Posts about murdoch

Daily economics

I have not seen News Corp’s Daily (I was invited to the preview last night but travel, exhaustion, health, weather, and thus prudence had me take the train home and I couldn’t get in today because of the ice). So I have nothing at all to say about the product. I am trying to get my head around the economics and I hope better mathematical and business minds than mine will analyze what it will take for the Daily to succeed.

Rupert Murdoch said the Daily went through $30 million in development costs that are already written off. He said operating costs will run $500,000 a week. So in the first year, the Daily will cost roughly $55 million. That’s a lot. For comparison, Portfolio went through somewhere between $40-100 million. I said we’d never see another publication launch of that scale. I was wrong. Also for comparison, News Corp’s abortive aggregator, Project Alesia, went through a reported $30 million.

Let’s say that circulation covers the costs of the Daily — since getting consumer revenue is the real point of the exercise — and that advertising is profit. Note well that I have *no* reason to believe that’s News Corp’s strategy. It simply makes it easier to illustrate the economics and the questions I hope other reporters tackle.

The Daily is selling for $1 a week or $40 a year.

So how many subs would they have to sell to break even on the $500k/week cost? (Note that’s break-even on an operating basis, not on the total investment.) It’s a bit more than 500k subs at $1 each for the reasons below.

Figure that Apple is taking something less than its normal 30% share for the privilege of having the Daily. Murdoch said that it will be ported to all major table platforms but then he said that last year, this year, and next year “belong to Apple.” (I have no idea whether he means that metaphorically or contractually.)

Figure also that there will be churn as there has been in iPad magazine sales. That means — as it always does with sub sales — that one must sell new subscriptions to replace cancellations to reach your magic number. Let’s say the Daily loses–and I’m pulling this number out of a hat– 10% a month, which it needs to replace. So if you’re selling 100k this month, you need to sell 110k next month to get to 200k and 120k the following month to get to 300 and so on.

I’m not qualified to run these numbers; I wish someone with circ experience would. But to pick another number out of the hat, let’s say that the Daily needs 750k net subs to hit cash-flow break-even because around 25% of circ revenue goes to Apple and half the subs are sold at the 20% discount. With churn, they’d need to sell a total of up to 1 million gross to reach that number while accounting for a subscriber acquisition (marketing) cost of, say, $10 (which is light but given Apple’s promotion, probably not unreasonable).

I picked 750k because it’s somewhere in the ballpark — Murdoch said he eventually plans to sell “millions” — and also because it leads to an easily rounded number for marketshare: The Daily would capture about 10% of the installed base of iPad owners today (though that’s a worldwide number, so the U.S. figure would be higher). That’s pretty high.

For comparison, Wired sells about 22k issues a month on the iPad, down from a debut of 31k, Glamour sold 2,775 in November, losing 20% a month from the prior two months (even as iPad sales soared)–note the higher churn number than I used above. So the Daily would need to sell roughly 34 times the sales of Wired. But it is daily and not monthly.

Now switch to advertising. The market will be small for sometime. I’m told these days that major brand advertisers won’t pay attention to a site until it gets 3 million audience. Then again, the value of tablet advertising is supposed to be high and advertisers like the experience. I also wonder whether the ads will also go through Apple and it will again take a share of a quarter to a third. There are so many variables in advertising–unique users per day; time spend and pages and ads views; avails per page; measurement of ROI (is there click-through?)–that it’s nigh until impossible for me to guess at the revenue. But I throw this out, again, in hopes that someone will tackle it.

Once more: I have NO figures other than the two Murdoch gave. I have ONLY questions. I hope the Daily is profitable; I hope any new news venture is profitable. I’d simply like to have a better idea of what it will take to get there. Anyone want to help? Please DO tell me where I and my assumptions are full of crap and please DO add experience and data. I just want to understand the dynamics of the business.

: Folks on Twitter are saying that I say the economics of the Daily don’t add up. I am not saying that. I simply want to see the addition.

Murdoch: The Dirty Dumper

Rupert Murdoch, known as the Dirty Digger, is more like the Dirty Dumper as he drops ad prices in New York (and he’s known for dropping cover prices in London) — because he apparently doesn’t really give a damn about making money with his newspapers, he cares about influence and killing his ideological enemies. The New York Times vows not to drop to his level — and rates — as Murdoch starts his New York would-be Times killer. We’ll see. Keep that in mind when you hear about Murdoch pushing business models charging for content. Profitability in news isn’t his model. His agenda is. Just saying.

