The Silicon Alley Insider recently calculated that the New York Times could actually cut down its costs in half by gifting all its subscribers a free Kindle. The immediate conclusion seems to be that the Kindle is the end to the U.S. newspaper industry’s woes. Get everyone a Kindle, you’re back in business.
Or not.
The article’s conclusion is probably right (this is what this post is about; the Kindle could indeed help the U.S. newspaper industry) but its reasoning is entirely incorrect.
Costs (printing, distribution or others) were never the newspaper industry’s biggest problem; it was revenues. Readers have been moving online in droves, resulting in plummeting print sales and print advertising revenues. Also as newspapers have found out, generating revenue from online advertising wasn’t easy. Advertising on the web works fundamentally differently from print. As Nicholas Carr points out:
A print newspaper provides an array of content—local stories, national and international reports, news analyses, editorials and opinion columns, photographs, sports scores, stock tables, TV listings, cartoons, and a variety of classified and display advertising—all bundled together into a single product. People subscribe to the bundle, or buy it at a newsstand, and advertisers pay to catch readers’ eyes as they thumb through the pages. The publisher’s goal is to make the entire package as attractive as possible to a broad set of readers and advertisers. The newspaper as a whole is what matters, and as a product it’s worth more than the sum of its parts.
When a newspaper moves online, the bundle falls apart. Readers don’t flip through a mix of stories, advertisements, and other bits of content. They go directly to a particular story that interests them, often ignoring everything else. In many cases, they bypass the newspaper’s “front page” altogether, using search engines, feed readers, or headline aggregators like Google News, Digg, and Daylife to leap directly to an individual story.
In other words, the true value of the newspaper – the bundle – is lost once online. It becomes a set of standalone articles, each responsible for its own revenue.
Here is where the Kindle can change the game back in favor of print. Since newspapers on the Kindle are subscription-based – just as in print – the bundle can now be restored. Only the medium will have changed, from paper to e-ink. In fact, if Amazon can track the location of a Kindle, it could even display local advertisements, in exactly the same way that local editions of a national newspaper do.
But not so fast. Newspapers (and their partner, Amazon) also need to understand why users moved online in the first place: the convenience of having unlimited news accessible instantly for free. This is what they need to deliver. For the bundle to work, the Kindle must make all its newspapers available for free, instead of charging an arbitrary subscription fee. Revenue from advertisements (on a per-impression basis, since per-click makes no sense in the absence of a web browser) should be split between Amazon (the medium) and the newspapers (the content).
Of course, we still don’t know how many online readers will bite and make the move to the Kindle. But the U.S. newspaper industry sure can’t afford to not try.