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Gawker's Nick Denton: See, You Ingrates? This Is What We're Trying to Do (Video)

Peter Kafka — Fri, 11 Feb 2011 04:44:21 +0000

Gawker Media’s Nick Denton has spent much of the week responding to whiny readers and armchair Web designers who don’t like his sites’ new look.

If you didn’t know any better, you’d think the publishing impresario was feeling just a titch…defensive.

But Thursday night, Denton hosted a gathering of 100-plus chitty-chatty newsish media types at his SoHo loft, and there he seemed quite confident again. Midway through his cocktail party, he dimmed the lights, clambered up on a windowsill and toasted his sales team, his technical team and his writers. As well as former New York congressman Chris Lee.

And then he played us this movie, which shows quite clearly what he’s trying to do with his properties. He wants to morph them from “blogs” into something more ambitious, but also older: He wants them to be like TV.

A Day in the Life of Gawker Media – FINAL from source/record on Vimeo.

Apple, Google and the Publishers: Here's How to Make Subscriptions Work

John Squires — Thu, 10 Feb 2011 16:39:58 +0000

In recent weeks, we’ve heard growing concern from magazine and newspaper publishers regarding the challenge of providing content for mobile media while preserving their print franchises. The concern is nothing new, but it’s apparent that content providers are at risk of losing track of their customers like toddlers in a shopping mall.

Apple’s iPad success and the imminent release of new application distribution platforms from Google and other software companies threaten another seismic shift for publishers that may have far greater impact on their business models than the growth of free media on the web. Devices like the iPad offer consumers a rich reading experience and offer publishers even more targeted advertising, but the revenue tradeoff as publishers navigate the path from print to this new world is lopsided–and not in a good way.

While we all enjoy browsing publications at newsstands, over 90 percent of the circulation of U.S. magazines is delivered directly to consumers through the mail. The data and cross-marketing opportunities that these direct customer relationships provide to publishers is the fundamental underpinning of their business model.

Data informs advertising in magazines and allows for better targeting. It provides for the sale of ancillary products like books, videos and special issues. It allows multi-title publishers to solicit new readers across their enterprise. Even competitors agree to exchange lists because it benefits the industry by building more magazine readers from a pool of customers who already enjoy receiving their publications through subscription rather than by single copy purchase.

Without direct access to customers, publisher revenue will decline sharply and the publications that we depend on for in-depth reporting, news and entertainment will risk a final digital Armageddon.

Should we care? Why can’t the publishing industry just leave the world of messy ink and rural route delivery? Can’t it pivot to a less costly distribution model where customer ownership isn’t as critical?

Unfortunately, even if we assume that publishers retain their customers, there are extraordinary business challenges in transforming today’s print consumers into exclusively digital readers. And publishers can’t afford to relinquish their direct connection to readers without a more attractive economic model than the digital publishing world presents today.

Here’s why:

The Advertising Model Won’t Pay.

Magazines are a wonderful advertising medium. Among the top fifty publications ranked by advertising revenues, each copy of paid circulation generates a pass-along audience that averages seven readers. Those seven readers factor heavily into advertising rates, and provide a significant revenue multiple to be weighed against the editorial, marketing, printing and distribution costs of delivering a copy to the consumer.

What happens to this audience with a digital magazine? If a publisher wishes to be paid for its distribution, it will likely set entitlement requirements that discourage free circulation of its products. Even with integration of social networking tools to enable article sharing, publishers won’t generate more than 1.5 or two readers per copy. So the advertising revenue per circulation unit will fall due to the fact that fewer people see the ads. Even to remain constant, advertising effectiveness per copy would have to increase over four times to make up for the audience decline from seven to 1.5 readers per copy.

Of course, most publishers believe these new digital magazines will have wonderful consumer engagement qualities that will result in a higher value being placed on their advertising. They believe digital ads will be better targeted and more efficient than print at delivering the right message to the right reader. But will that value be four times the value of print today? Not likely.

Some argue publishers must cast their lot with free content and endeavor to survive with an exclusively ad driven model. But we need to remember the lessons of the web for most publishers. Even with the powerful reach the web provides, The Economist, The New York Times, The Wall Street Journal, Sports Illustrated and Vanity Fair would fail without the significant vote their consumers make every month by making a direct payment to the publisher.

So editors and consumer marketers will bear a larger burden in this new mobile reading world. They’ll need to increase the revenue from consumers. And one could argue that this is a good thing, redressing the imbalance of an industry that has been too highly leveraged on advertising. But for the consumer stream to become more valuable, one of two things must happen: either the demand for magazines must rise, or the cost of distribution must fall.
A 30 percent Cut to the Store Isn’t a Great Deal.
Isn’t selling your magazine through an app store and receiving 70 percent of the revenues a great deal? After all, magazine subscription agents and newsstands don’t return anywhere near that amount to publishers. But this is argument misses an important point. In iTunes and the Android Marketplace, there’s virtually no merchandising of magazine products. A magazine app must swim to the top of several hundred thousand other applications. And even in the context of a dedicated magazine store, the publisher won’t control featuring. The value of the brand must pull the consumer through to the purchase. And brands are expensive to build and nurture. So the publisher will continue to bear a high marketing cost to ensure enough sales for a stable level of circulation, just as they do today in the offline world. These marketing costs would certainly erase any advantage that a 70 percent cut would provide over the conventional agent model, particularly if the publisher cannot capture information on the customer and determine an effective ROI against their marketing expenditures.
Margin Must Come Before Marginal Cost.
What about the fact that there is virtually zero distribution cost? Well despite the problems of the U.S. Postal Service, the cost of printing and distribution represents a relatively low percentage of publisher expenses–somewhere on the order of 20 to 25 percent today. Of course there are significant creative and technical costs in publishing a beautiful new magazine in tablet form. Just adapting to the variety of screen sizes, screen resolutions and operating systems requires significant new investments. These costs, together with the aforementioned ad revenue decline, more than eclipse the savings from eliminating paper and postage.

So where will this margin come from if not from the consumer?

Tablets provide publishers a wonderful opportunity to rethink their products and add more value. But no manner of reinvention will be possible if they can’t mine their customer relationships to merchandise these new products. If the relationship between the magazine publisher and customer is broken, the industry will end up like music and book publishers–removed from customers, wedded to old habits and powerless as digital delivery inevitably overtakes and diminishes the value of their physical distribution.

Lastly, let’s consider the argument from a consumer’s perspective. Nearly one out of every two Americans subscribes to a magazine today. Many will purchase iPads and other tablets over the next year. When they do, Apple and others suggest that 150 million consumers ignore their existing relationships with publishers.

In this battle over ownership consumers are the losers. They will not be able to direct publishers as they wish, choose to get both a print and digital version of the magazine, or move to digital only delivery. They won’t be afforded the opportunity to get a better value by bundling their print and digital delivery together. They won’t be able to align their print and digital purchases so that expirations synchronize and billing is simplified. They won’t be able to move their experience to the device that suits them–irrespective of the platform–and read on phones, laptops, tablets or anywhere they like. Nothing in the transition will remove friction or frustration. Is this an experience we will be proud of?

There will be a transition from print to digital delivery that publishers and software providers must manage for consumers, and not solely for the advantage of their business interests. A print magazine is informative, beautiful, portable and easy to navigate. It’s also inexpensive. There will certainly be a long period when consumers will wish to try out new forms of reading on tablets but not give up their trusted print brands.

Businesses that make these transitions easy for consumers will flourish. Consider the long path to electronic billing for the banking industry, the Netflix shift from DVDs to video streaming, or even Apple’s introduction of Macs that run Windows software. In each case, the transition strategy provided for significant long-term advantage. And most would agree that there’s a significant long-term advantage for the software industry to make friends with 150 million magazine consumers.

Here’s how they do it:

Allow the customer to buy access to print, digital or bundle both together with one-click convenience.
Create simple APIs that connect the handful of major print fulfillment houses to application storefronts so existing print accounts can be harmonized with digital access.
Provide for critical customer data to flow to publishers so they can refine their products and find new ways to merchandise them to consumers.
Build opportunities for publishers to cross-merchandise products from within their applications and utilize one-click checkout.
Don’t thwart retailers like Amazon and Barnes and Noble who have existing relationships with publishers. They know how to merchandize magazines and will be a positive force for competitive pricing and product development.

With these measures I think very few publishers would object to the 30 percent cut these stores wish to collect or have any significant concerns about the stores retaining the direct billing relationship with their customers. In the end, publishers would build more unique magazine products, sell more related products and encourage their consumers to buy more devices.

Of course, without such cooperation publishers will always have a choice where to play. Tablets are not made of stone and publishers are not called upon by a higher power to work with distribution platforms that are fundamentally destructive to their consumer relationships and business interests.

John Squires is a former EVP of Time Inc., and founder of Next Issue Media

AOL + Huffington Post Won't Go to 11. But It Does Make Sense.

Peter Kafka — Mon, 07 Feb 2011 11:30:09 +0000

There are lots of Web M&As that don’t make much sense. But after you get past the “OMG!!!!!” novelty of AOL’s $315 million Huffington Post buy, this one has a straightforward logic to it: Old, big, slow company buys new, small fast company, hopes some of the zippy mojo rubs off.

Steve Case is right to point out that AOL CEO Tim Armstrong’s “one plus one equals eleven” logic didn’t pan out during the first boom, when Case was running AOL and engineered the disastrous Time Warner deal.

