Why the Kindle HD Can't Save Newspapers

56 Comments

amazon-kindle-21.jpg
Updated with my interview on Yahoo Tech Ticker. Amazon (s AMZN) will reportedly introduce a new Kindle later this week, one with a big screen. Let’s give it a cute name, like the Kindle HD. And because it’s got a big screen and because it counts The New York Times among its launch partners, many of my fellow bloggers have decided that it will be the product that digitally delivers newspapers and in the process, saves the industry. Thankfully ZDNet’s Larry Dignan is keeping his wits about him, and instead of buying into the hype, proposes this much more plausible theory: Amazon may be targeting the Kindle HD at the higher education sector.

The eagerness with which people are assuming that Kindle HD will be a savior for the media business is striking. Comparisons are being made to the iPod, which came at a desperate time for the music industry. But while after eight years, the iPod is a megabillion-dollar business, the music industry is still in the toilet, with digital sales failing to grow fast enough to cover the drop in sales of physical CDs. The most recent reminder of that for me came last week, when I went to the Apple store to pick up an accessory and saw that the Virgin Megastore across the street in San Francisco had closed.

When it comes to the media business, why would things be any different? I’ve spent my entire working life in media — writing for newspapers, news agencies, magazines and web publications. Without a doubt, it can be painful to watch the slow and steady decay of the newspaper and media industry.

What’s more painful to watch is how unwilling so many people in this business are to come to terms with the shift the Internet has brought by wresting control of the distribution of content. The result has been the rise of blogs, Twitter, Facebook and other publishing platforms that are creating micro-brands for what I like to call the Me Media. But the Internet is not solely responsible for the demise of the core media business model; it contains critical flaws. Clay Shirky did a good job of laying out its problems earlier this year, saying: “Society doesn’t need newspapers. What we need is journalism.” Spot on. And new business models will emerge. My ex-boss Josh Quittner of Time magazine thinks one of these models will be “appgazines — that act more like computer programs than Web or printed pages.”

James Kendrick over on jkOnTheRun captures my feelings when he writes, “This has desperation written all over this. A large Kindle is not going to stop the death spiral that newspapers are firmly in the grasp of, no matter how cool.” Indeed, Amazon would have to sell millions of these devices to even come close to racking up enough subscriptions to make up for the loss of advertising revenues. The Wall Street Journal in its report on different e-reader initiatives by news companies has this revealing paragraph:

The Wall Street Journal — the second-most-popular newspaper for the Kindle after the New York Times — has more than 15,000 subscribers, according to a spokeswoman for the paper, compared to its paid circulation of more than two million daily. Fortune magazine has roughly 5,000 subscribers, according a person familiar with the matter, while the magazine has an average print circulation of nearly 866,000. Subscription prices vary, and are set by Amazon. In general, newspaper subscriptions range from about $5.99 to $14.99 a month, and magazines range from $1.25 to $7.99 a month.

But how does that expression go? Ah yes — a drowning man will clutch at a straw.

Related Posts:

  • Jeff Bezos on the State of Kindle
  • iPod, Kindle, Facebook – and a Nomad Called Me
  • The Standalone Kindle Won’t Stand Alone for Long
  • Will Google’s Android Power the New Fourth Screen?
  • E-Books Have the Fame, But No Fortune
  • 56 Comments

    Henry

    Most of the news comes from that monopolistic entity AP. I’m glad that the business is diversifying, I’d rather read original content than AP wires anyday.

    Michael

    The music industry failed partly because it resisted digital media too long, partly because it did not embrace the internet for distribution too long and partly because it was time – biggest music distributors were too concerned with large profits that they could not see that the people that they served would quickly embrace anything but them given the chance. i.e. the Internet and digital media (which flows well on the internet).

    Cannot discount the effect of the flood of artist now also. It is hard to make money when the churn is so great with artist now. (A bit of the Long Tail theory applied here.)

    The newspaper/news media is similar but I think that there is a place for it. I personally prefer well written articles that hire selectively people for their writing and journalistic skills – WSJ, NYTimes, Economist. Blogs have their place. They are a fast source of information but the quality is awful – exaggerations, inaccuracies, and lack of depth all accompany blogs. High-quality news has a home – smaller, but it will have a home for sometime.