Compare/contrast

Tweet: Compare/contrast Rupert Murdoch on the internet (and me) then and now.

In 2005, Rupert Murdoch gave a rousing speech to the American Society of Newspapers Editors calling on them to listen to digital natives. Yesterday, his deputy, Les Hinton, gave a speech to the World Association of Newspapers in India warning them to beware geeks bearing gifts.

Murdoch in 2005:

Like many of you in this room, I’m a digital immigrant. I wasn’t weaned on the web, nor coddled on a computer. Instead, I grew up in a highly centralized world where news and information were tightly controlled by a few editors, who deemed to tell us what we could and should know. My two young daughters, on the other hand, will be digital natives. They’ll never know a world without ubiquitous broadband internet access.

The peculiar challenge then, is for us digital immigrants – many of whom are in positions to determine how news is assembled and disseminated — to apply a digital mindset to a new set of challenges.

We need to realize that the next generation of people accessing news and information, whether from newspapers or any other source, have a different set of expectations about the kind of news they will get, including when and how they will get it, where they will get it from, and who they will get it from….

The challenge, however, is to deliver that news in ways consumers want to receive it. Before we can apply our competitive advantages, we have to free our minds of our prejudices and predispositions, and start thinking like our newest consumers. In short, we have to answer this fundamental question: what do we – a bunch of digital immigrants — need to do to be relevant to the digital natives?

Murdoch deputy Hinton yesterday:

We are all allowing our journalism – billions of dollars worth of it every year – to leak onto the internet. We are surrendering our hard-earned rights to the search engines, and aggregators, and the out-and-out thieves of the digital age.

It is time to pause and recognize this – Free Costs Too Much. News is a business, and we should not be ashamed to say so. It’s also a tougher business today than ever before. We have survived other perceived threats – radio, television, cable TV. But this time it is different.

How can it be that the Internet offered so much promise and so little profit? I guess a lot of newspaper people were taken in by the game-changing gospel of the internet age. It was a new dawn, we were told. A new epoch, a new paradigm. And we just didn’t get it.

Like an over-eager middle-aged dad, desperate to look cool, we ended up dancing obediently to other people’s tunes. For a while. You can almost hear the music – an algorithm and blues soundtrack – accompanying the harbingers of the new economy with the new rules of the new age. Their rules.

These digital visionaries tell people like me that we just don’t understand them. They talk about the wonders of the interconnected world, about the democratization of journalism. The news, they say, is viral now – that we should be grateful.

Well, I think all of us need to beware of geeks bearing gifts.

Listen to digital natives or beware them? Which is it?

On a personal note, see Murdoch on me in 2005 (a plug I was given because I helped Murdoch’s then speechwriter, Gary Ginsberg, with the substance of the talk):

Instead, they want their news on demand, when it works for them. They want control over their media, instead of being controlled by it. They want to question, to probe, to offer a different angle. Think about how blogs and message boards revealed that Kryptonite bicycle locks were vulnerable to a Bic pen. Or the Swiftboat incident. Or the swift departure of Dan Rather from CBS. One commentator, Jeff Jarvis, puts it this way: give the people control of media, they will use it. Don’t give people control of media, and you will lose them.

Now see Hinton referring to me yesterday:

Or as Jeff Jarvis, one of the leading proponents of the information-must-be-free imperative puts it: The content economy is over. Is it really?

(By the way, I’m not part of that crowd. Jay Rosen would challenge Hinton for a link.)

The new divide: Walled v. open

Tweet: The new divide in media is walled v. open. Here’s why I think walls are bad for the builders and us all.

In the discussion about news, there’s always a divide – because news loves divides. The splits have been old v. new, MSM v. blogs, professional v. amateur, institutional v. entrepreneurial, and lately paid v. free.

But I fear another divide we’re beginning to see develop is walled v. open. The legacy players – in what I believe is their last-ditch effort to save their old ways, models, and empires — are threatening to put up walls. News Corp. is forever rumored to be putting up both pay walls and more walls to keep Google’s hordes of Huns (aka us useless asshats) out.

Some say: Fine, digital suicide couldn’t happen to a better mogul. But I say we should fear the precedent, the balkanization of the web into isolated worlds. It’s true that all the data on the web is not today available via search — content trapped in data bases, in Flash, in comments, in video — though I see continuing efforts to bring that content into the tent. The momentum is toward including ever more data. But now come Murdoch and Microsoft, threatening to take their balls and go home. It’s their right to do so; as Google always points out, it’s also easy to do so.