But here, at least, both companies are trying to do the same thing: Make a lot of Web stuff at a low price, and sell ads against it.

So maybe AOL + HuffPo won’t equal 11. And maybe 10x Huffington Post’s reported 2010 revenue is a very pre-Lehman multiple. But the broad strokes here make sense to me:

AOL is pushing its workers very hard to make more content it can sell. HuffPo is a content-making machine:

Huffington Post still has the reputation as a left-leaning political site written by Arianna Huffington’s celebrity pals. In reality, it is most concerned with attracting eyeballs anyway it can. Sometimes it’s with well-regarded investigative journalism, and much more often it’s via very aggressive, very clever aggregation. And sometimes it’s by simply paying very, very close attention to what Google wants, which leads to stories like “What Time Does The Super Bowl Start?“

However they’ve done it, it’s worked–much more efficiently than AOL, which is headed in that direction as well. AOL reaches about 112 million people in the U.S. every month with a staff of 5,000. The Huffington Post, which employed about 200 people prior to the deal, gets to about 26 million.*

AOL can start selling this stuff immediately:

HuffPo reportedly generated around $30 million in revenue last year, but that was done using a relatively small staff that sales chief Greg Coleman had just started building. AOL’s much bigger sales group, which has just about finished its lengthy reorg, should be able to boost that performance immediately.

AOL can afford it:

Tim Armstrong’s company ended 2010 with $725 million in cash, much of which it generated by selling off old assets. This seems like a relatively easy check to write and one that shouldn’t involve a lot of overlapping staff–AOL figures it will save $20 million annually in cost overlaps, but that it will spend about $20 million this year on restructuring charges. HuffPo is about four percent of AOL’s size, and several of its top executives are already stepping aside. (This is the second time in two years that sales boss Greg Coleman has been moved out of a job by Tim Armstrong.) The biggest risk here will be in the way that Huffington, who is now editor in chief for all of AOL’s edit staff, gets along with her new employees. On the other hand, morale is low enough at many AOL sites that it will be hard to make things worse.

AOL Gets a Really Big Brand:

There’s some downside risk to attaching Arianna Huffington’s name to a big, mainstream media brand, as her politics and/or persona might scare off some readers and/or advertisers. But two years after Armstrong arrived from Google, AOL still doesn’t have a definable identity, other than “the Web site your parents might still pay for even though there’s no reason to do so.” Being known as “the guys who own Huffington Post” is infinitely better than that.

HuffPo’s “pro” list is much shorter, but only because there’s not much to think about for them: Huffington, co-founder Kenneth Lerer and their backers get a nice return on the five years and $37 million they put into the company. And those who stay on get to leverage the benefits of a much larger acquirer–access to more eyballs and more advertisers. Easy enough to understand.

Spinal-tap-ampli
Uploaded by TZA. – Click for more funny videos.

*(Something about these numbers, culled from AOL’s and Huffington Post’s own releases, doesn’t add up, as AOL now says the combined company will have 117 million uniques. But it’s close enough for now.)

B&N Aims E-Books at Kids

Jeffrey A. Trachtenberg — Mon, 25 Oct 2010 12:00:54 +0000

Barnes & Noble Inc., intent on winning over a new generation of readers, including some who haven’t yet learned to tie their shoes, is launching a digital collection of more than 12,000 books under the name Nook Kids.

The works, aimed at children 3 to 8 years old, include picture books, novels and a selection of enhanced editions of classics, such as “Jamberry,” the tale of a boy and a bear who have a good time together finding berries.

An estimated 12,000 chapter books, among the largest digital collections for young readers, is expected to be available at NookKids.com by late Sunday. In addition, 100 or so picture books will be available in mid-November, while about 30 enhanced picture books will be available by the end of the year, or early in 2011. The collection, also available online at BarnesandNoble.com, will be accessible by year end via a Nook Kids app for Apple Inc.’s iPad and other devices.

Nook Kids represents a crucial effort by the nation’s largest bookstore chain to establish itself with children and their parents as a digital e-book leader.

Read the rest of this post on the original site

Honey, I Shrunk the E-Book: Amazon Slicing "Singles" for Kindle [UPDATED]

Peter Kafka — Tue, 12 Oct 2010 13:50:32 +0000

No reason not to do this: Amazon is carving out room on its digital shelves for “Singles”–essentially, mini e-books for its Kindle platform.

Or, if you prefer, you can think of them as very long magazine articles. Here’s the company’s description of the new program:

Today, Amazon is announcing that it will launch “Kindle Singles”—Kindle books that are twice the length of a New Yorker feature or as much as a few chapters of a typical book. Kindle Singles will have their own section in the Kindle Store and be priced much less than a typical book. Today’s announcement is a call to serious writers, thinkers, scientists, business leaders, historians, politicians and publishers to join Amazon in making such works available to readers around the world.

Amazon being Amazon (AMZN), there’s nothing else of substance in its press release, but I have asked the company to answer some basic questions. From my email to Amazon PR:

1) Please provide an anticipated pricing range
2) Please explain how wholesale pricing will work
3) Is this program directed at conventional publishers, or does Amazon anticipate that most of the Singles will be self-published by the authors themselves?

UPDATE: Here’s Amazon’s response. Apologies for not getting these up sooner: Amazon sent them along shortly after I posted my story Tuesday morning, but somehow they were swallowed up in an email vortex–some sort of recurring problem I have with Apple Mail client and Google App email.

Anyway:

1) Prices will be less than a typical book.

2) With any particular publisher, pricing and terms will be consistent with our general terms with that publisher.

3) We expect to work directly with publishers and also for writers themselves to publish Kindle Singles.

The Chapter And Verse on E-Bookstores

Geoffrey A. Fowler — Thu, 27 May 2010 01:14:49 +0000

As books go digital, much of the focus has been on which gadgets offer the best approximation of old-fashioned paper and ink on a screen. But there’s another choice that’s just as important for readers to weigh before they make the leap to e-books: which e-bookstore to frequent.

Reading devices like the iPad, Kindle and Nook will come and go, but you’ll likely want your e-book collection to stick around. Yet unlike music, commercial e-books from the leading online stores come with restrictions that complicate your ability to move your collection from one device to the next. It’s as if old-fashioned books were designed to fit on one particular style of bookshelves. What happens when you remodel?

[ See post to watch video ]

Much of this problem stems from the publishing industry, which has demanded that e-bookstores embed digital rights management software in most best sellers to keep them from being stolen and swapped, free, online. The music labels once asked the same from digital-music retailers, but eventually agreed to open up.

The e-bookstores share in the blame. Amazon.com Inc. (AMZN), Apple Inc. (AAPL), Barnes & Noble Inc. (BKS) and Sony Corp. (SNE) all want you to buy their own gadgets and to continue buying e-books from their stores. For example, purchases from Apple’s new iBooks store can be read only on Apple’s own iPad (and soon the iPhone). Even though Apple said it would support an industry standard format called ePub for iBooks, in practice your iBooks purchases remain locked on Apple’s virtual bookshelf. (So I hope iBooks customers like Apple’s light-brown wood paneling.)

Browsing Amazon.com on the Kindle

Many of the biggest e-book providers fall short of putting readers fully in charge of their own digital-book collections, but they have begun to unveil their own solutions for moving your e-books around.

Amazon, which jump-started the shift to e-books with its Kindle, lets customers read its e-books through apps on at least six kinds of devices. Amazon custom-built the free apps for gadgets that include the iPhone, iPad, BlackBerry, PC, Mac and (later this summer) devices running Google’s (GOOG) Android software. If a device has an Internet connection, the apps automatically load Amazon e-book purchases from the company’s website, saving you the fuss of keeping track of files and transferring them between gadgets with cables. In many ways, this is more convenient than the way we manage our digital-music collections by manually adding and deleting files from iPods through a computer.

Amazon’s apps are slick and work on many of the most popular devices today, but Amazon buyers should know that they’re likely stuck using the retailer’s software forever. While Amazon says it plans to keep making apps for more devices, the list of potential devices for reading grows longer every day. Moreover, Amazon sells its e-books in a proprietary format, so there’s no way to open those files on another device without an Amazon app or without resorting to cumbersome (and potentially illegal) third-party conversion software.

The Nook with Barnes & Noble store

Barnes & Noble, too, adopted an Internet-connected app approach, providing a seamless way to shift its e-books between the Nook, PC, Mac, BlackBerry, iPhone, WindowsMobile for the HTC HD2 and soon iPad. Barnes & Noble has been integrating its e-bookstore into niche e-reading devices, like those by Plastic Logic, Irex and Pandigital. It also, uniquely, offers you the chance to “loan” some e-book purchases to a friend for 14 days. But its bookstore requires a somewhat annoying step: Each time you download a book to a new device, you must enter your name and the credit-card number that was used to buy the book in order to unfasten the digital lock on the book.

Beyond the apps, Sony, Barnes & Noble and Apple and a few smaller e-bookstores all promised they’d put their weight behind the industry standard format ePub, which is the e-book version of music’s Mp3 and can be read by almost every reading device (except the Kindle). That sounds great in theory, but in practice, the ePub files either can’t be transferred or doing so is cumbersome.

The problem is each company adds digital rights management software to an ePub book. A copy of “Moby Dick” I bought from iBooks delivered just blank pages when I opened it on the Nook. A Barnes & Noble e-book produced an error message in Sony’s PC ePub reading software. Barnes & Noble says its books will be compatible with devices like the Sony Reader after a software upgrade.