    The Kindle will be slow to embrace given its hefty price but if they can create a model similar to the wireless phone industry, I’d subscribe to 2~3 publications and buy at random single issues of others when traveling or when I get bored from major news. The Kindle will not save all newspaper companies but it will make reading fun again and will bring to 21 Century. Newspapers are so 17 Century.

    candorville

    Maybe the solution is for newspapers to drop their physical editions and send every subscriber who signs up for a year of service a free Kindle. I’m sure Amazon would sell them at a steep discount to the Wall Street Journal if it were buying two million of them. Even small and medium sized papers probably wouldn’t have to pay $400 per Kindle. I wouldn’t be surprised if that were cheaper than running a press and distributing a physical paper.

    eideard

    The other shoe has dropped, this morning, on the road to tomorrow’s press conference at Pace University. Giving me another chuckle at the pundits [no, not OM – he knows who I mean] who make enormous leaps to unfounded conclusions over the simplest leak about new hardware or software.

    I worked in marketing long enough to be perfectly happy over a product that satisfied a niche and just maybe had the capacity to move beyond that niche.

    Tomorrow’s press conference and info leaked via the WSJ make it clear the target market for this larger Kindle is textbooks. I can hear millions of students breathing a sigh of relief, right now, over getting rid of 40 lbs. of paper from their backpacks.

    jess

    Relating e-newspaper sales to e-music sales ignores the fact that artists now make much more money on concert tickets. Even though album and electronic sales are down (based mostly on price decreases as opposed to volume decreases), concert ticket prices have skyrocketed. The music industry, from the perspective of the artist, is by no means in the toilet; it’s actually thriving. Since the newspaper has no real analog to concerts that would be able to pick up the slack from declining prices and reader bases since they have more alternatives like blogs, youtube, etc. I agree that it’s unlike that the education Kindle will really turn around the newspaper industry. On a personal note, though, I’d really like to read the Wall Street Journal, but the paper edition is too cumbersome, the current Kindle edition too expensive and hard to navigate. If they could fix the problems with the latter option, I’d be all aboard. In addition, since I got the Kindle 1 several months ago, I do find myself reading more and better titles, so the fact the the historical trend is for people to read fewer newspapers, it could turn around. I’m excited for the official news tomorrow…I wonder particularly what the price of the new device will be???

    Phil Rack

    The magazine prices are not that great! I renewed my Fortune subscription for three years at a total cost of $22.

    I think if the Kindle could make it into the schools and replace the costs associated with storing and repairing text books, it might have a future. Hell, I watch the kids waiting for the school bus with a huge back pack, gym bag, and some have a musical instrument case as well. Lot’s of baggage!

    Phil Rack

    macdad

    And it is not just a lot of baggage. It is a strain on the back that creates problems with the alignment of the spine. This is especially true when kids carry the backpacks on one shoulder or on one arm.

    Books have become too large, too heavy and too expensive.

    The suggestion that the Kindle (or something like it) might replace physical textbooks in the future is one that every school system should consider. Updating textbook info would be simple and inexpensive, a real plus for systems that select textbooks once every five years because they are too expensive to adopt every year. Right now the only drawback would be that the electronic reader devices are not in color and have few images. However, I expect that to change within the month – given the news that a revised Kindle-like multimedia device is impending.

    Will

    I wonder if nytimes.com became a member-only site at $1 a month, would I pay? As the site is now, I don’t think I would. Even as small a price as this, it’s simply not differentiated enough for most of the content I get (tech news) from any other news source. I sometimes wonder why on a platform as rich and malleable as the web a typical article has but one or two pictures, maybe a map, and then just text with some links.

    What if the NYTimes threw away all the clutter around the main article, hired a media collaborator to work with the journalists to create a custom presentation built around each story. In-page expansions on related materials, pictures/videos following the logic of the content – a hand-made piece like a living magazine article. Similar to the increasingly popular dedicated apps for bands in the appstore replete with pictures, memorabilia, videos, etc., a consumer gets content he can’t anywhere else AND it eases his search for related content as it’s already been sought and presented meaningfully by a human.

    I’d pay money for this kind of content, I already do in the appstore. But I am getting a bit annoyed by what seems like laziness on the part of media creators – text, picture, done; text, picture, post; text, map, picture, send. Imagine if they made magazine articles like that, or paid-for apps.

    chris

    The PBS program “Frontline” did something like this with a website they built supporting their story on the beginnings of the Wall Street Meltdown (starting with Bear Stearns). They created a timeline with links to video interviews, in-depth articles that were the background material for the TV program, etc. It was really fascinating. Perhaps they do this for all theiir programs, I don’t know, but it seems like the kind of rich media experience you’re describing. I don’t think it scales, though, which could be the fatal flaw.

