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Yesterday, News Corp. made what many publishing executives hope will be one of the most important announcements in the annals of digital publishing: the launch of the much-anticipated iPad publication, The Daily.

But while subscribing to The Daily is probably accurately described as 'affordable' at 99 cents a week, or $39.99/year, producing the publication isn't. News Corp. has confirmed that its investment to date is already a whopping $30m, and that The Daily will have a weekly overhead of $500,000.

Working with these numbers, the company would need some 750,000 annual subscribers just to recoup its initial investment. And to cover The Daily's $2m in monthly overheads, News Corp. would further need over half a million monthly subscribers paying 99 cents a week.

This calculation, it should be noted, does not take into consideration Apple's commission, so the number of subscribers required is actually higher, and is substantially so if Apple is receiving its standard 30% cut.

Unfortunately for News Corp. and Rupert Murdoch, the market is limited. Through September 2010, Apple had sold 7.5m iPads. Impressive for a new device in a new space, but hardly a massive market for publishers compared to the internet at large.

Even if we assume that number has jumped to, say, 15m, today, News Corp. would need just over 3% of the entire iPad owner base to purchase a subscription to The Daily to break even on a monthly basis pre-Apple commission. That figure is even higher if we limit the math to iPad owners in the United States.

If these numbers don't seem daunting, consider this: The Wall Street Journal had approximately 414,000 paid digital subscribers in April 2010. That means that for Murdoch to see The Daily become a self-sustaining publication within his lifetime, he will need it to acquire more paying subscribers than The Wall Street Journal Online has. Possible? Perhaps, but I doubt the over-under would favor him.

Of course, Murdoch isn't planning to rely entirely on subscriptions. He hopes that at least half of The Daily's revenue will come from advertising. While there's no doubt that many advertisers will buy into just about anything iPad related, one has to question whether Murdoch is going to be able to create a meaningful level of ad inventory without alienating subscribers, many of whom will likely be disappointed that a paid subscription doesn't mean an ad-free experience.

In announcing the launch of The Daily, Murdoch stated that "new times demand new journalism" and "we believe The Daily will be the model for how stories are told and consumed in this digital age." Unfortunately, it appears that Murdoch has missed the point: journalism itself is channel and platform-agnostic.

The problem for publishers engaging in journalism isn't figuring out a new model for telling stories in the digital age as much as it is finding new business models that work in the digital age. The Daily may prove to be a shining example of exemplary journalism, but the business model of throwing huge amounts of money at staff and operations doesn't look new at all.

Photo credit: bm.iphone via Flickr.

Patricio Robles

Published 3 February, 2011 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2365 more posts from this author

Comments (5)

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Roger Stone

The Daily is initially on the iPad but the potential is to make it available on other tablets as they become popular. It will take some technical effort and money to adapt to different OSs but the journalism costs can then be spread over a larger audience and the advertising revenue increased by targeting a bigger market.

Also why should readers complain about adverts when they have paid a subscription? There are adverts in newspapers that they purchase. Yes they will be upset if the adverts are too intrusive but there are opportunities for new types of advertising e.g. brands could pay for built-in links when they are mentioned in articles.

over 5 years ago

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Paul Gailey

How much of the reported expenditure is assigned to media promotion to actually recruit subscribers versus production of the publication?

over 5 years ago

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Charlie

I would query your numbers on acheiving a good ROI on this project with assuming that the break-even point would be when the number of yearly subscribers = the initial investment.
I doubt news-corp would see it this way and no company would use this method of calculating profits. The 30mm is likely a Capex expenditure spread of several years.
Revenue and profitabilty could be based on the number of yearly subscribers + number of 99p subscribers + marketing revenue minus a portion of the operating costs (which they would likely amortize in some way as well).
Interesting article though since it is clear that there is some way to go, but I would suspect Rupert sees this as a loss leader for the next few years but wants to make sure he is in the space early and in a position to influence the market.

over 5 years ago

Toby Kesterton

Toby Kesterton, Head of Digital at Lab Lateral

I agree with Charlie above.

Some paper numbers: Assuming 50% of revenues come from advertising. A reader is worth $2 per week / $100 per year.
300,00 readers pays running costs and the Capex after 6 years.

over 5 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Charlie, Toby,

I acknowledge that my analysis is different than the one an accountant would make, but I would pose this question: do you really believe that The Daily can count on having 300,000 subscribers in 6 years? Given the pace of technological development, the trends in the news publishing business, and the state of paid content, I hardly think that The Daily is what would be considered a 'smart' investment, any way you slice the numbers. In fact, I think there's a good chance The Daily won't even exist in 6 years.

over 5 years ago

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