An iPad showing Apple’s iBooks store.

There were two notable exceptions: Purchases from Sony’s e-bookstore and a Borders Group (BGP)-backed store called Kobo could open on the Nook and other ePub-reading devices if I used a free program from Adobe (ADBE) called Digital Editions to transfer it. That’s a nice insurance policy but the process is far more complicated than it should be.

There may yet be a third way. Google, which plans to launch an e-bookstore later this year, says customers will be able to access its books through apps on popular devices and through a Web browser on any device—including a phone or computer. Google’s argument is that we shouldn’t lock ourselves into one bookstore if it is going to offer titles that are dependent on special apps or devices. Google’s existing free out-of-copyright books service works under this same general premise, but it isn’t yet ready for prime time. It requires you to always be online to read a book and its pages aren’t well formatted for reading on small screens or mobile devices. Google executives say they will fix both issues when the commercial service launches.

For now, the e-bookstore choice comes down to which compromises readers are willing to accept. Anybody who just wants a simple way to carry digital books around might be happy with an app-based approach. But readers intent on building an e-library may want to either invest in an ePub-based collection, or hold off until the industry figures out a better solution.

Walter S. Mossberg will return June 10.

Write to Geoffrey A. Fowler at geoffrey.fowler@wsj.com

Time Inc.'s Newest Product: A Magazine, Printed on Paper

Peter Kafka — Wed, 03 Mar 2010 16:01:45 +0000

Time Inc.’s newest product took nine months of meticulous work, carefully calibrated focus groups and a bunch of money. And it has absolutely nothing to do with the Internet, the Kindle or the iPad.

Time Warner’s (TWX) magazine unit is showing off a redesign of Fortune magazine, which should be in subscribers’ hands shortly and on newsstands next week.

Like every other business magazine, Fortune took a pretty good beating from the one-two punch of the recession and traditional media collapse. And I don’t think overhauling the way its pages look and feel will do much to change that.

But it’s still interesting to hear editor Andy Serwer explain why he thinks it’s important, and he was kind enough to chat with me about that the other day.

Note how emphatic Serwer is about the standalone status of Fortune as a print product. The periodical is starting to overhaul its neglected Web site as well, and Serwer pays obligatory lip service to the notion of Fortune on Apple’s (AAPL) iPad, Amazon’s (AMZN) Kindle and other digital platforms of the future.

But he’s clear that the magazine’s success or failure will depend on how readers and advertisers respond to the pen-and-ink product it is selling in the present tense.

Not revelatory, but a good reminder.

[ See post to watch video ]

Macmillan CEO Defends E-Book Price Hike, Again

Peter Kafka — Wed, 03 Mar 2010 13:00:48 +0000

Cheers to Macmillan CEO John Sargent, who has taken to writing long open letters to his readers about changes in his company’s e-book pricing model. Alas, the newest installment, on the company’s blog, doesn’t add much more to the discussion.

The short version: Sargent wants you to know that while he’s going to raise prices on new e-book titles, that doesn’t mean all e-book prices will be going up.

There has been a lot of concern from e-book readers that $9.99 books will no longer be available. Most Macmillan e-books will still be priced below ten dollars. Our e-book sales over the last year clearly indicate that only about a third of our e-book business is in the digital versions of new release hardcovers. Unit sales of older books far exceed our new release hardcover sales, so the $9.99 and lower prices will continue to represent the largest portion of our business.

This will be an interesting data point to remember when prices do bump up this spring, prompted by Apple’s (AAPL) entry into the e-book market via the iPad, and Amazon’s (AMZN) reluctant acceptance of the new scheme.

But ultimately, it’s a red herring. Either you’re sympathetic to publishers’ attempts to protect pricing of their paper-and-ink books or you’re not. If you want a good summary of the debate, check out the comments on Sargent’s post.

Condé Nast's iPad Plan Gets Caught in the Apple-Adobe Crossfire

Peter Kafka — Mon, 01 Mar 2010 02:00:14 +0000

The Wired iPad app Condé Nast showed off this month looks great. But the chances that the publisher will give its other magazines the same treatment don’t look promising.

Condé is still creating a digital version of its tech magazine for the device. But the influential publisher says it won’t create similar iPad apps for other titles unless Apple and Adobe figure out how to work together.

Condé does plan to sell iPad-friendly versions of some of its other magazines. But they will be similar to the iPhone app the publisher has already created for its GQ title, and not the more ambitious stuff that Wired has been talking up since last fall.

In a memo the company plans to distribute internally tomorrow, Condé says it is trying two different approaches to the iPad (and tablets in general) as part of an “R&D period” that will run through October, while it figures out the best way to please readers, advertisers, etc.

But in a conversation I had with Chuck Townsend last week, Condé’s CEO was more blunt: He can’t fully embrace the Wired version, which was created with Adobe’s (ADBE) help and uses Adobe’s Flash platform, unless Apple (AAPL) embraces Flash.

Condé will have “two parallel development tracks going until the relationship between Apple and Adobe is clear,” he told me Friday.

But what about Adobe’s assurances that it’s no big deal to move the mag app it built for Wired, which is based on Flash, into a form Apple approves of? Not convincing enough, Townsend said.

I asked Townsend if he’d prefer to use the Wired model–which boasts features like integrated video, interactive ads, etc.–if Apple is okay with Flash. In that case, he said, “the answer would be an easy yes.”

Given that Apple has made its distaste for Flash a key part of the iPhone/iPod/iPad ecosystem, Condé is in a difficult position.

The magazine publisher has spent significant time and energy working with Adobe, and one of its flagship titles (“magazine of the decade,” per Adweek) has lined up behind the company. And it is indeed possible to move Flash apps to the iPhone, and presumably the iPad.

But content companies like Condé have convinced themselves that the iPad will be a huge part of their future. And this means they want Apple’s full cooperation, not just its grudging approval. For instance, there’s zero chance Apple will promote a Flash-based app in one of its ads.

The GQ app for the iPhone is pretty good, by the way, and I’m assuming it will work well on the iPad, too. But it’s a pretty straightforward transfer of the print version to digital form and lacks the bells and whistles that Wired and Adobe dreamed up.

Will anyone care? Let’s see. For now, here’s Condé’s official iPad app time table: A new version of the GQ app, tweaked to the iPad’s specs, should be available when the device launches at the end of March. After that, the company is planning similar apps for Vanity Fair, The New Yorker and Glamour. The Wired app is scheduled to debut at the end of May.

And then, readers, advertisers, and everyone else can finally compare for themselves.

Wired Comes to the iPad, Version 2.0

Peter Kafka — Tue, 16 Feb 2010 18:36:20 +0000

We’ve seen the iPad. And we’ve seen what some magazine people think their stuff might look like once it gets to the wonderdevice.

But what will it really look like? Here’s a more informed guess, via Condé Nast’s Wired magazine, which has been working on an iPad-compatible version of the title for many months.

Wired, which has been building the iPad-version of the magazine with Adobe (ADBE), began previewing a rough version of the tabletized title last fall, but that was mainly conceptual. The newest demo, though, ought to be fairly close to the way Wired will actually appear when it makes it onto Apple’s (AAPL) device.

Last month, Wired showed off a brief demo to a small industry gathering. And over the weekend, it showed it off the to the invitation-only crowd at the TED conference. Now here’s a glimpse for you (it’s not free, of course–you’re going to get a good dose of promotional chatter on behalf of both Wired and Adobe):

So when will you actually be able to buy/see this thing in person? “Midsummer,” Condé Nast says, which means it won’t be ready for the device’s official launch in a couple of months. Condé will make a less glitzy version of some of its titles, a la GQ’s iPhone app, available before that, though.

And what about the fact that this thing was built by Adobe, which Apple is doing its best to freeze out of the iPhone/iPod/iPad ecosystem it is building? No problem, says Adobe.

That will come as a surprise to lots of tech pundits, but here’s Adobe’s explanation, via Jeremy Clark, the guy you see in the video above:

What was shown at TED, and is featured in the video, is an Adobe AIR application. This means it is compatible on Mac, Windows, Linux, Android (as of our announcement at Mobile World Congress yesterday), and it will run on the iPad as a native application. It is possible to develop applications leveraging a common ActionScript 3 codebase that can be converted at compile-time into a native .ipa (iPhone App) package instead of an AIR app installer (see [this post] for more information)

The English-language translation, if I have it right, is that Adobe says it’s no big deal to port apps built with its code into an iPad-friendly format. And Clark says Adobe is tracking at least 30 applications in which that has happened with the iPhone.

This is different, by the way, from Web sites using Adobe’s Flash, which are still S.O.L. on the iPhone and iPad. So for now, let’s assume that Adobe and Wired will indeed be able to get this stuff onto the iPad, until we hear differently.

A few other quick thoughts:

There’s no mention of price for this. But note Wired editor Chris Anderson’s reference to “resetting the economics” with tablet magazines. He’s talking about the Web, of course, which has trained readers not to pay for content, and advertisers not to pay much either. That’s a heady goal, but Anderson and his cohorts want to do more than that. They also want to reset print economics, by which readers have been trained to pay almost nothing for magazines. (A current Wired promotion gets you a subscription for 83 cents an issue. You get a free hat, too). So if you’re the kind of person who thinks digital goods should be supercheap because the marginal cost of each new item is basically zero, you and Condé Nast aren’t going to get along well.
Also note the cool picture of a bear, somewhere around the 2.40 mark–the one that changes as the tablet gets flipped from portrait to landscape mode. It’s actually two different images, which means Condé has to pay twice for that particular spread. So going forward, Condé is either going to have budget for that additional expense or figure out how to use images that work for both the print magazine and the digital version. Which gives you a little sense of the kind of thinking, and work, involved in producing a flashy product like this.