    Dale Harrison

    This is looks like a desperate attempt to re-tweak the old media business models hoping to make them function again.

    The answer will not be found trying to salvage the old business models through clever gadgets, new forms of paper, new laws, lawsuits or pay-walls.

    A lesson worth remembering is that at the turn of the 20th century, people had a transportation problem…and the solution turned out not to be a faster horse…but a Ford. And one should note that the Ford didn’t arise out of the “horse industry’s” R&D efforts, nor the “Horse Industry Stabilization Act” nor the horse industry’s attempts to experiment with new Business Models. I think the future of the media business will look as different as Ford and GM’s operations look from horse traders and blacksmiths.

    ———————–

    What’s historically given value to editorial content is the relative scarcity of distribution versus readers (not the Kindle kind). Newspapers have historically had natural localized economic monopolies coupled with a finite number of column inches with which to distribute news and ads. That natural monopoly meant that each paper had total control over the amount of content they allowed into their local marketplace.

    Monopoly constraint of distribution and supply will always lead to prices (and profits) significantly above open market rates. These newspapers then built costly organizations commensurate with this stream of monopoly profits (think AT&T in the 1970’s).

    The dynamics of content replication and distribution on the Internet destroys this artificial constraint of distribution and re-aligns ad (and subscription) prices back down to competitive open market rates. The often heard complaint of Internet ad revenue being “too low” is inverted…the real issue is that traditional ad rates have been artificially boosted for enough decades for participants to assume this represents the long-term norm.

    Unfortunately the Internet came along and changed all the rules!

    Any individual reader now has access to what is essentially an infinite amount of content on any given topic or story. All those silos of isolated editorial content have been dumped into the giant Internet bucket. Once there, any given piece of content can be infinitely replicated and re-distributed to thousands of sites at zero marginal costs. This breaks the back of old media’s monopoly control of distribution and supply.

    The core problem for the newspapers is that in a world of infinite supply, the ability to monetize the value in any piece of editorial content, will be driven to zero…infinite supply pushes price levels to zero

    This isn’t to imply that editorial content doesn’t have real value to most of its readers…it just means that no one source can marshal enough market power to effectively monetize the value of their content in the face of infinite supply and massively fragmented distribution.

    There absolutely are answers to the question of how to create value with online news and to be able to monetize it…but I doubt that new kinds of paper will be any more successful than faster horses…

    dale.harrison@inforda.com

    Rocky Agrawal

    It’s interesting to look at where newspapers rank relative to other purchases on the Kindle store. The NYT is the #1 newspaper, yet it ranks 8,861 overall in the Kindle store. By contrast, the #100 ranked non-fiction book is ranked 210 overall.

    For a consumer, a Kindle combines the worst aspects of print and online:
    – harder to read (like online)
    – incremental subscription fee (like print)
    – out of date (like print)
    – lack of color images (worse than print and online)

    The Kindle makes for a reasonable substitute for books where timeliness is not expected, there is an expected price and pictures are less prevalent.

    macdad

    And just imagine all the trees that won’t be cut down for the sake of reading material.

    Adapting requires employers who are willing to pay for the writing, regardless of the form where it lands.

    Bob Wickus

    Several things that I think also have led to the downfall of newspapers. They became less about delivering news and more about delivering ads. Even the Sunday funnies were broken apart, stuffed with ad flyers and put in different places in the paper. I suppose they figured that if you had to dig through all the ads to get to them, you might read some ads. Also, pick up the New York Times, a paper from California, or even from a small town in Georgia and the front page stories are the same, written by the same guy from one of the big news services.
    They need to become more about local news and issues and less about world or national news. There are plenty of places to get that information much more quickly now.

    I don’t see how an electronic device is going to do much for the industry as it stands. Reading a newspaper on the current kindle is a painful experience as anyone who has tried knows. Why would I pay for that when it’s much easier and more pleasurable on a laptop or desktop.

    As we always say,
    Newspapers, all of yesterdays news, day after tomorrow.

    Gadget Sleuth

    Newspapers as a medium (these days) are just flawed, which is why digitizing them in their existing form won’t matter.

    On the Money

    Top post! However, I don’t believe the Kindle will ever be as ubiquitous as, say, pocket calculators became.

