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Can ‘The Daily’ Get To Profitability?

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The big question about e-paper subscriptions is whether they can make enough money to support themselves. That question will be tested by News Corp.’s ‘iPad newspaper” The Daily, which debuted this morning. Buzzmachine’s Jeff Jarvis and, separately, Scout Analytics’ Matt Shanahan, have pondered the economics of The Daily and whether it can break even.

And what kind of numbers will The Daily need to break even? Here’s some early guesses:

The Daily is selling for $1 a week or $40 a year. (And Apple (NSDQ: AAPL) is still taking its usual 30 percent share of the revenues, our Staci D. Kramer points out. Though Murdoch hopes the company will eventually lower that.)

— Replacing the usual flow of subscriber cancellations with new subs is an issue every service has to contend with. Jarvis: “Let’s say The Daily loses — and I’m pulling this number out of a hat — 10 percent a month, which it needs to replace. So if you’re selling 100k this month, you need to sell 110k next month to get to 200k and 120k the following month to get to 300 and so on.”

— Choosing another ballpark figure, Jarvis expects the publication needs 750k net subs to hit cash-flow break-even. Maybe more, since Apple is taking more than the 25 percent share of the revenues, Jarvis estimates.

— Looking at how other titles have fared on the iPad, Jarvis says Condé Nast sells about 22,000 downloads of Wired each month. That’s down from a debut of 31,000. Glamour, meanwhile, sold 2,775 in November, “losing 20 percent a month from the prior two months (even as iPad sales soared)… So The Daily would need to sell roughly 34 times the sales of Wired. But it is daily and not monthly,” Jarvis concludes.

— Shanahan’s post has an overview of the recent spate of paywall proposals by newspapers. In an e-mail, he tells paidContent that The Daily still needs to deliver 2-3X more ad revenue, even if they could get to 750k subscribers. In general, “Because digital does not have the print production and distribution expense structure, a lower amount of revenue should be able to generate the same profits.” Using the Washington Post (NYSE: WPO) as a hypothetical candidate for a paywall, Shanahan sees some possibilities for the paywall model, but only if newspapers are able to cut costs deeper than they have.