AT&T Has a Million Reasons to Love E-Books, and the iPad Is Bringing More

Peter Kafka — Thu, 28 Jan 2010 17:08:07 +0000

Interesting footnote in AT&T’s earnings this morning: The carrier everyone loves to hate has quietly become the carrier of choice for e-book readers.

AT&T (T) provides wireless connections for Amazon’s (AMZN) Kindle, Sony’s (SNE) Daily Reader and Barnes & Noble’s (BKS) Nook. And the carrier said it added more than one million wireless data subscriptions for those “emerging devices” last quarter.

Given that the Nook only started shipping this month and that the Sony Daily Reader only showed up at the end of the year, my assumption is that Amazon accounts for almost all of that million. Though perhaps the device makers, which are essentially reselling the subscriptions to consumers, are buying some of the accounts in advance.

And now, of course, AT&T is adding Apple (AAPL) to its “emerging device” roster. So whether the iPad really “kills” the Kindle or not (my hunch is that the devices will appeal to two different customer bases for quite some time), AT&T doesn’t care–it wins either way.

The New York Times Officially Starts Construction on Its Pay Wall: "Metered Model" Coming 2011

Peter Kafka — Wed, 20 Jan 2010 14:39:05 +0000

After much consideration, the New York Times has finally decided to start charging readers for access to its Web site. But not for a while: The Times says it will introduce a “metered model”–which offers a certain number of free visits to NYT.com before requiring a payment–in 2011.

The publisher hasn’t said how much it will charge readers and isn’t offering many other details for now. But subscribers to the print edition will be able to access the site for free.

By adopting the “metered model,” the New York Times (NYT) is emulating the Financial Times, which lets readers peruse up to 10 stories a month before forcing them to buy a subscription to the online paper.

That model isn’t all that different from the subscription strategy employed by News Corp.’s (NWS) Wall Street Journal: While much of the Journal is theoretically behind a pay wall, it’s a fairly permeable one designed to give both casual readers and search engines access to the content. (News Corp.’s Dow Jones owns both the WSJ and this Web site).

Both are have-cake/eat-cake strategies: Generate as big an audience as possible to sell to advertisers while extracting a second revenue stream from hard-core readers. The Times, which is reportedly generating $100 million a year from Web display ads, wants to do the same thing.

The paper has tried a pay wall before. In 2005, it rolled out “Times Select” whereby it cordoned off access to op-ed columnists like Thomas Friedman and to archived stories and other features. That strategy generated around $10 million a year. But it was considered a failed experiment, and the Times dropped the wall in September 2007.

Now, of course, $10 million a year sounds like a nice boost for a paper that lost more than $35 million in its most recent quarter and saw print ad revenue plummet throughout the year.

A New York Magazine story published on Sunday predicted the timing of the announcement, even though New York Times executive editor Bill Keller told me the piece was “long on speculation.”

The New York Times Announces Plans for a Metered Model for NYTimes.com in 2011NEW YORK, Jan 20, 2010 (BUSINESS WIRE) — The New York Times announced today that it will be introducing a paid model for NYTimes.com at the beginning of 2011.
The new approach, referred to as the metered model, will offer users free access to a set number of articles per month and then charge users once they exceed that number. This will enable NYTimes.com to create a second revenue stream and preserve its robust advertising business. It will also provide the necessary flexibility to keep an appropriate ratio between free and paid content and stay connected to a search-driven Web.
Through 2010, NYTimes.com will be building a new online infrastructure designed to provide consumers with a frictionless experience across multiple platforms. Once the metered model is implemented, New York Times home delivery print subscribers will continue to have free access to NYTimes.com.
“Our new business model is designed to provide additional support for The New York Times’ extraordinary, professional journalism,” said Arthur Sulzberger, Jr., chairman of The New York Times Company and publisher of The New York Times. “Our audiences are very loyal and we believe that our readers will pay for our award-winning digital content and services.”
“This process of rethinking our business model has also been driven by our desire to achieve additional revenue diversity that will make us less susceptible to the inevitable economic cycles,” said Janet L. Robinson, president and CEO, The New York Times Company. “We were also guided by the fact that our news and information are being featured in an increasingly broad range of end-user devices and services, and our pricing plans and policies must reflect this vision.”
More details regarding the metered model will be available in the coming months.

[Image credit: etoile]

Is That a Real New York Times App or a Fake? Apple Doesn't Want to Know.

Peter Kafka — Thu, 14 Jan 2010 11:30:13 +0000

Has the New York Times finally started charging people to read its news online? Not yet.

But it sure looks like the Times is charging online readers if you visit Apple’s iTunes Store, which is selling two different New York Times (NYT) iPhone apps at 99 cents a pop.

The Times has nothing to do with either app, both of which are called the “New York Times Mobile Reader.” And both are supposed to do the same thing: Spit out the paper, along with other Web content like podcasts, in iPhone-friendly form.

You’d think the Times would want Apple (AAPL) to remove the miniprograms, if only to protect the value of the paper’s own app, which is both free and very good.

When I pointed out the apps to a Times spokeswoman on Tuesday, she asked around and later confirmed that the two apps “are not authorized and our legal department is looking into the matter.” But as of Thursday morning, the apps are still there, ranked No. 14 and No. 18 on Apple’s list of top paid news apps.

As Josh Quittner notes, hijacking publishers’ names and content and turning them into paid apps isn’t uncommon at iTunes. I count at least eight such offerings among the top paid news apps at the online store.

But it shouldn’t be that hard for Apple to put the kibosh on this stuff. For instance: It ought to be fairly obvious that developer Chad Rivoli, who has produced one of the “New York Times” apps–along with ones that boast brands like CNET, Fox News, the BBC and the Drudge Report–is not authorized to do so.

But Apple’s approach to this is weirdly passive. Here’s the statement I got from Apple PR’s Trudy Muller yesterday:

As an IP holder ourselves, we understand the importance to developers of protecting their IP. We have a process in the App Store for developers to alert us to possible IP infringement. When we’re notified, our policy includes the removal of the infringing app until a resolution is reached between the parties.

If this approach sounds familiar, it’s because it’s a lot like the one Google (GOOG) takes toward YouTube copyright complaints: Put it up, then take it down if someone complains.

In Google’s case, the company claims it has no idea what people are uploading to YouTube–anyone can throw anything up there. And that approach may well be protected by the Digital Millennium Copyright Act (we’ll see). But Apple knows exactly what it’s selling via iTunes because it approves every new app individually.

Maybe the Times isn’t hell-bent on griping to Apple because it has other priorities, like working with Apple on something for the upcoming wondertablet. And maybe every other publisher whose stuff is getting repurposed for profit doesn’t want to bother Apple either. Hard to believe there is really big money being made here, after all.

All I know is that this situation wouldn’t last long at all on the regular Internet: Good luck starting a “New York Times” Web site and charging people to visit–or even just linking to the paper while using its iconic “T.”

What’s different about iTunes?

UPDATE: At least two other publishers are aware, and unhappy, about unauthorized apps. CNET tells AdAge that it has asked at least one of the developers using its stuff to take it down, apparently without success.

And Fox News says it complained directly to Apple in December, says MediaWeek. In that case, though, it seems to had at least some effect: “Mobile News Pro — Fair & Balanced” is still available in the app store, and still aggregates Fox News content, including radio feeds. But the app’s description does note that it has “removed FOX wording per FOX request.”

The Secret Behind the Kindle's Best-Selling E-Books: They're Not for Sale

Peter Kafka — Tue, 29 Dec 2009 11:00:58 +0000

One big reason readers choose e-books over ink and paper versions: The digital ones are cheaper.

This wasn’t the case when e-books first appeared a decade ago. But Amazon (AMZN) has made a point of selling its Kindle titles at a discount compared with physical editions, even if it means losing money.

And then there are the titles that Kindle owners really, really love–the ones they get for nothing. As the Washington Post noted earlier this week, the list of best-selling Kindle titles is dominated by free books:

Amazon’s customers have made it clear that $9.99 is still too high for their taste. Most titles in the company’s list of top 100 Kindle bestsellers are priced below $9.99, and the most popular price point is $0.00.

The good folks at MediaBistro have gone ahead and counted, so you don’t have to. As of a day ago, 64 of Amazon’s top 100 Kindle titles cost nada.

How exactly does that work? I understand why Amazon is able to hand out public domain works like “The Adventure of Sherlock Holmes” and “Pride and Prejudice” for free. But I’m not sure what’s going on with titles like Noel Hynd’s “Midnight In Madrid” (No. 1 on the Kindle charts) or Beth Hensperger’s “Not Your Mother’s Slow Cooker Recipes for Entertaining” (No. 9). Anyone want to weigh in?

I’m also not sure what conclusions we can draw from the dominance of freebies on the Kindle charts. I’m tempted to say that Kindle buyers are rabid but indiscriminate readers, and they’ll lap up whatever you put in front of them.