    Gordon Peter

    There is a whole new generation/market that is digitsl that will buy the digital version at an attractive price model similar to itunes and the existing generation that is happy with the traditional newspaper. So really by going digital the media companies can get a new stream of income that should compensate for the loss of revenue from the traditional source. This is what happened to music distribution. With digital the customer can decide the content(itunes model) without the editor’s bias.Do what P&G does – sell different versions of toothpaste.

    rohit

    A better business model requires better journalism or a new form of it in any case. For example, speaking strictly as a reader of written word, my needs as a consumer are also increasing in this connected world. Reading a story about gun owners hoarding ammo, I expect to be looking at historical and new stats about ownership, ammo sales, geographical distribution, and demographic distribution and a set of tools to figure out if where I live is average, above par or below par for this trend. Instead what I get is a rehashed set of opinions expressed by ‘common folk’ and a gun shop owner or two and the obligatory quote from some NRA shill. That, i m h o, is lazy reporting and will drive away people from a business model and the associated content. NYT, as noted by others here, is taking some notable steps by opening up their archives and I can go read a newstory from 1992 on similar issues for example. for most others, where a storied history isn’t available, I hope the focus turns to better journalism. Tools for journalists are far better and more efficient than they have ever been historically. Access to data sources and experts is a mere tweet away. So I dont quite believe that its merely the business model at fault. Its a potential systematic failure of journalism as an institution as well. It is failing in its attempt to address the needs of its consumers. No one is going to hand them a business model that will just work. They need to work at finding it – as hard as they work on finding the next good story.

    Om Malik

    Rohit

    I am not willing to make the blanket statement about the systematic failure of journalism. I disagree because I have read many hundreds of stories over last 12 months that show that the “content” side of the business is still very functional. I see some major changes happening in the nature of what people want to consume and that is something entirely different than most people seem to really care for.

    On some of the short comings of the business, You and I are on the same page.

    rohit

    Om,

    I agree that content side is functional but I don’t see it changing fast enough to keep up with the form + content of user’s expectations. In media, form matters as well as the content and in real time media, form may matter even more. So while it is true that new business models are required (the commodity value of journalism and its conspicuous consumption is not in question), a potential systematic failure is a failure of ‘legacy’ content and the form it is delivered in.

    In the McLuhanisque sense, media, especially real-time media, is a fluid extension of our senses and is vital to our social existence. The medium is currently in an evolutionary mess on its way to being the “mess-age”. Kindle, HD or not, is not a light bulb that illuminates and creates a space for content (http://en.wikipedia.org/wiki/The_medium_is_the_message), a deeper reinvention is required and Journalist and their craft is the medium through which to reinvent the delivery form.

    rohit

    chris

    I believe most newspapers that are migrating to online, whether gradually a la the NYT or overnight like the Post-Intelligencer, are doing so with an axe in one hand cutting away large chunks of staff — reporters and editors as much as pressmen. It would be naive to think that time-consuming investigative reporting won’t be sacrificed in favor of more immediate “near real-time” updates of web-length stories. There are many drivers of the demise of the printed newspaper. I think diminishing attention spans is a major one.

    chris

    Thanks for the pointer. I find it all a bit depressing, frankly, but I suppose, in the immortal wailings of Howlin’ Wolf “I’m built for comfort, I ain’t built for speed”.

    Tony Casson

    The newspapers will get it – at least the last ones left. As some have pointed out, the NY Times almost gets it with its online edition. I don’t know how much it costs to staff a newsroom with great writers, editors and support staff. But I know its a whole let less than the total cost of running a print distribution network with the associated ad sales. Those excellent writers and editors will find their distribution channels online once the old channels start to dry up. And once we, the consumers, have less choices in terms of the variety of content, the price will go back up – from free in many cases.

    Omar Iftikhar

    I agree that with Higher Education market being more of a target than newspapers. Large format ebooks vendors such as IREX and Plastic Logic have been talking to the Higher Education providers, and the arrival of the new Kindle will surely add to that momentum. The higher ed industry is ready for the right device and delivery mechanism, (it’s iPod for the lack of a better word) to achieve critical mass and really usher in the acceptance and wide-spread use of e-textbooks in the classrooms.

