The efforts of newspapers to find a business model that will ensure their continued viability in the online world continue unabated.Take the saga of the Financial Times.
As described in the June 16 posting of Chris Cameron's "ReadWriteWeb" blog on nytimes.com ("Financial Times Expects Direct Payments to Outpace Print Ads in 2010") here, itself based on a article that appeared in The Los Angeles Times, the blog focuses on the efforts of the FT to find sources of revenues in a declining print media world. In particular, the piece discusses a report that the FT "will see print ad revenues dip below direct payments made to the paper this year." As well, the FT is developing alternative sources of revenues, including IPhone and IPad applications as well as "series of glitzy events and conferences drawing luminaries from various industries." Let's consider further what seems to be going on.
1. What is entailed by "direct payments? " At least for the FT, "diret payments" appear to mean subscription payments both for its print edition (approxmately $348 per year) and for access to its online contents (approximately $186 per year). If so, this does not really tell us very much. First, we do not know the division between print and on-line subscription payments. Second, and more importantly, we do not know of the trend lying behind this division; is it stable or is it changing over time in favour of online subscriptions? Third, we do know to what extent an increase in "direct payments" can ever make up for the lost revenues from the decline print ads.
2. What about iPhone and IPad applications? What seems to be going on, at least for the moment, is that the FT has made available a free download app for the iPad (thus far available only in the U.S.). There have been over 130,00 downloads of this app since its launch two weeks ago. This is to be compared with the launch of a similar Phone-enabled application last year, the difference being that the iPhone app requires payment of a subscription fee. The FT plans to convert the fee iPad app to a monthly subscription model after the free promotional period comes to an end.
Here, as well, there seems to be less going on than first meet's one eye. The reasonable conclusion to draw from the iPhone experience is that it remains a challenge to convince readers to pay an online subscription fee. So why does the author think that "this time will be different"? In part, he explains, it is "because much of the readership of the paper (like that of the Wall Street Journal) is mainly wealthy financiers and business executives--just the type of audience that is likely to subscribe and more likely to own the expensive iPad."
No offence is intended to the author, but this is hardly convincing. First, his characterization of the FT readership seems off-the-mark (either that, or a number of my friends and colleagues who read the FT have either received significant promotions or suddenly made it big in the stock market). Second, the price amounts involved here, both to obtain the device and to pay for the online subscription, are not so high that the only the wealthy are able to participate (and that is before any possible tax deductions). Third, I am skeptical that wealthy financiers and business executives are the consumer population most likely to be buying, much less using, an iPad.
3. What about those glitzy events? Perhaps I am simply uninformed, but the notion of the FT and glitz together seems a bit dissonant. And yet, the blogpost writes that "the paper hosts events and conferences aimed high-rollers [being the FT's "upper-class audience"--NW]. At the forefront of these events is the Business of Luxury Summit, which has become a strong source of profit for the paper thanks to high-end sponsorships and expensive prices, with executives from companies like Estee Lauder, Calvin Klein and Jimmy Choo drawing in wealthy attendees."
We are fascinated about the apparent brand extension being adotped by the FT. In June 2009, we published a post on this website here where we suggested that brands would become even more important in the online contents world. There, the thought was that strong newspaper and content brands would be best positioned to successfully migrate to a subscription model in the on-line world. We did not imagine at the time that brand leverage would extend beyond the contents themselves to allow the brand owner to take advantage of revenue streams far-removed from the core activities of the newspaper.
That said, if I had to put my proverbial money down on which form of brand leverage is ultimately the more important for the long-term viability of the FT, I stick to my comments of a year ago. Ultimately, it will be the enduring strength of the FT brand as signifying high-value newspaper contents, and not "Business of Luxury Summits", which will determine its business fate in the online world.
Just to add, the FT app was launched six weeks ago, and is available in the UK as well as the US (possibly elsewhere too).
The reason the iPad version is free until the end of July is that the subscriptions are covered by a sponsorship deal, made possible by the improved graphics of the iPad over the iPhone - the images would be obnoxious on the iPhone screen size, but are no more in the way than standard print advertising on the iPad. It will be interesting to see whether this sort of functionality (and/or Apple's forthcoming iAds) will increase the range of free quality material.
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