But without a real sense of the numbers, which Amazon is never going to cough up, it’s hard to tell what the sales patterns really look like.

I suspect, for instance, that a lot of the freebies are picked up by readers in the first few weeks they own a Kindle when they’re looking to download something simply for the sake of downloading something.

I also assume that the Kindle charts are skewed by hardcore early adopters’ reading habits. And that the patterns will start changing now that more casual users are picking up the Kindle for the first time.

And in case you were wondering–because I was–Amazon says it is not counting free book downloads when it releases sales statistics like the one it put out on Saturday, when it said more customers had purchased Kindle titles than physical books on Christmas day.

[Image credit: lordcolus]

Journalism and Freedom

Rupert Murdoch — Tue, 08 Dec 2009 19:13:58 +0000

We are at a time when many news enterprises are shutting down or scaling back. No doubt you will hear some tell you that journalism is in dire shape, and the triumph of digital is to blame.

My message is just the opposite. The future of journalism is more promising than ever–limited only by editors and producers unwilling to fight for their readers and viewers, or government using its heavy hand either to overregulate or subsidize us.

From the beginning, newspapers have prospered for one reason: the trust that comes from representing their readers’ interests and giving them the news that’s important to them. That means covering the communities where they live, exposing government or business corruption, and standing up to the rich and powerful.

Read the rest of this post on the original site

BoomTown Decodes Google CEO Schmidt's Shut-Up-You-Whiny-News-Folk Op-Ed (So You Don't Have To)!

Kara Swisher — Thu, 03 Dec 2009 21:30:47 +0000

Please see this disclosure related to me and Google.

Google CEO Eric Schmidt did one of his patented throat-clearers in an opinion piece in The Wall Street Journal today and it pretty much begs for translation.

Well, BoomTown shall not tarry from the task of decoding the extra-long rumination from the head of Google (GOOG), who was responding to the recent spate of aggressive attacks by traditional media publishers.

They have blamed the search giant for everything from their current business woes to the destruction of journalism to Tiger Woods’s dicey marital troubles.

Okay, not that! But the rest for sure.

First and foremost among the attackers has been Rupert Murdoch, CEO and ruler-of-all-he-surveys at News Corp. (NWS), which owns The Wall Street Journal and this Web site.

How ironic, yet still typically cozy from a corporate bigwig point of view! I call you a cur in public, but please use my newspaper so that I can get some decent traffic from this wrestling match.

But all is not what it seems in the Schmidt piece, of course, so here’s the translation:

What Schmidt wrote: How Google Can Help Newspapers

Video didn’t kill the radio star, and the Internet won’t destroy news organizations. It will foster a new, digital business model.

By ERIC SCHMIDT

Translation: We come in peace, always. You know, like the freakily calm lady from “V,” who is really a lizard under all that pretty and is actually secretly trying to decide between grilling and broiling all you whiny news people.

Also, you can address me in the future as Emperor Palpatine.

What Schmidt wrote: It’s the year 2015. The compact device in my hand delivers me the world, one news story at a time. I flip through my favorite papers and magazines, the images as crisp as in print, without a maddening wait for each page to load.

Even better, the device knows who I am, what I like, and what I have already read. So while I get all the news and comment, I also see stories tailored for my interests. I zip through a health story in The Wall Street Journal and a piece about Iraq from Egypt’s Al Gomhuria, translated automatically from Arabic to English. I tap my finger on the screen, telling the computer brains underneath it got this suggestion right.

Some of these stories are part of a monthly subscription package. Some, where the free preview sucks me in, cost a few pennies billed to my account. Others are available at no charge, paid for by advertising. But these ads are not static pitches for products I’d never use. Like the news I am reading, the ads are tailored just for me. Advertisers are willing to shell out a lot of money for this targeting.

Translation: It’s the year 2015 in the United States of Google, where the new country colors are a festive green, blue, red and yellow.

As per the new Declaration of Googlependence, besides the tracking chip in your thighs, every citizen will be outfitted with a tablet running Chrome and looking suspiciously like a large iPhone, except that Apple (AAPL) was outlawed in the Fanboy Purge of 2010.

Every day, citizens will receive news specially aimed at them, such as “The Health Benefits of Sergey Worship.” Ads will also be tailored to citizens’ likes and dislikes, such as a pitch for Googley deodorant with the motto: “Search me, because I smell nice!”

Costs will be billed to your accounts at the National Bank of Google.

What Schmidt wrote: This is a long way from where we are today. The current technology–in this case the distinguished newspaper you are now reading–may be relatively old, but it is a model of simplicity and speed compared with the online news experience today. I can flip through pages much faster in the physical edition of the Journal than I can on the Web. And every time I return to a site, I am treated as a stranger.

So when I think about the current crisis in the print industry, this is where I begin–a traditional technology struggling to adapt to a new, disruptive world. It is a familiar story: It was the arrival of radio and television that started the decline of newspaper circulation. Afternoon newspapers were the first casualties. Then the advent of 24-hour news transformed what was in the morning papers literally into old news.

Translation: [Rachel: Please insert usual pap boilerplate here damning the newspaper business with faint praise. History of how change hurts, but is inevitable...blah, blah, blah. Please make sure to deliver a few digs too, like how--unlike Google--newspapers have no idea what their readers did last summer. Like we do. Cue evil Mwahahahaha laugh here.]

What Schmidt wrote: Now the Internet has broken down the entire news package with articles read individually, reached from a blog or search engine, and abandoned if there is no good reason to hang around once the story is finished. It’s what we have come to call internally the atomic unit of consumption.

Translation: “Atomic unit of consumption” is one of those terms we don’t expect you small-brained people to even begin to understand. Although you use only eight percent of your mental capacity, we here at Google use an average of 71 percent, tracking on our search share.

What Schmidt wrote: Painful as this is to newspapers and magazines, the pressures on their ad revenue from the Internet is causing even greater damage. The choice facing advertisers targeting consumers in San Francisco was once between an ad in the Chronicle or Examiner. Then came Craigslist, making it possible to get local classifieds for free, followed by Ebay and specialist Web sites. Now search engines like Google connect advertisers directly with consumers looking for what they sell.

Translation: I also don’t expect you Luddites will get this, but all your base are belong to us.

For those who need an older cultural reference, it is like the end of “Butch Cassidy and the Sundance Kid.” Um, as much as you Hollywood types like a happy ending, Butch and the Kid did not make it.

What Schmidt wrote: With dwindling revenue and diminished resources, frustrated newspaper executives are looking for someone to blame. Much of their anger is currently directed at Google, whom many executives view as getting all the benefit from the business relationship without giving much in return. The facts, I believe, suggest otherwise.

Google is a great source of promotion. We send online news publishers a billion clicks a month from Google News and more than three billion extra visits from our other services, such as Web Search and iGoogle. That is 100,000 opportunities a minute to win loyal readers and generate revenue–for free. In terms of copyright, another bone of contention, we only show a headline and a couple of lines from each story. If readers want to read on they have to click through to the newspaper’s Web site. (The exception are stories we host through a licensing agreement with news services.) And if they wish, publishers can remove their content from our search index, or from Google News.

Translation: Shut your overstuffed pie holes, you grumbling antiques. You were dying by the cell long before our superior technology arrived to save the day and help you out of your sorry mess.

Plus, we toss you all that traffic and you still manage to fumble our perfect pass like the pikers you are. (In truth, you are Charlie Brown and we are Lucy.)

Also, have you ever heard of “fair use”? It’s the law now and we can hire more lobbyists in Washington, D.C., than you with the bazillions and gamillions of dollars we make from all those tiny little blue links.

You do realize I have a key to the the White House and visit more times than Joe Biden?

What Eric wrote: The claim that we’re making big profits on the back of newspapers also misrepresents the reality. In search, we make our money primarily from advertisements for products. Someone types in digital camera and gets ads for digital cameras. A typical news search–for Afghanistan, say–may generate few if any ads. The revenue generated from the ads shown alongside news search queries is a tiny fraction of our search revenue.

Translation: Here’s an easy formula for you to grok: Michael Jackson+the pretty boy from “Twilight”+digital cameras=Big bucks for Google! Some thumbsucker you did on Afghanistan, however worthy and important for our nation’s future=14 cent CPM, but only if a drunken Lindsay Lohan story is in close proximity.

What Schmidt wrote: It’s understandable to look to find someone else to blame. But as Rupert Murdoch has said, it is complacency caused by past monopolies, not technology, that has been the real threat to the news industry.

Translation: [Rachel: Please insert Rupe quote that actually hangs him here.]

What Schmidt wrote: We recognize, however, that a crisis for news-gathering is not just a crisis for the newspaper industry. The flow of accurate information, diverse views and proper analysis is critical for a functioning democracy. We also acknowledge that it has been difficult for newspapers to make money from their online content. But just as there is no single cause of the industry’s current problems, there is no single solution. We want to work with publishers to help them build bigger audiences, better engage readers, and make more money.

Meeting that challenge will mean using technology to develop new ways to reach readers and keep them engaged for longer, as well as new ways to raise revenue combining free and paid access. I believe it also requires a change of tone in the debate, a recognition that we all have to work together to fulfill the promise of journalism in the digital age.

Translation: Really–we’re from Google and we’re here to help! Mwahahahahaha.

Seriously, you guys, please go back to demonizing Microsoft (MSFT) or those banker salaries or the health care bill.

