Blog Post

Rupert Murdoch Is Right About The Daily

Ben Elowitz (@elowitz) is co-founder and CEO of Wetpaint, a web publisher, and author of the Digital Quarters blog. Prior to Wetpaint, Elowitz co-founded Blue Nile, the online retailer of luxury goods. He is also an angel investor in various media and e-commerce companies.

There are plenty of naysayers who point out that Rupert Murdoch’s new initiative, The Daily – the first major-media publication created expressly for tablet computers like the iPad – is an expensive and risky bet.

But here are four reasons why Rupert is right…

1) Rupert knows the ad model of publishing is doomed. Print and broadcast command the heftiest premiums, and both are at risk of price and volume erosion as consumers cut their ties to offline media. In the digital environment, online advertising is highly commoditized: the explosion of content publishers is outpacing the shift in demand, while technologies target audience ever more efficiently. Advertisers have plentiful ways to reach a consumer.

For his part, Rupert knows that his offline publications are at risk from decreasing ad revenues, and web-advertising models are hardly an adequate solution. Whether it’s out of desperation or vision, Rupert is willing to break through – and lose money in the short term – in pursuit of a better model.

2) Rupert can afford a longshot bet – and can’t afford not to make one. And he’s leveraging his considerable influence by putting something out there that can be truly cutting-edge. A $30 million investment may seem ridiculous for a new publication – and it is. But even with that hefty price tag, this is an insignificant bet relative to the industry and consumer behavior Rupert is trying to move. Throwing money at this is OK, because the possibilities are so great; if The Daily succeeds – or even provides the key insights so his next venture can succeed – it will be worth billions.

3) Rupert has influence to change consumer and industry behavior. He beat his drum loudly last year to get paywalls on the agendas of other publishers’ boardrooms. And it’s worked; just look at The New York Times’ pending move to a metered system. This is what I love about Rupert: Unlike other leaders in publishing, he uses his voice – and his treasury – to influence the industry and consumer behavior. He’s all about trying to get to a more successful model.

4) Rupert has a friend in Steve. Steve Jobs has a lot riding on this, too. Is Apple (NSDQ: AAPL) in the device business or the media business? To date, the lion’s share of its revenue and growth has come from the sales of ever-more-advanced devices. But as device categories mature, Jobs knows growth will get harder to come by: iPod sales grew at just 2% for Apple in 2010, as the venerable device line nears saturation.

In a world where mobile devices are ubiquitous and fiercely competitive, the fat margins of media revenue-share arrangements can powerfully fuel profits. But even more attractive is the tremendous expanse of the pool: Apple’s media revenues are currently around $5 billion – a paltry sum compared to the global media and entertainment market that PricewaterhouseCoopers pegs at $1.3 trillion.

Apple has already proven that in its remarkably successful closed media ecosystem, the company’s store can earn an estimated 30% of the top-line for media sales – without having to produce any media. This happens when Apple creates compelling devices, exciting user-experience platforms, and fresh marketplaces. For Steve, the upside here is huge. And so he should be happy to tie that upside with anyone who is as crazy-aggressive as he is about getting legions of consumers in the habit of paying for media. And that list has just one name on it: Rupert Murdoch.

A fresh start and a new division — with a new concept and a new design for a new platform — is the only way someone like Rupert can have the freedom he needs to reinvent media for a new age. And only Rupert can do this – without falling into the ruts of compatibility with existing businesses or holdover assumptions from old models.

Kudos to Mr. Murdoch for summoning up the courage, and putting up the money.

6 Responses to “Rupert Murdoch Is Right About The Daily”

  1. i would pay five dollars if i wasnt hit with an ad everytime i click or attempt a video. anyway you look at it Murdoch is trying something new and that is good. at some point people will have to start to pay for quality content. otherwise the whole journalistic system will fail and new entities will emerge anyway…

  2. Do we really want a world where every article, viewpoint, discussion and news is brought to us via an advertisement? For that is the “free” and “open” world of google that everyone advocates yet refuses to count the long term cost.

    I dont want articles pulled, re-focused or edited because it its in a certain advertisers interest. I’d rather pay to know that something is coming from one group or one persons vision. That at least gives me the choice. TV is already heavily censored based on what advertisers want and I would hate for the other media to go that way completely.

    Finally, if we do not want to pay for journalism but would like to pay double that amount for a beer what does that tell us about our priorities? What do we value? The fact is true value is derived from scarcity of an item. The reality is Murdoch has to artificially make his products scarce by reducing access to them in order to preserve their value.

  3. There are plenty of naysayers who point out that Rupert Murdoch’s new initiative, The Daily – the first major-media publication created expressly for tablet computers like the iPad – is an expensive and risky bet.

  4. Tedbaker

    Elowitz,

    What unmitigated bollocks! “In a world where mobile devices are ubiquitous and fiercely competitive …” what is needed is a range of connected, dynamic, linkable and user interactive means of accessing news and information. In other words, everything other than Murdoch is offering with this dead pixel straightjacket nonsense.

  5. It figures that all the Jobs loyalists are praying and hoping that Murdoch’s The Daily will be successful only to justify the ridiculously high priced IPAD ( wait, still no FLASH!) and the even more outrageous $4.99 subscription fee Murdoch wants to charge for this digital publication.

    What’s worse is that writers (including yourself) are acting like this is the most amazing idea ever for the future of digital publications. Really? Throwing up pay walls and controlling content is what this new digital world is all aobut? Old media barons using old media tricks to make the consumer pay more for what essentially is already free on the internet.

    These are the same people who think linking to stories is the worst idea ever and robs content producers of revenue. When, in fact, the link economy that is created now allows for more voices, more traffic and essentially more revenue to content providers and those that link to it and from it.

    Murdoch’s The Daily is one more gross example of how a bored rich media person wants to throw more money to an old idea and think it will work. Look at Fox’s My Space failed acquisition and all the money they wasted buying that company. Now, it looks like its on a cheap fire sale to anyone who dares to drop money on this sad attempt to take on Facebook.

    So, $30M on an ad-driven, subscription based digital news paper with Murdoch’s conservative spin on the world won’t be getting any views or money from me and many others who think paying for what’s already available for free makes absolute no sense!

    In the end, this is all about trying to fight the continued success of Google and the Droid’s open platform that encourages link economies and moves the ball further in terms of monetizing content!