But I would hate to see walls go up just as we are tearing them down. That’s how Guardian Editor Alan Rusbridger began his road show on the mutualization of news for my students a week ago: showing the wall between the press and the people coming down. But then, Rusbridger recognizes that the future of news – any industry, really – is about handing over control. That is what Murdoch et al fear most.

I fear balkanization. I fear stupidity, too – that others will follow Rupert the Pied Piper over the cliff. And I fear the impact on democracy.

At some events lately, I’ve heard it argued that information needs to be free to be democratic. I don’t agree. But I do say that when information is free, it becomes more democratic. Or put it a better way: the cheaper news and information is, the more people can be informed and the better that is for democracy.

Rusbridger reminds us that advertising freed newspapers from ownership and control by political parties and special interests who exercised that control via patronage. Advertising gave journalism independence. Advertising also subsidized news and reduced its cost so more people could get it. Surely the mission of news is to serve as many people as possible and so things that serve that end serve the mission; things that don’t, don’t.

I’m accused by those who don’t listen to what I say of arguing that – in the too-often paraphrased half quote – news (information, content) wants to be free, as if that is my cause, my religion. No, I say that I want to support news in the most sustainable and profitable way possible — and I believe today, that’s still advertising, which will work better in the open. I want to make news more efficient and less expensive so it can, again, be more sustainable — which will also work better in the open as networks, collaboration, and links serve that efficiency. And I want news to be as open as possible so as many people as possible can use it — that’s as close as I get to a cause: not that information wants to be or must be free but that it is better to be open.

Murdoch thinks Google is doing evil — kleptomania — because he doesn’t understand the new realities of media. Microsoft knows better. Its alleged attempt to woo old-man Murdoch is an act of deepest cynicism. It’s evil.

I believe that the next wave of virtue in society will flow from openness: from government transparency, from corporate transparency, from personal publicness and an ethic of openness that will bring greater accountability, deeper connections, and meaningful sharing.

Walls used to contain value; that’s why it’s the reflex of the legacy powerful to want to build them. They don’t see that today, in an open society and economy, walls no longer preserve value, they diminish it.

So I’m not rooting for Murdoch to build his walls as good sport. I really wish he wouldn’t, for his sake and ours.

Rupert has balls

Tweet: Rupert has balls. Well, he used to.

That’s the essence of Murdoch: balls. It’s the essence of the culture of News Corp., which I learned from working there (at TV Guide): Australian macho seat-of-the-pants instant decision making.

That is the secret to Murdoch’s success. It is also the secret to his failure: Sometimes his balls land on red, sometimes on black. Murdoch plays the odds but he does it by making big bets. He can do that because he’s a mogul; they’re his balls. Companies that are ruled by task forces don’t act like him; they overthink to convince themselves they’re making smart decisions (like merging with AOL). News Corp. underthinks.

So I don’t buy the worship of those who think that Murdoch must know something we don’t know, that he’s inscrutable and brilliant and so one mustn’t question his actions – as in the case of pay walls and Google – for fear of missing some Yoda moment. No, sometimes Murdoch wins his bets, sometimes he loses.

He almost lost the company once with bad bets with debt. He bet big on U.S. satellite (and then said, oh, nevermind). He bet huge on China but now admits it’s tough. He wasted a fortune and a decade and any hope of an internet strategy on Delphi (where I worked) and Iguide. MySpace – need I say more?

But he bet big on sports and keeps winning as a result. He started a fourth network against all odds. He launched successful satellites elsewhere in the world and won. He won and lost but so far has still won more than he lost and that’s why he’s a winner.

What’s sad about the Murdoch family’s pathetic mewling about Google as if it were a big, bad bully kicking sand in their face and their desperate, cliff-grabbing speculation about pay walls is that neither is a big bet. Neither shows any vision. Neither shows balls. That’s why I have no faith in the argument that Yoda – or Jabba the Murdoch, if you prefer – has one more up his sleeve. No, son James Murdoch just said News Corp isn’t a news corp anymore but a TV company. They’ve given up. They’re just hoping to squeeze one more pint of milk out of old Bessie before they turn her into fajitas.

You want to look to an executive who has a strategy and fearlessly executes it, look to Jobs. Bezos, too. You want big-picture vision, see the Google boys. Charisma? Obama. Experience? Well, that was Jack Welch, until the value of experience expired.

Murdoch? He has balls. Big ones.