While my gabillions of dollars are more than protecting me from the blows you are trying to land, I am not liking the hairy eyeballs I got at the Allen & Co. conference at Sun Valley last summer. I think Washington Post head Don Graham even short-sheeted my 600-thread count Frette bedding there.

What Schmidt wrote: Google is serious about playing its part. We are already testing, with more than three dozen major partners from the news industry, a service called Google Fast Flip. The theory–which seems to work in practice–is that if we make it easier to read articles, people will read more of them. Our news partners will receive the majority of the revenue generated by the display ads shown beside stories.

Translation: [Rachel: Please insert some kooky-named Google 20 percent project we have no intention of really going large on here, so they think we really are working on something to save them. Those media folks like Hail Mary tech solutions, even if they don't even know how to turn them on.]

What Schmidt wrote: Nor is there a choice, as some newspapers seem to think, between charging for access to their online content or keeping links to their articles in Google News and Google Search. They can do both.

Translation: You de-indexin’ me? You de-indexin’ me? You de-indexin’ me? Then who the hell else are you de-indexin’? You de-indexin’ me? Well I’m the only one here. Who the %*#! do you think you’re de-indexin’?”

What Schmidt wrote: This is a start. But together we can go much further toward that fantasy news gadget I outlined at the start. The acceleration in mobile phone sophistication and ownership offers tremendous potential. As more of these phones become connected to the Internet, they are becoming reading devices, delivering stories, business reviews and ads. These phones know where you are and can provide geographically relevant information. There will be more news, more comment, more opportunities for debate in the future, not less.

The best newspapers have always held up a mirror to their communities. Now they can offer a digital place for their readers to congregate and talk. And just as we have seen different models of payment for TV as choice has increased and new providers have become involved, I believe we will see the same with news. We could easily see free access for mass-market content funded from advertising alongside the equivalent of subscription and pay-for-view for material with a niche readership.

Translation: Smartphones are the answer! Sure! Your aging demo loves reading teeny-weeny writing on a device they want to throw against a wall.

Or maybe you can be like HBO! Except you’ll need more borderline porn and Mafia guys.

What Schmidt wrote: I certainly don’t believe that the Internet will mean the death of news. Through innovation and technology, it can endure with newfound profitability and vitality. Video didn’t kill the radio star. It created a whole new additional industry.

Translation: A census taker once tried to test me. I ate his liver with some fava beans and a nice chianti.

AT&T Dead Last in Consumer Reports Survey

John Paczkowski — Tue, 01 Dec 2009 19:00:15 +0000

[ See post to watch video ]

AT&T Ranked Last in Consumer Reports' Best Cellphone Service Survey

John Paczkowski — Tue, 01 Dec 2009 15:15:29 +0000

The annual survey of wireless customer satisfaction from Consumer Reports hits the streets this week and it doesn’t have much good to say about AT&T. In a canvass of more than 50,000 readers spanning 26 U.S. cities, the organization found the carrier had the lowest customer-satisfaction rating in 19 cities surveyed; Verizon ranked highest.

To hear that AT&T (T) ranked dead last in customer satisfaction in high-profile markets like New York and San Francisco isn’t all that surprising. New Yorkers often carp about dropped AT&T calls, and complaints about lousy service in the Bay Area are legion.

But to find that the carrier placed last in 17 other cities as well suggests that AT&T’s shortcomings are more widespread than the carrier would have us believe and not simply the product of a high concentration of iPhones in the country’s larger cities.

As Pali analyst Walter Piecyk wrote in an investor note this morning, “We believe it has been an elitist investor view that only a few high profile AT&T markets are having problems on the theory that only ‘tech savvy’ residents of coastal cities would find enough use in the iPhone to impact the quality of AT&T’s network.”

It certainly would appear that way. With low marks for several key indicators of customer satisfaction–including service availability, circuit capacity, dropped-call frequency and voice service–across 73 percent of the markets Consumer Reports surveyed, it’s pretty clear that AT&T has become overextended by the popularity of the iPhone. Which is bad news for the carrier and, of course, for iPhone owners as well.

As Consumer reports notes, “Apple’s iPhones are the top smart phones in our Ratings–actually, among the best of all phones we tested, period–but their exclusive carrier, AT&T, was middling at best in satisfaction….If you’re readying to buy Apple’s phone, prepare for possible disappointment with its service and expect to love the phone anyway. Despite the network problems, a staggering 98 percent of iPhone users in our cell-phone-buying survey were satisfied enough to say they would definitely or probably buy the phone again. Only 79 percent of respondents who bought other cell phones said the same.”

Verizon (VZ), which has been mercilessly slamming AT&T’s service in a recent ad campaign, is going to have a field day with this. And somehow, I don’t think a hurriedly cobbled together Luke Wilson ad will undo the damage.

UPDATE: Reached for comment, AT&T had this to say about Consumer Reports’ findings, which, the company stressed, were based on anecdotal feedback from a self-selected group of subscribers: “We appreciate and value all customer feedback. We learn from it and it helps us serve our customers better. Without question the surest indication of customer satisfaction is churn, or turnover. For the last quarter, our postpaid churn was just 1.17 percent.”

Condé Nast's Offering for Apple's Mystery Tablet: Wired Magazine

Peter Kafka — Wed, 18 Nov 2009 21:19:42 +0000

Here’s yet another content creator convinced that Apple has a tablet device in the works: Condé Nast says it will have a digital version of Wired magazine ready for the rumored gadget by the middle of next year and will eventually create similar versions for all of its 18 titles.

But Condé, like other publishers, says Apple (AAPL) won’t actually talk to the company about its plans for the device, or even acknowledge that it has plans.*

Condé’s plan, meanwhile, is to create digital versions of its magazines that will work on all the upcoming tablets, using new software from Adobe (ADBE). Those tablets aren’t actually on the market yet, but the publisher says it’s confident that we’ll soon see multiple versions of machines featuring large color touchscreens and wireless connections.

So who’s going to make those gadgets? Condé Nast CEO Chuck Townsend says his company is working closely with Hewlett-Packard (HPQ) and that it has also been communicating its plans to Apple. But Townsend made a point of saying that Apple executives themselves refuse to acknowledge that they’re actually planning a tablet: “They’re not talking to anybody openly,” he says.

Adobe is creating a publishing tool for the new format, as well as magazine-reader software that may come pre-installed on the devices or may require a download. The software company says it is working exclusively with Condé now, but will offer its tools to other publishers next year.

[Important technical point several readers have brought up: Adobe says its new reader software will run using its AIR platform, which works on multiple operating systems, including Apple's desktop system. But neither AIR nor Adobe's flash software works on Apple's iPhone, so if the new mystery device runs on that operating system, there's a problem. I'm following up with Adobe to see what it has to say. UPDATE: Here's Adobe's response.]

Condé says its work with Adobe won’t preclude the company from joining the “Hulu for magazines” storefront/distribution joint venture it has been discussing with Time Warner’s (TWX) Time Inc. and other publishers. “Those discussions are ongoing and important and imminent,” Townsend says.

Okay. So what will Condé’s magazines look like once the tablets appear? The publisher has been showing a demo video to advertisers, industry executives and employees, and I’m trying to convince the company to show it to the rest of the world. (UPDATE: Here’s a partial, low-quality version of the video).

But until then, you can get a sense of it by checking out the publisher’s first attempt to port a magazine to the iPhone, which was released today at the iTunes App Store.

Like the iPhone version of GQ’s December issue, Condé says its tablet magazines will feature the same content found in the print versions, including original advertising, with the ability to view pages in their original form or in formats designed specifically for the device. They will also import multimedia content, like videos, and offer the ability to synch up with social networks and other Web sites.

Condé also thinks the business model for its tablet mags will mirror that of its iPhone app. The company intends to charge readers for each title, and it plans to convince the Audit Bureau of Circulations, the magazine industry’s standards board, that its online sales are equivalent to newsstand sales. That will allow Condé to charge advertisers the same rate as for print ads.

If all of this works, it’s a dream scenario for Condé and other publishers. The magazine industry gets to keep the revenue streams its print publications generate without having to make the “analog dollars for digital pennies” discount that the Web requires. Meanwhile, Condé gets to bask in the benefits of digital–lower distribution costs, more engagement with readers.

Or put another way: Publishers hope the new devices will repair all the value destruction the Web has wrought.

But all of this assumes that consumers, who’ve shown no inclination to pay for this stuff on the Web, will be willing to pay for it once it appears on devices no one owns yet. We’ll find out soon enough.

*One possible exception is the New York Times (NYT), where editor Bill Keller refuses to talk about possible talks with Steve Jobs and company.

BusinessWeek's Future Is Cloudy, but Better Than It Could Have Been: The Grim Non-Bloomberg Scenario

Peter Kafka — Fri, 30 Oct 2009 19:12:05 +0000

BusinessWeek employees are waiting to hear if they’ll have jobs once Bloomberg takes over the publication, and I’m told that staffers expect to hear their fate shortly after Thanksgiving. “Either you’ll get an offer or you won’t,” is the conventional wisdom among the 400 staffers, an employee tells me.

That has to be unnerving, but I can at least offer a little bit of comfort: The worst-case scenario the employees would be facing had they been purchased by private equity firm ZelnickMedia, which was also bidding for the publication.

The short version: Almost everybody gets fired.

