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Summary:

Apple CEO Steve Jobs in his keynote interview at the D8 conference came close to endorsing the kind of “iTunes for news” model that many print publishers and media observers have wished for. But would such a system really be the savior of traditional media? No.

In his interview with Walt Mossberg and Kara Swisher at the D8 conference (transcribed by All Things Digital and Engadget), Steve Jobs raised the hopes of media executives everywhere — including, no doubt, News Corp. CEO Rupert Murdoch, who made some opening remarks before the Apple founder took the stage — by saying he believes people will pay for other forms of media, just as they have been paying for movies and music. This is the closest Jobs has come to endorsing the “iTunes for news” model that many newspaper and magazine publishers have dreamed about. The Apple CEO said:

I think people are willing to pay for content. I believe it for music and video, and I believe it for the media.

And how would this work? Jobs described it this way:

I can tell you as one of the largest sellers of content on the internet to date — price it aggressively and go for volume. That has worked for us. I’m trying to get the press to do the same thing. They need to do it differently than they do it for print.

The vision of an iTunes that served up paid-for newspaper and magazine content to millions of adoring readers has captivated the traditional media for some time. One of the most eloquent pleas for such a model came from New York Times media writer David Carr last year, in a column entitled “Will Someone Please Invent iTunes For News?” Carr described Apple’s success in selling music, and then said he hoped that someone like Jobs would come along and convince “the millions of interested readers who get their news every day free on newspapers sites that it’s time to pay up.”

It seems like a slam-dunk idea in so many ways: If record labels can cut a deal with Steve Jobs that sees music sold through iTunes instead of being downloaded for free, then why couldn’t newspapers and magazines do the same thing with their content? Bundle it up, cut a deal with Apple to create an iTunes for news and watch the cash roll in.

But this vision has two fundamental flaws — one psychological and one economic. The psychological flaw is that news stories and other forms of content that appear in newspapers and magazines (with very few exceptions) are not the same as music or even movies or books, in the sense that users want to keep them forever and read or watch them repeatedly, as media gurus Clay Shirky and Jeff Jarvis have also pointed out. In addition, all of that content is currently available in a completely legal way for nothing, from the websites of the content creators themselves, whereas music and movies are not.

Both of these factors suggest that the price for news would have to be orders of magnitude lower than it is for music — pennies, or even fractions of pennies, instead of dollars. Is that really a viable model for these media entities?

The economic flaw, meanwhile, is that cutting this kind of deal would involve handing over control of a significant part of your newspaper or magazine’s destiny to Steve Jobs. Is that really a bargain that media outlets want to strike? It’s true that Apple has sold billions of songs through iTunes since the store launched, and that has done great things for one company: Apple. Record labels and movie studios, for the most part, haven’t seen truckloads of money come their way from the arrangement. If anything, iTunes pricing has put downward pressure on the prices they charge for CDs and DVDs.

The bottom line is that an iTunes for news might be in Steve Jobs’ best interests — primarily because it might help to sell iPads — but it’s not clear that it would be in media outlets’ best interests, as attractive as it seems. Nor is it obvious that it would even work, if it ever actually came to pass. More than anything, it feels like an industry grasping at any straw it can, in the hope of building a life raft.

Related content from GigaOM Pro (sub req’d):

Post and thumbnail photos courtesy of All Things Digital

  1. i am no expert in the P&L of movie and music companies, but i dont think the statement that they have not seen truckloads of money coming their way is on point. true, revenue from online music sales may be lower per unit, but so is the associated cost ie almost zero. compare that to production, inventorisation, and distribution of CDs, which is no doubt a very significant cost.

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    1. Alexander, most of the costs associated with the music industry remain the same regardless of whether that music is sold online or offline, with the exception of the production and distribution of the actual discs. All of the marketing and other music-production costs are the same.

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      1. I’ve tried to point this out in the comments on several posts about the pricing structure of ebooks, and it’s both fascinating and extremely frustrating to observe how people who think that the electronic versions of content should be free or nearly free will simply stick their fingers in their ears and keep saying “I can’t hear you!” when confronted with the data that defeats their argument.

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      2. Mathew, you’ve basically agreed with Alexander there.

        The cost from recording through to pre-press is the same, regardless of distribution mechanism.

        The incremental cost of distribution by CD or other prerecorded media is the cost of the media, plus the cost of the effort of recording onto that media.

        The incremental cost of distribution by iTunes is zero.

        My understanding of what Steve Jobs is saying is that any entity selling through the iTunes Store or similar endeavor should realize that people will buy more stuff through the digital distribution chain than through the physical distribution chain – even though it means they’re spending more money.

        iTunes sells more music content than Walmart – the proof, as they say, is in the pudding.

