The tablet PC: Assessing another delivery channel's opportunity
NewsFutureBy Owen Smith.
Editor's Note: This article was published, in slightly different form, in the March-April issue of Ifra's Asian Newspaper Focus magazine. Republished here with permission.
The introduction of the tablet-PC late last year has set off a familiar flurry of product development activities at many newspaper companies. Advice is being offered about how to best apply this new wireless computer and about how to best design "pages" for the device. In my opinion, most of these approaches are being launched with little reflection upon lessons learned from previous newspaper Web development efforts.
In addition, my personal experience suggests most publishing houses have not constructed a coherent strategy that exploits the spectrum of publishing channels. Instead, it seems that the state-of-the-art practice is to add one new technology (forms or channels) in a patchwork fashion without carefully considering an integrative approach that exploits the best revenue opportunities of each form.
Since the time moveable type was designed to imitate the letter forms of scribes, publishers have generally carried their old product designs and strategies into whatever new technologies they developed. For example, when many newspapers constructed their first Web sites, they designed the computer pages to look like newspaper pages. The Web sites tended to be "type intensive" and static. In the U.S., newspapers forgot that approximately seventy-five percent of a newspaper's "content stream" was advertising content, and advertising ended up being the last aspect of the equation to get consideration-long after the launch of the Web site. And newspapers wondered how they would ever make any money from a Web site!
The key to profitability
Profitability, by definition, is a short-run phenomenon. To sustain
profitability in the long run, we must make short-term decisions using long-term
criteria. We have to develop new channels and products in this new Relationship
Economy in a way that returns maximum lifetime value to an organization's stakeholders
and delivers value to our readers and advertisers.
But how does this relate to the tablet-PC?
It is difficult to expect that a newspaper that has not successfully integrated its existing channel strategies can possibly be successful with yet a new one. The arrival of the tablet-PC gives the industry a chance to reflect upon and implement the lessons it has learned from past new product and new channel development work. The tablet-PC represents a fresh chance for organizations to integrate their strategies.
In general, this integration starts with an overarching goal such as: "We need to be where people are when they want information and supply it in the form they want." This means developing multiple presences (various forms) that are linked and derive their content from a common pool. In addition, driving content to these various consumer contact points has to be cost-effective.
The solution to the huge cost posed by such integrated "ubiquitous presence" strategies is going to come in part from automation technology and in part from changes in organizational approaches. One organizational change is that of contracting out more of the work to subsidiaries who remain free to work on developing other non-news revenue streams that will help carry the financial burden of the investment. The channel (or technology) may be owned by an outside firm, but the strategy integrating it all remains tightly coupled at the corporate levels of the two organizations.
Multiple channels - multiple forms
The idea of being ever-present in the marketplace via whatever form
the reader chooses to use is expressed in most newspaper strategic plans. The
trouble is getting it out of the strategic plans and into the operational plans.
By now, most newspaper executives are highly skeptical of the revenue potential
of new digital technologies. Nevertheless, they continue to keep them in their
plans and allot limited resources to R&D projects.
The digital technologies that have received significant investment attention are those that reduce costs and increase service. For example, digital production technologies have been responsible for a giant leap in production efficiency. Also, a number of circulation/distribution departments have embraced palm technologies to solve distribution problems.
Still, the revenue side of new technologies has remained shrouded in mystery. Some of this mystery is the nature of its newness, but the "mystery" is also a function of the lack of systematic planning and integration in how new technologies are brought to advertising and readership markets.
What does a successful multi-channel approach look like?
The successful organization will:
1. Have an explicit long-term view of profitability based on lifetime relationships
2. #1 above will guide even mid-level decisions that affect short run profitability
3. Have a written plan to guide and encourage innovation
4. Have a detailed technology applications assessment that is updated at least
twice a year. The assessment should layout the comparative application weaknesses
and strengths of emerging technologies.
5. Place a top priority on integrating advertiser needs into new products during
the assessment, design and testing phases.
6. Embrace new business models such as contracting out new channel production
and distribution services to a subsidiary or "sister" company.
Sample channels for integration
Print-Large volume of news, effective advertising medium, convenient, cheap, and format invites random access. Proven revenue equation.
Blended Web/Television/Print-Breaking news, interactive ads, potential circulation builder, increase brand awareness. Provides potential newsroom efficiencies, but the revenue equation remains untouched.
Wireless Phone/Palm-Customized stock and news flashes, voice news & updates for car phones. Revenue equation undeveloped.
Tablets-Electronic subscriptions for same price as print without all the costs, event publishing in real time at the event, single-copy sales, niche publications, mass customization, bundled services & cooperative advertising, news, & software deals. Revenue equation undeveloped.
Digital Presses-Event print publications with different value propositions than the ones for the tablet, mass customization, possible conversion of pre-printed "inserts" to post-prints that are printed and inserted in real time on the packaging side of the newspaper operation. Revenue equation tested but awaits full deployment.
Putting revenue first
The first priority in product development strategizing is to focus
more on putting revenue through the new channel or technology than putting news
through it. The news-to-advertising-ratio goals of newspapers vary dramatically
from one continent to another, but, globally speaking, the overall content stream
of the world's newspapers consists of more advertising than news.
Advertising has to be the key, and advertising directed at new technologies has to be effective-i.e., it has to bring customers into the merchant's shop and make the cash register ring. Adequately mapping a path toward a solution to the revenue question ought to come well before content is directed down any new channel. The time for focus groups and market research ought to come during the strategic planning stage rather than after the product is in the market.
Selling vs. giving it away
An aspect of new product development that cannot be overlooked is that of building
an audience that can be sold. This, at least, is the traditional and dominant
view of the road to profits. It is one thing to tell a newspaper publisher that
he can gain access to 40,000 new readers in the market through a tablet newspaper
- a fascinating claim that appeals to journalists. But this claim is far more
robust if one can say that these 40,000 new readers will count as new subscribers
under the rules of the Audit Bureau of Circulations.
This means that we cannot foolishly expect to build a large audience on free content and then sell that audience on the basis of mouse clicks. From an economist's perspective, that which is free has no value and will be either consumed to depletion or ignored completely. The challenge with any new product is to balance quality against costs to produce something with perceived value by the consumer. Heretofore, the mistake the newspaper industry has made is that it applies the same value equation it uses for print to each new technological form.
Advice to suppliers
There is a great opportunity for products that move content across
platforms without human intervention - sacrificing, in some cases, content design
for efficiency and advertising opportunities. Those suppliers that know what
publishers' advertisers want from new technologies will be at the forefront.
The leading suppliers of technologies will be those that provide solutions that
have multiple uses for the same organization-e.g., the electronic edition of
the newspaper along with a host of other content bundled by the publisher can
be delivered to, from, or though the device or form.
The advent of the tablet-PC is a new opportunity that ought to be embraced but not without forgetting the product development lessons of the past.
The time for focus groups and market research ought to come during the strategic
planning stage rather than after the product is in the market.
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