Here’s the longer version of the plan, provided to me by a person familiar with ZelnickMedia’s bid. It sounds like a plausible idea for a PE group that specializes in turning around distressed assets–and a chilling one for anybody who draws a paycheck at BusinessWeek:

Wind down BusinessWeek’s print business “as profitably as possible”–the company would have to honor existing subscriptions and could still sell ads in the magazine. But the focus would be on building up BusinessWeek’s Web site, which has a decent-sized footprint, though not a huge one.
Dump almost all of the company’s newsgathering staff and outsource most of that work to Thomson Reuters (TRI).
Employ a small handful of editorial employees–perhaps 20, down from the 200-plus who are there now. Some of them would run a Huffington Post-style aggregation site that produces no original content, and some more expensive hires would produce a smattering of high-quality reporting and writing designed to burnish/sustain the BusinessWeek brand. “Just to give it uniqueness and sizzle,” my source tells me.
Dump most of the existing business side, as well, but overhaul and bulk up the sales force.

The insult-to-injury kicker: Under ZelnickMedia’s proposal, the buyer wouldn’t pay a dime for the publication it intended to rebuild. Instead, McGraw-Hill would pay the fund to take the publication off its hands. If that sounds implausible, consider that McGraw-Hill just announced that it will save up to $25 million next year by not owning the title.

Given the above terms, it’s easy enough to see why McGraw-Hill ended up going with Bloomberg. For starters, the winning bidder actually paid cash for the magazine, and McGraw-Hill will end up netting a $5.9 million gain, after taxes, on the deal.

Also important: McGraw-Hill won’t have to anguish as it watches one of its flagship properties get dismantled.

So what will happen to BusinessWeek now that Bloomberg owns it? Nothing nearly so drastic, at least in the short term. For now, Bloomberg is talking about bulking up the title, not shredding it, so that’s a good sign for both employees and readers.

Alas, Bloomberg can’t take on all of the magazine employees looking for jobs, and that pool is only going to get bigger.

Forbes slashed deep into its staff this week, and next week Time Warner’s (TWX) Time Inc. will lay out some of its layoff goals. I’ve heard Time Inc. employees refer to layoff plans as “tree-trimming” or “surgical,” but I think the trimming will feel much blunter to the folks who lose their jobs. The publisher’s cost-cutting plans include hundreds of layoffs–something likely similar to the cuts the publisher went through last year, I’m told.

The New York Post’s Keith Kelly reports today that Time’s News and Finance unit, which includes Time, Fortune and Sports Illustrated, will be particularly hard hit, and I’ve confirmed that myself.

UPDATE: No surprise here: BusinessWeek President Keith Fox is stepping down. Mild surprise: He’s staying on at McGraw-Hill. Here’s his memo:

When we announced that McGraw-Hill was exploring strategic options for BusinessWeek, I promised to communicate with you as openly and often as I could. In this spirit, I wanted each of you to know that I will be remaining with McGraw-Hill after the deal with Bloomberg is closed. I will continue to play a role in the integration post-close and plan to take on a new role at McGraw-Hill in 2010.

During this process, our collective goal was to find the best buyer for BusinessWeek. I am proud that I played a role in ensuring that BusinessWeek has a new home at Bloomberg, where it will thrive under the leadership of Norman Pearlstine. I am committed to the transition and helping in any way that I can.

It’s been a privilege to be the President of BusinessWeek. I thank Terry McGraw for his confidence and trust in me and Glenn Goldberg for his support, direction, clarity, and sense of humor. I’ve also been a member of an amazing team which has navigated the transformation of the media environment with agility, focus, passion, and integrity.

The team–Steve Adler, Jessica Sibley, Tania Secor, Linda Brennan, Roger Neal, and Carl Fischer–is the best in the industry. Like BusinessWeek, they have bright futures ahead of them. I will miss the daily interaction, but I am wiser (and a little grayer) because of their collaborative spirit and desire to make BusinessWeek the global leader in business that it is today.

I also have a special thanks to Patricia Hipplewith, my assistant, who juggled my calendar, protected me from solicitors, and kept me on schedule and well fed! She is the personification of commitment and integrity.

I am humbled by BusinessWeek’s 80-year history. Thank you for allowing me to play a small part in it.

Keith

All The News We'll Pay For: Why Newspapers' Shrinking Circulation Isn't All Bad

Peter Kafka — Tue, 27 Oct 2009 10:00:24 +0000

No surprise that Americans are dropping their newspaper subscriptions, as a new batch of numbers from the Audit Bureau of Circulations showed yesterday. But before you file this under “death of newspapers,” do ponder this for a second: Declining circulation might not be the worst news in the world.

Tough times have forced many papers to rethink their circulation strategies. An obvious conclusion: Much of the money publishers were spending to print and deliver dead trees has gone to waste. New strategy: Print fewer copies, and charge more for the ones you do sell.

That’s a tactic, not a strategy, but in the near-term it might work.

In its last quarter, for instance, the New York Times (NYT), saw its daily circulation drop by more than seven percent, but saw circulation revenue jump 6.7 percent, due to price increases. Last spring a single copy of the Times at a newsstand jumped from $1.50 to $2.00, and a Sunday Times now costs a staggering $6. But people are buying them.

Meanwhile, News Corp. (NWS), which owns The Wall Street Journal as well as this Web site, has been steadily increasing the WSJ price. And circulation revenue is up at the McClatchy (MNI) and Media General (MEG) chains.

Again, the industry can’t shrink its way to recovery. There are fewer people paying for news–on or offline–than there have been in decades, and there’s no way to paint this as a positive. But the people who still subscribe to papers value them, and it would be foolish not to capitalize on that. Editor & Publisher:

There are several reasons as to why circulation keeps dropping, aside from former readers who have kicked the print edition to the curb. Publishers have been purposely pulling back on certain types of circulation, including hotel, employee and third-party sponsored copies. No longer are they distributing newspapers to the outer reaches of the core market. The cost of delivery and the cost of materials have forced publishers to scale back.

Another shift has occurred: volume has taken a back seat to dollars.

Several major newspapers across the country have aggressively hiked prices of single-copy and home-delivered papers in search of circulation revenue and a renewed focus on loyal readers. Circulation is guaranteed to go down as prices go up, but publishers have opted to wring more revenue from readers as advertisers keep their coffers closed.

Condé Nast Tries Turning the App Store Into a Newsstand: Will You Buy GQ for Your iPhone?

Peter Kafka — Tue, 20 Oct 2009 19:26:56 +0000

I’ve all but declared a moratorium on “Company X has an iPhone app” stories–memo to PR folk: There are now 85,000 apps–but this one is actually interesting: Condé Nast is turning the app into a digital magazine.

The publisher plans to start selling digital copies of its print titles via a yet-to-be-approved app. Condé will start with the December issue of GQ, which it will sell for $2.99 (versus a newsstand price of $4.99), but the idea is that the publisher can use the same technology to sell other issues of other magazines down the road.

Condé says the GQ digital issue will replicate the print one on a page-by-page basis, including the ads. Digital bonuses include related videos, as well as links to sites for products (clothing, music, etc.) featured in the issue.

I wasn’t able to attend Condé’s presentation this morning, so I can’t tell you how its attempt to transfer a rich glossy magazine onto a phone (or iPod touch) actually works. But for now, I’ll take the company’s word for it and assume that it’s a nice alternative to carrying around some dead trees.

The interesting question is the business model, which I think has some real potential. This doesn’t solve Condé’s core problem–its costs are too high to support its shrinking ad revenue–but it does have several things going for it.

For one, this approach reaches its potential readers where they are: I don’t want to read a magazine at my desk, and I’m far from sold on the idea of buying a specialized reader to consume it digitally. Getting it to me on my phone, which goes wherever I do, is the way to go.

It also generates some (potential) additional revenue for Condé Nast right off the bat without creating a channel conflict with its analog product line: Condé will be able to count any magazines sold via its app platform toward its audited circulation numbers, a trick that no publisher has been able to pull off with Web products so far. Meanwhile advertisers in the print publication who want to add digital links to the iPhone version will pay a premium, Condé says. And the publisher has been able to extract additional dollars from Grey Goose and Gillette, which will be “premium sponsors” of the GQ issue.

Bonus upside: Condé says the technology it has assembled for this effort should work well for future Apple (AAPL) products, like, say, its mythical tablet. “We think that the minute Apple is ready, if they ever are, to announce that they’re going forward with a tablet, that we’ll be ahead of everybody,” says Sarah Chubb, president of Condé Nast Digital.

This doesn’t solve the distribution issue that Condé and other publishers have with Apple, Amazon (AMZN) and other potential digital delivery outfits: Apple, not Condé, will control the billing relationship for the app. But then again, Condé doesn’t get to interact with you when you buy a magazine at a newsstand either, so at least it’s not getting disintermediated.

The question, as always, is whether customers are willing to pay anything at all for content they’ve been getting free on the Web. I still think we’re going to end up with a small segment of people willing to pay up for specialized stuff and a very large group that are going to end up with free things of dubious value. It would be great to be proved wrong, though.

Bloomberg Buys BusinessWeek for a Song, Plus Up to $5 Million

Peter Kafka — Tue, 13 Oct 2009 21:35:45 +0000

What’s one of the biggest names in magazine publishing worth? These days, maybe $5 million, plus liabilities.

That’s the high end of the range Bloomberg will be paying for BusinessWeek, reports BusinessWeek, which has done an excellent job of covering its sale. One important note to make about the price: Those liabilities could total up to $32 million, although it’s not clear whether Bloomberg will assume all of them.

