up of people from a particular social and cultural class.

Like, do you have evidence for the cause-and-effect relationship here, in this particular case?

Freddie said...

Nope. It's speculation.

Neil said...

"I said that structural, material conditions may have distorted their perception of their potential business. You're free to disagree with that, but you don't need to express your disagreement by telling me how I feel about the argument that I'm making."

I'm speculating on your biases in the same way that you're speculating on theirs. Au revoir.

cian said...

'm simply saying that I think our media lacks insight into how a lot of people live, and that has an impact on analysis and the businesses that depend on it.

Perhaps, but the 'media' are not the ones who will be making these kinds of business decisions on the whole. I think your mistake here is that you don't really understand how businesses work, or operate.

I agree with your views on how the media operate - we just saw a fairly obvious demonstration of this in the election coverage. I just don't think its particularly applicable here.

Freddie said...

And now we all understand each other.

Jay Ackroyd (@jayackroyd) said...

"number" of people. It's sad, you might say it's stupid, but "amount" makes my teeth ache.

Freddie said...

Gotcha.

Phineas said...

With 29% of Americans now owning an iPad, I don't think the universe of iPad owners is quite as limited or exclusive as Freddie seems to think it is.

Nick said...

Phineas that statement is not true, unless....

Are you from the future?

http://news.cnet.com/8301-1023_3-57392478-93/one-third-of-u.s-adults-will-own-a-tablet-by-2016-says-report/