        If you want advice about distributing news in the iTunes era, do you seek the advice of the people who run iTunes, or the people who read for-free web sites?

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      3. Just because the people who currently benefit from working in bloated organizations might loose their unnecessary jobs does not mean that Steve Jobs is wrong. For decades, music-, movie- and media industry fed on their customers like vampires. All the managers, administrators, accountants and bureaucrats the gravy train of their business. But this time comes to an end.
        And don’t come with the argument of expensive music-production: modern recording technology is more advanced and cheaper than 20 years ago. Studio technicians and sound engineers don’t cost so much.
        The same for books: some publishers want their authors to typeset and layout the books themselves, so what do you need else? An editor, ok. Marketing can be outsourced.
        Coaches were replaced by cars, assembly line workers were replaced by industrial robots. Adapt or suffer extinction but please stop whining.

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      4. You use the example of the same relative cost, yet fail to factor in how much the industry rehashes content. How many times have people bought and rebought the same Beatles albums? Big content providers have been running a unsustainable business model for 30 years of reselling back catalog content every 5 years and assuming people will keep lapping it up. Rehashed content costs little to nothing to produce yet still content providers still want premium pricing for it.

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      5. Surely, there are saving to be had by distributing music or other media digitally, not least a MASSIVE benefit to the environment. The cost to manufacture and deliver CDs carries a cost both which is obviously offer set with the reduced cost you pay for digital content (justifiably so) but the real winner is the environment, not plastic to produce that never bio-degrades and no oil to deliver the goods.

        As for digital newspapers, Steve is right, content is critical for it’s success. People are not used to paying to watch the news and with so much good content available for free on the Internet the online publications need to offer value add over that to win.

        Murcoch’s answer is to try and shut all available free news sites downs, hence his desire to kill the BBC but that’s not the solution, the solution is about offer contend people value and are willing to pay for a low cost, stack it high sell it cheap, model but do something different.

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  2. I think that it actually will to a certain extinct

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  3. It’s way too early to say how this is going to play out, and to assume that’s going to fail right from the get go is rather arrogant. Mobile computing and media appliances are just beginning to percolate into the consumer hands, I say let the market dictate what content is worth. There were 84,000 Wired apps downloads, and I think if users can see value they will pay for it. Some one has to invent a revenue model that’s going to work for the news industry and it remains to be seeing what this paradigm will be.

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  4. One problem that traditional print media faces is one that the music industry never did – the content became free. Going back to charge for something that was once free is a tough road to hoe for newspapers. Had music companies offered free music in the past, I don’t think they would be successful in today’s $0.99 a song market.

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    1. Totally agree, Kevin.

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    2. Has it been so long since the days of napster and knutella and other file sharing sites? MP3 were flying off and everyone was downloading them, the RIAA had to suit their own customers to stop the flow! The music industry had the same problem, but I get that news does not equal music.
      Does this mean that news will be distributed through iTunes, no, but certainly the App store is providing a viable alternative.
      I think if there is an editorial and fact checking process put in place people will know what they’re getting; not what we have in the blogsphere random posts or rants that has not been fully vetted. I applaud Wired for experimenting with a new model and so far it proves that some people can recognize quality and are willing to pay for their content. This is not rocket science.

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    3. Matter of fact is that over 70% of potential buyers of music don’t pay for it.

      Example form Asian market in 2005.
      http://www.synovate.com/news/article/2005/10/synovate-survey-reveals-70-of-asians-don-t-pay-for-digital-music-downloads.html

      and i doubt that Asian market is endemic.

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    4. Guys, the newspapers are as different from music as chalk is from cheese. It is not just that music has a shelf life far longer than that of news. The music industry is self-financing. The media is ad financed. And that is the big difference. As long as news media continues to be fed by the ad gravy machine, why would the model of paid readership ever work? There will always be a media house that will undercut readership costs using an ad based model. So, it’s time the media guys are reminded to stop whining about how unfair the world is. They better figure out how to fix their gravy train, or take a bold step and get out of that dependency.

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      1. You’re right about media being fed by the ad gravy train being the issue. That has to stop. We are so sick of ads that we don’t even see them anymore.

        On the other hand, give me top-notch content (quality), delivered to my device (simple access), automatically (easy) and maybe syndicate with other providers to give me variety (keep me interested) and I could easily see paying real money for that.

        This is where the iTunes music model does compare well: I prefer to buy my music from iTunes because delivery is simple, they let me sample first and the ecosystem closes well with my devices being at the end of the chain. The cost of the music is in line with the experience. If the cost were $5 per song, spending some effort ripping CD’s, or finding music illegally would be worth it, but the iTunes model is higher value.