    Michele

    This debate about a device to “save” newspapers is fundamentally flawed because it assumes that the newspaper industry will remain cohesive with a single revenue and distribution model, as it did until about 5 years ago. I think e-readers like the Kindle are just one of many ways that news can be distributed and be profitable. What the past 15 years has taught us is that as technology improves, it also proliferates – spinning off new devices and applications. Each person forms his or her preferences for information distribution, be it Web site, listserv, RSS, iPhone, Kindle, etc. And each person has a different level of involvement with technology. Obviously some are incredibly tech savvy while others prefer to print every article they find interesting. What news organizations (newspapers, magazines, online only, TV, all of them) have to realize is that we are in an era of personalization and one paper does not fit all. I think the Kindle model will be great for some (I happen to love mine for reading the NYT and WSJ) and be rejected by many others. The challenge to news orgs is to create business models that incorporate multiple revenue streams to reach as many people as possible.

    Om Malik

    Michele

    I agree with you on almost all the points except I do want to note that these devices and the Internet are enabling extreme personalization and that makes it difficult for the old media model of front page-driven story lines to be relevant. Now I think over a period of time they will readjust and refocus but in the short term they are going to suffer. The money problem of these companies is going to make it difficult for them to innovate.

    Bart

    Ericson, the NYTimes website is one of the most popular websites for news, people are constantly linking to their articles and multimedia pieces, a huge portion of their staff is online-only people, and they’re doing stuff like offering their content on new devices like the Kindle and iPhone. How are they not understanding that printing presses are obsolete? Their problem isn’t that people don’t want to read their content, it’s that the traditional ways of making money off of it aren’t working.

    Om Malik

    Hear Hear Bart. I think the big issue here is not the “ability” but desire to completely embrace new business models and let go of the past. Unfortunately it is a painful journey for all. Not just the Times, which remains one of the best reads on the web.

    James Kendrick

    I don’t hear anyone stating the obvious reason that online news consumption has hammered the print newspaper business- online news sites are updated in almost real-time. Print news is old before it hits your hands. That won’t change with an electronic version as I can’t believe they’d be linked online all the time.

    Om Malik

    James

    I think that is pretty much figured into all discourse about media. The problem is not the speed — being a product of the old media, I can attest that things move fast in the old media’s web world as well. I think the problems are more systematic.

    James Kendrick

    What I haven’t seen one person mention about this electronic newspaper idea is the simple fact that not a single consumer has spoken out for one. Not one. Those who prefer to read the big format newspapers do so right now every day, and happily. They don’t need the electronics. Do not overlook the fact that it is the newspapers themselves that want this because their print business is dying.

    Om Malik

    Spot on. I brought up the same exact point when I was on Yahoo Tech Ticker this morning. I think it is pretty clear where the readers are and want to be – unfortunately the old business model can’t support the new distribution model.

    Ericson Smith

    I rarely agree with Om, though I read him daily, but here we meet minds.

    The newspapers don’t understand that their printing presses are obsolete. They don’t realize that its no longer expensive to distribute written content. They don’t realize that that monopoly is gone.

    There is absolutely nothing that they can ever do that will make it come back. Its gonna be painful (for me too as a former newspaper tech writer) to watch as the venerable institutions shutter. To watch magazines fold, to see journalists try to make a go of it blogging. Its a whole generation that are going into forced retirement or career change.

    And the TV industry is not far behind. Just watch as the cost of internet distribution drops. Already I never watch anything in its scheduled time-slot.

    Niraj

    “And the TV industry is not far behind. Just watch as the cost of internet distribution drops. Already I never watch anything in its scheduled time-slot.”

    But the difference with the TV industry is that even though it took them a long time to figure it out, they’re embracing and progressing with that shift. The reason many people no longer stick to the time-slot is their DVR, but also increasingly sites like Hulu, Joost, Fancast, CBS, NBC, etc. all of which are run by (or have deals with) the content owners. So they’re not sitting on the sidelines as their industry and viewers evolve.

    On the other hand, much of the newspaper industry saw this coming but they haven’t done much to adapt to it. They should be using a competitive advantage in real journalism and investigative pieces, and distribution through alternate means but they’re moving too slowly and are too interested in fluff pieces to get where they should be.

    Mehul

    I guess the one good thing is that Newspaper companies are atleast looking at all sorts of new technologies (right from applications fro Ipod Touch to Amazon Kindle) to reach out to as many subscribers as possible. However, with the dirth of excellent quality news available for free, I am just not sure how successful newspapers will be if they keep on relying on paid subscriptions.

    To survive, they need to move away from loss making businesses asap, & then focus on writing good articles & then find innovative ways to include advertisements ( pay per click etc..) even on devices like kindle & Ipod Touch. Even with that, I am just not sure how they can return to profitability ( or continue to be) with their giant size!

    Comments are closed.