Feature Article

April 29, 2009

Memo to the Press

Memo to the barons of the press: Wake up and smell the spectrum!
At the recent meeting of the Associated Press, newspaper owners bemoaned how the Internet ruined their business. Bankruptcies, for sale signs, staff cuts and even shutdowns are today’s headlines. The cover of Time magazine recently featured a dead fish wrapped in a newspaper. “It is now possible to contemplate a time when some major cities will no longer have a newspaper,” the story warned.
Interestingly, however, another ink-on-paper business appears to have found a way to remake itself using new technology. While Time forecasted the death of newspapers, a Newsweek magazine cover proclaimed, “The Book Isn’t Dead.” The cover featured Amazon.com’s Jeff Bezos holding his Kindle e-reader. The article contained a sentence that the press lords should take as their new manual of instructions: “The Kindle’s real breakthrough springs from a feature that its predecessors never offered: wireless connectivity.”
Yes, the Web has changed the economics of the newspaper business, but it doesn’t have to mean the end of newspapers — just the end of the business as it is currently conducted. Wireless can do for newspapers what it is in the process of doing for books.
Columnist Michael Kinsley has observed, “Newspaper readers have never paid for content (words and photos). What they have paid for is the paper that content is printed on.” A week of the Washington Post weighs about eight pounds and costs $1.91 for a new subscriber, home-delivered. With raw paper costs at about 34 cents a pound, Kinsley comments, the Post loses almost a dollar a week on paper costs alone. “A more promising idea, is the opposite: to give away the content without the paper. In theory, a reader who stops paying for the physical paper but continues to read the content online is doing the publisher a favor.”
This, of course, is exactly what Hearst Corporation has done with the Seattle Post-Intelligencer. On May 17th the P-I ceased to be printed and became available only online. It is a step in the right direction, but it still misses the lesson of that other Seattle company and its Kindle. Yes, save the paper and delivery costs with electronic delivery but don’t make the reader go to a computer screen — deliver the content wirelessly to his or her e-reader.
It is possible already to get major newspapers on Kindle. Reading a newspaper, however, is a different experience from reading a book and that reality needs to be reflected in the display device. A U.K.-based company, PlasticLogic, however, appears to have broken the code. An e-ink reader, just like the Kindle, PlasticLogic’s device is about the size of a magazine. What’s more, the device’s user interface allows “flip through the pages” ease of use so the reader can scan the electronic newspaper just as he or she does the printed version. And, of course, the information is delivered to the device wirelessly.
Recently I was talking with a top executive of one of America’s major newspaper chains. He told me of a 375,000 subscriber (and declining) newspaper that spends $300 million in annual paper, printing and delivery costs. At that cost they could give each subscriber two e-reader devices (at Kindle’s retail price) and still come out ahead!
E-readers and wireless delivery solve another problem for the newspaper business — delivery to a company’s proprietary e-reader is a closed network. If publishers are worried about their content being taken for free and monetized by the likes of Google, here is an answer. Wireless e-ink readers allow the newspaper control over which information goes over their proprietary network to their own devices and what information goes on the Web for general consumption.
For wireless carriers pulling the newspapers’ coals out of the fire this way would seem to be manna from heaven. Sprint has already proved the value of delivering to 3 million Kindle users with no churn and no billing, collection or customer care costs. The bulk of wireless newspaper delivery would be late at night when the network has nothing but excess capacity. Making money off an unused network without the need for billing and collection is not a difficult business decision.
The new formula for the newspaper business is at hand. The question is whether the press barons will seize the opportunity? If the current ink-on-paper folks don’t grab this lifesaver there is little doubt others will. In a little-noted event on the same day as the Seattle newspaper shut down, wireless visionary Craig McCaw launched 1CAST to take live video feeds from established news sources for delivery to wireless devices.
Guttenberg developed movable type in the 15th century; six hundred years later the world is going wireless… just in time to save the heirs to Guttenberg’s business.
Tom Wheeler is Managing Director of Core Capital Partners,, a venture capital firm specializing in early stage companies, including next generation wireless services. For almost a dozen years prior to joining Core Capital he was the president of the Cellular Telecommunications & Internet Association. To read more of Tom’s articles, please visit his columnist page.

Edited by Greg Galitzine

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