        Newspapers have the opportunity through this model to reach audiences they never have in the past. They need to stop regionalizing themselves, understand a worldwide market and bring value to that table. They may need to rethink price as they would be better off making $5/mth from millions upon millions of users than where they are headed now, trying to get $25/mth from each user and still get ad revenue.

        It’s just sad to see that they clung onto their old model for so long instead of leveraging their brand value worldwide that now many won’t make it that should have, based on content value.

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    5. subscription models won’t save print – even in the best of times revenue from circ sales made up less than 20% of total revenues

      the music industry has always been a model driven by paid content – iTunes simply shifted the price (downward) and delivery model

      looking to an iNews solution to save newspapers is like trying bail out the Titantic with a teacup…

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      1. Doug Petrosky Friday, June 18, 2010

        I think you discount the HUGE cost associated with distribution and how this shift should dramatically change things. The prime example of this is the newspaper. The price of the newspaper does not cover the materials and distribution costs. So adding subscribers actually costs money which is offset by ad dollars. In comparison the cost of CD distribution was only a fraction of the cost of the sale so going digital only saved a small amount of money.

        Most magazines probably more than pay for the cost of printing and distribution but the per unit profit is a small fraction of monthly subscription costs, and most of the real money is made in ad’s.

        So a digital magazine has a near zero per unit cost and as such can be sold to consumers dramatically cheaper which should dramatically increase distribution which will increase the amount made in ad’s.

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  5. Agree with the analysis that it’s going to take a few pennies from a lot of consumers to make this viable, which itself might make this a non-starter. Also, paying for news seems like a bad idea…….how many news portals today can claim to be making a profit by charging readers? Unless the content involves some valuble analysis (like the editorials from the NYT, for example), charging the reader is not going to work. It has to involve some sort of advertising supported model. Maybe the iAd with the iPad might make it work, but then, would it need an iTunes?

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  6. “It feels like an industry grasping at any straw it can, in the hope of building a life raft.” So you’re offering no future for newspapers and magazines? That can’t be right. People will always consume news and magazines’ content. All that needs to happen is for someone to figure out a way to sell them in the modern era, and someone will.

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    1. I sincerely hope that you are right, Rich. Thanks for the comment.

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    2. The problem is people holding on for dear life to this concept of newspapers or magazines. Newspapers & magazines will die just like records, tapes and CD’s have.

      Information gathering and distribution will always exist. Those that do it really well will be able to make a living off of it.

      The reason many media organizations are dying today though is because they don’t do it well anymore. Their content is not very efficient or informative and its not something that people would be willing to pay for.

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    3. You’re talking about two different things.

      Newspapers & Magazines vs Stories.

      People will always want more stories. What will change is how the people get the stories. In the new world order, journalists will sell their stories directly to a distribution house, readers will buy from the distribution house. Journalists who suck will not sell.

      I am curious about the future of shock jocks (Paul Thurrot & the ilk). Will people keep paying for that kind of nonsense? looks at the news stand with National Enquirier being sold out every day… guess that answers my question.

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  7. The iTunes model could absolutely HELP media.

    If the question was can the iTunes model SAVE media then that’s a whole other can of worms.

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  8. @ Kevin C. Tofel: I don’t consider paying $2.00 for a copy of The Washington Post or several dollars for a copy of Newsweek “free.”

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    1. Rich, neither do I, but those are examples of where the media isn’t free and outlets that are already charging. There are numerous other examples of newspaper websites that are free and have been free — those are the ones that will struggle to reverse the model.

      And in the case of Newsweek – there’s plenty of free content on their site, so I personally have no plans to start paying for the paper copy of Newsweek. Not suggesting that you should do the same, of course, just responding to explain what I meant. ;)

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  9. Content isn’t free though. Newspapers are losing money hand over fist.

    They have to charge for it or go extinct.

    Jobs is right. They need to charge a lower price though. Certainly lower than the print content.

    Doesn’t mean you have to buy per article either like iTunes. IT just means your price should be low.

    YOu should be getting people used to the idea of paying.

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    1. Content is free. That’s a fact. You can get it anywhere. Newspapers can’t sell news any longer. What they can sell is curated content and opinion pieces (editorials, columns, op-eds, …).

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      1. Good content isn’t free. Having knowledge is free and the cost of transmitting knowledge is near free. But attaining knowledge and communicating it in a way that attracts consumers is far from free.

        There’s very few opinions I would ever pay for. There’s an over-abundance of opinions, everyone has them, and most of them are just echoes of other people’s opinions.

        “Curated content”…that’s an interesting (and probably Steve-Jobs-influenced term). Isn’t “curated content” really just what we used to call good reporting? A great reporter investigates and learns all the facts (content) and then creates a consumable news piece that effectively communicates that content (curated).

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  10. Good post.
    But the headline is cheap.

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