Why the disappointing iPad won’t save newspapers: Kohler

Apple’s iPad is a huge disappointment, but let’s face it – after hype like that it was always going to be.

I’m normally a big fan of this company’s products: the iPod was one of the greatest consumer inventions in history; the iPhone was even better – a beautiful product; iTunes is by far the best online store; I carry a Macbook Air with me everywhere; on my desk at home is a nice big iMac.

With the iPad, though, it seems Steve Jobs and his team has only displayed a talent for marketing. The management of the device’s launch this week was magnificent – the long, tantalising build-up and then Jobs’ overblown speech.

Perhaps I’ll change my mind when I eventually hold one, but the iPad looks like just another tablet computer. I bought my first one about six years ago but didn’t find it very useful and went back to laptops.

The fact that Apple’s tablet, in 2010, it doesn’t have a camera or allow video-conferencing is astounding – what are they thinking?

And I think Amazon is probably right, that backlit screens are not good for reading books and newspapers. The fact that the Kindle is not backlit and the iPad is, and that these devices are now going to battle it out for the eBook market, means Jobs is making a big bet that Jeff Bezos of Amazon is wrong about that.

The geeks are horrified that the iPad doesn’t have Flash software, which runs on about 80 per cent of the world’s internet sites. That means the iPad won’t be very effective as a web tool.

And the fact that is doesn’t do multitasking will be very annoying. My Macbook Air doesn’t have a lot of memory but I can still run quite a few applications at once, so switching between them is fast and efficient. My only complaint about the iPhone is that you can only do one thing at a time, so moving between applications is slow and cumbersome. That’s acceptable (just) on a smartphone, but not on a device that is supposed to pass as a computer.

So unlike the iPod and the iPhone, the iPad does not look like a revolutionary device, although there’ll no doubt be a (smallish) market for it.

And it definitely won’t rescue newspapers.

It’s true that laptops and smartphones are not perfect substitutes for the portability of printed newspapers, since the phones are too small and laptops are awkward for just reading, so having a 10-inch screen you can hold more easily is appealing. Also, the newspaper designers will have more freedom in the way their websites are presented.

But the big problem for newspaper companies is not that their customers don’t want to read their products on smartphones and laptops: they all have ‘unique browsers’ by the millions – far more readers online in fact than they have reading newspapers.

No – their problem is that advertising revenues have collapsed because online ads are more accountable and there are a lot more of them.

Media is no longer a cartel in which the publishers control the price and tell lies about the effectiveness of the ads. It has become a business with very low barriers to entry and more competition, and now the customers – that is, the advertisers – can measure exactly what they are getting for their money.

The result is that online advertising revenue per unit is, on average, one-tenth of what is in print.

Publishers are, understandably, thrashing about desperately trying to find a way out of this. They are talking about charging consumers to use the sites (but mostly they’re not doing it) and they’re hoping that new devices like the Kindle and the iPad will save them by providing a way to charge readers.

But it’s too late – journalism is free and will never be otherwise. Some newspapers, such as the Wall Street Journal, the Financial Times and, perhaps, the New York Times, will be able to charge online, but they won’t really be charging for the articles – they’re charging for their brand, for the experience and confidence of reading the WSJ, or the FT or the NYT. The stories are much the same as those on free websites – it’s just the brand that’s different.

In Australia, the Financial Review is trying something quite different: a very high-priced website. It charges $1300 a year for a package of the print and online versions, versus $900 a year for the paper alone. It’s an interesting experiment.

Anyway, charging for content online will not save newspapers because there’s not enough money in that to offset the catastrophic loss of advertising revenue.

And neither Kindle nor the iPad will save them because they won’t get the price of advertising up – nothing will do that. And selling iPad newspaper subscriptions through Apple’s iBookstore for $12 a month, with 30 per cent going to Apple, won’t make up the difference: $8 a month is the same as the price of about four days worth of newspapers.

Sure, with no paper and ink, the delivery cost is lower, but that part of the cost of a newspaper is not significant enough to make up the loss of ad revenue.

To put that another way: the cost of the journalism is too large to be paid for by advertising at online rates even when distribution costs are slashed by delivering the product to laptops, smartphones and now tablets.

Some lucky journalism brands, like the WSJ and FT, might be able to persuade some of their customers to contribute to the cause by paying a subscription, but there’s a risk that the resulting lower traffic means less ad revenue to offset the gains.

So Steve Jobs … thanks for the lesson in marketing.

This article first appeared on Business Spectator.