I'm not sure any product has "years" to prove itself anymore. With Quarterly results numbers becoming events in themselves and senior management under intense pressure to provide constant growth, I don't think anyone is willing to give anything more than a few months to show success.
The Xbox is an excellent example of what most companies are unwilling to do. Over the course of development Microsoft poured billions of dollars into the project, with nothing but losses to show for years. Now it's generating some returns, but nothing compared to its costs. Analysts look at the "time value" of that money, and they realize that Microsoft would have been better off putting the money in Treasury notes, or some other cash equivalent, and generated more income. That's one of the reasons that despite making tons of money Microsoft stock has been essentially flat for five years.
News Corp. has launched its iPad newspaper dubbed the Daily and the effort will be closely watched. The Daily is either the rebirth of the newspaper or another overfunded launch like Conde Nast Portfolio.
Of course, the Daily could turn out to be something in between. The big point here is that the fate of the Daily will be determined in months and years from now. In fact, the subscriptions will tell the tale over time. One day of hype doesn’t make a new paradigm for traditional media.
Add it up and we have no idea whether the Daily is the moment for traditional media or just another effort fumbling toward mobile app ecstasy.
As I noted in my Kindle Single, 2011 is the year of media subscriptions. The rub is we don’t know whether consumers will go along for the ride. It’s quite possible that 2011 will merely be the year of trying to do media subscriptions. Simply put, the New York Times pay wall and the Daily will be closely watched efforts.
Stifel Nicolaus analyst Jordan Rohan, who has been watching this space for a long time, outlined the ledger for News Corp.’s Daily, Rupert Murdoch’s pet project. Here’s the breakdown.
Pros:
- News Corp. has the resources to differentiate the Daily. If News Corp. can meld newspaper, cable, studio and Internet assets the Daily could sing. Indeed, the presentation outlining the Daily was heavy on the video.
- Apple is a great ally. Apple’s support for subscriptions in iTunes is quite the enabler.
- News Corp. is playing offense, which is a good thing.
- Subscribing to a daily publication makes more sense on the iPad and 99 cents a week—$39.99 for a year—won’t break the bank.
Cons:
- It’s going to take time for consumers to accept an iPad newspaper. Sure, early adopters will check it out. Then what?
- Early hype doesn’t turn into market share, revenue or cash flow instantly.
- Apple is controlling. Rest assured that News Corp. and Apple will clash down the road over apps and subscriptions. That fact could chill the market for other iPad publishers.
- Ads will matter. Subscriptions alone won’t support the Daily alone, but will carry the day initially. What will the ad picture look like and how will the details be handled with News Corp. and Apple?
