XplanaZine

(This article was originally posted at Six Slides.com)

The WSJ ran an article Friday, detailing plans of a Hearst project to develop an electronic reader for newspapers and magazines. This news points to the evolving tension between form factor and content, and between free and premium e-content in the newspaper industry. More important, the Hearst project provides and outline for decision-making processes that are facing other publishers.

The Hearst announcement indicates an important trend as they represent one of the major owners and influencers of important newspapers and magazines. Their e-reader will be a handheld device that is designed specifically for their newspaper and magazine e-content. In contrast to Amazon’s Kindle or Sony’s Reader Digital Book, Hearst’s e-reader will have a larger form factor designed specifically for newspaper and magazine formats.

For Hearst, of course, the e-reader represents more than a fanciful foray into the digital product marketplace. Rather, it is s bold — if too late — attempt at reversing the fortunes of an industry whose processes and vision did not evolve with the times.

Like other newspaper owners who see their revenues dwindling, Hearst is hoping to find success with premium online content. The company wants to find the magic market coordinates where users will pay for some of its online content while continuing to offer the rest for free via the ad-supported model. The premium content model has been elusive for newspaper publishers thus far and Hearst must be hoping that the e-reader will give it an advantage.

The general problem in the newspaper industry is that subscription revenues have dropped precipitously while ad revenue has not increased enough to offset that loss. Making matters worse is that fact that the publishers have been forced to support both print and online news with 24/7 update expectations from their users.

Steven Swartz, the president of Hearst newspapers, puts it this way. “Our cost base is significantly out of line with the revenue available in our business today,” He goes on to add, “It is equally inescapable that during good times, our industry developed business practices that were, at best, inefficient.”

Of course, there is more at play here than a simple case of getting costs under control and finding a technological magic bullet. The newspaper industry is also beleaguered by some deep philosophical issues. Chief among these is its conundrum that the marketplace is demanding more community presence and a greater voice in the news process while the industry itself is founded on value through expertise. This is summed up quite succinctly in a headline from last Friday — “Facebook gets it. Bummer newspapers didn’t.”

I do believe, however, that the decision-making process Hearst seems to be going through is the right one — even if too late — and that other publishing entities can learn from it. The road from analog to digital in the content business has a common set of forking paths at which each company or organization must make decisions.

• Scarcity vs. abundance — When I was a kid I only had easy access to my local paper. Today, I have easy access to papers and other types of news sources all over the world. There is an abundance of information which means consumers can afford to be more demanding and more discerning with regards to what they are willing to pay for. In a world of information abundance, how do publishers manage the concept of value? Premium vs. public content — This is a case of the chicken and the egg for most publishers. If a company loses its reader base then its content has no value, regardless of how “premium” it may seen to be. On the other hand, if a company has no unique content or premium value, there is no differentiation from competitors. How much free content must companies provide in order to keep their readerships? What do they have by way of premium content that is valuable enough to get people to pay for it?
• Experts vs. community — Historically, publishing has been about the few providing an information or entertainment service to the many. Experts ply their craft for a wage so that the rest of us can have high-quality content. What happens, however, when the marketplace announces that it puts less value on expertise and increased value on community participation? What happens when the readership demands a place of the decision-making table?
• Singular, proprietary formats vs. common (open) templates — Hearst owns sixteen major newspapers and came to the realization that, while the differences between the newspapers weren’t that great, they had not been able to harness any efficiencies around that sameness. Is it possible to have a common design that lends itself to production efficiencies without lowering the perceived identities or value of the products?
• Closed delivery models vs. open distribution — At this juncture, Hearst is betting on the idea that a single form factor will help them find production efficiencies and drive the value of their premium content. This is contrasted with another prevailing philosophy that says the value of content is its availability anytime, anywhere, and in any form factor. A digital newspaper reader is cool but I don’t have to have one. I need my smartphone and notebook/netbook, however, and would rather not carry another device.

Certainly, here are other decisions that need to be made, and a number of lurking issues around cost to the marketplace and the fair treatment of content authors. Overall, however, the Hearst example provides a nice list of questions that must be answered for publisher to have any hope of managing successful transitions into the digital present/future.