Can’t call this one a surprise, as Bloomberg has reportedly been the lead bidder for some time now. BusinessWeek employees spent most of the day waiting for an announcement to that effect, and finally heard one, via Bloomberg’s wire service, shortly after 5 pm EDT.

Shortly after, BusinessWeek Editor Stephen J. Adler gathered his troops for an informal meeting to discuss the news and to discuss some blocking and tackling: No news on rumored (and expected) layoffs. But he did tell staffers that those who are cut after the deal closes later this year will receive the same severance package they would have gotten if they were still employed by McGraw-Hill (MHP), the magazine’s parent company.

There most certainly will be cuts: McGraw-Hill is selling the 80-year-old magazine because it’s a money pit that was losing between $20 million and $40 million a year, depending on your accounting. And the publisher’s bankers promoted a layoff plan as part of the sales process.

What exactly deep-pocketed Bloomberg intends to do with the publication, however, is unclear. The company, which makes its money renting its namesake terminals to Wall Street traders, is thought to be running its magazine and TV news operations at a loss as it tries to grab a footprint in consumer media. It may ultimately be willing to run BusinessWeek at a loss for a while, as well.

And now a tiny bit of context: At the beginning of this year, there were four major business magazines. Now one, Condé Nast’s Portfolio, has been shut down and another sold at a fire-sale price. Meanwhile, my former colleagues at Forbes expect to hear about yet another restructuring round in the near future. And while Time Warner (TWX) CEO Jeff Bewkes was careful to list Fortune magazine among the core assets at his company’s Time Inc. unit at an industry event today, that can’t assure the queasy souls who work there.

Here’s the memo to BusinessWeek staff from the magazine’s BusinessWeek publisher, Keith Fox:

All,

Moments ago, McGraw-Hill announced that Bloomberg L.P. has agreed to acquire BusinessWeek. This is exciting news on many levels. Joining forces with another of the world’s leading news organizations enhances BusinessWeek’s ability to further serve our global audience and our valued customers. And Bloomberg will gain a powerful brand with a history of editorial excellence and strong reach among business professionals.

While the ink is barely dry and the long-term plans are being worked out, we do know that Bloomberg is committed to and values our brand, our editorial integrity, and our ability to drive advertising, circulation, and new digital revenue.

BusinessWeek will strengthen Bloomberg’s online, television and mobile products and creates an opportunity for Bloomberg News to reach decision makers in the c-suite. Online, BusinessWeek.com and Bloomberg.com will have more unique visitors than any non-portal business and financial site. In addition, Bloomberg expects to build television content around the powerful BusinessWeek brand and our world-class journalists.

I am tremendously proud of the work all of you have done in the past few months. Despite the uncertainty, we have continued to produce first-class products for our readers and advertisers, and I want to thank you deeply for your efforts. I also want to thank Steve Adler, Jessica Sibley, Tania Secor, Roger Neal, and Linda Brennan, for their extraordinary ability to personify the best of BusinessWeek during the deal process while leading their respective organizations.

I know that while this announcement answers some of the questions you’ve been asking over the past few months, it raises others. The sale is expected to close by the end of the year and we will be working on transition plans in the coming weeks. I can tell you that all BusinessWeek staffers will remain employees of The McGraw-Hill Companies until the transaction closes, and that it will be business as usual–producing the magazine and the website, and serving our advertisers–through the close. We will give you more details when we can.

We’ll be holding a town hall meeting later today at 5:45 EST, after which a Q&A will be provided to all employees; you will receive more details shortly. A call for the Asia teams will be scheduled shortly.

Again, I want to thank you all for your professionalism and dedication during a challenging time. I look forward to working with you on the promising next chapter in BusinessWeek’s history.

Keith

Fighting Words! Time Warner Says Comcast/NBCU as Dumb as…Time Warner/AOL.

Peter Kafka — Tue, 13 Oct 2009 15:02:39 +0000

Just in case anyone thought Time Warner had any lingering interest in NBC Universal, this ought to put it to rest: Time Warner (TWX) CEO Jeff Bewkes just compared the proposed Comcast/NBCU deal with the disastrous one his company made with AOL nearly a decade ago.

At a TVWeek conference in Manhattan, Bewkes repeated arguments he has made in the past: Chiefly, that big media mergers have a lousy track record and that he couldn’t see how Comcast (CMCSA) could unlock any value by buying a majority stake in NBC Universal from GE (GE).

“Somebody has finally noticed that these things don’t work out so well,” he said, adding “We love to see our competitors taking risks.”

But just to hammer that point home, Bewkes compared the proposed deal to the one his company made nine years ago when it embarked on an ill-fated merger with AOL. That deal (made when Bewkes was running Time Warner’s HBO unit) “basically made no sense” at the time, he said.

The main talking point in favor of that transaction–that connecting Time Warner’s content with AOL’s Internet distribution would create synergy–was “nonsensical,” he said. But “these kind of arguments, you’ll hear some of them this week, in the other merger that we’ve been talking about,” Bewkes said.

Clear enough?

Wall Street, by the way, remains unimpressed with the proposed deal as well: Comcast shares are down about 10 percent since word got out.

In other reiteration news, Bewkes also said, again, that he doesn’t plan on selling his Time Inc. publishing unit. Though he left himself a tiny window of wiggling room by noting that “no public company can ever say that it wouldn’t consider restructuring some part, whether it’s Warner, HBO, whatever.”

But Bewkes insisted that Time Inc.’s best-known magazine brands, including “Time, People, Sports Illustrated, InStyle,” are holding their own as print products and that the challenge will be turning them into online successes.

“We have basically a healthy business in terms of our relationship with readers. These brands mean something and they’re evolving…,” he said. “If you can’t take the leading titles that people have known for decades, and use the new world to make them relevant, really, shame on us.”

Publishers Like Time Inc.'s "Hulu for Magazines" Pitch. What Will Apple and Amazon Say?

Peter Kafka — Fri, 02 Oct 2009 13:32:55 +0000

Earlier this year, Time Inc. CEO Ann Moore tasked her lieutenant, John Squires, with figuring out how to put the digital “genie back in the bottle.” Here’s part of his answer: A Hulu for magazines.

Squires has spent the past few months convincing other publishers to join a new joint venture aimed at a market that doesn’t really exist yet–magazine-like publications to be delivered via e-readers like Amazon’s Kindle and Apple’s rumored tablet.

The idea: The new company, which will operate independently from the publishers that invest in it, will create a digital storefront where consumers can purchase and manage their subscriptions, which can be delivered to any device. The pitch: Control a direct relationship with consumers while gaining leverage with heavyweights like Apple (AAPL) and Amazon (AMZN).

Industry executives briefed on Squires’s plan say it has been well received by Time Inc.’s peers and that several major publishers, including Hearst and Condé Nast, are expected to sign on for the JV, which isn’t scheduled to debut until 2010. No comment from Hearst, Condé Nast or Time Inc., a unit of Time Warner (TWX).

Many of the venture’s big details have yet to be hammered down. At one point, for instance, Time Inc. had explored the idea of including newspapers in the new company’s offering, sources say. The JV may also want to include a noncontent partner as an investor, as Hulu did with Providence Equity and as Vevo, the “Hulu for music” JV that Universal Music is creating with Google’s (GOOG) YouTube, plans to do. That approach is supposed to appease antitrust regulators’ worries about a group of content companies banding together.

But the rough outlines of Squires’s plan are attractive enough to publishers, who are hopeful that mobile devices like the Kindle will create a new market for them. And if that market does show up, they want to make sure they’re the ones in charge of sales and distribution. That’s been a huge problem for the music industry, whose digital sales are essentially controlled by Apple. And it has already cropped up as a point of contention with Amazon, which currently handles sales for all content delivered via its Kindle reader.

Other selling points for the JV: The ability to set standards for mobile content and the ability to integrate advertising into the publications. One thing the company isn’t supposed to do: Create an e-reader itself.

The takeaway, via a Time Inc. presentation that has circulated among publishers: “our destiny with readers, advertisers and distributors … [is] in our hands.”

Of course, there are plenty of hurdles facing the joint venture, starting with the fact that media joint ventures have a checkered record at best (though Hearst and Condé, for instance, have already partnered on Comag, a wholesale distribution company). But there are bigger problems for Squires and company. For instance:

They’ll have to convince consumers who already have billing relationships with Amazon, Apple and other vendors to sign up with yet another service.
They’ll have to convince device makers to play along with the strategy, which runs counter to many of their own plans. Both Amazon and Apple, for instance, have intentionally created closed systems that give them control of both devices and distribution.
They’ll have to create content consumers want to buy. The new product can’t simply be a digital version of the magazines they’re already printing: That’s already available on the Web, and consumers have shown almost no interest in paying for it, and advertisers haven’t fully embraced it either.

So what exactly will the JV be selling? That’s probably the most difficult question for publishers to answer, made even more difficult because they don’t know what capabilities the e-readers of the future will boast. Apple for instance, refuses to even acknowledge to Time Inc. executives that it plans to produce a tablet device, let alone provide them with specs.

But publishers feel they’ve got nothing to lose by trying. “We know that traditional magazines are going away, and that magazines on the Web don’t work,” says a publishing executive working on the plan. “But this gives us a chance to serve the reader who will pay for content, and provide advertising that really works. Can you think of a better idea?”