It's the technology sensation that's ignited the online newspaper nation! Bill Richards looks at how this dedicated electronic reader could change the economics of online newspaper publishing.
The text appears on Kindle with the same crisp clarity as print on paper, and the battery that runs the device will go a week before it needs a two-hour recharge. Amazon hopes Kindle will tear up the book business just like iPod tore up the music business.
But there is another business, newspapers, that ought to be closely following Amazon's bet on Kindle. ...
Success for Amazon's device would validate Kindle's key technology, known as E Ink. In May, Crosscut wrote about Hearst Corp.'s plans to test-market a wireless online newspaper within the next two years, using E Ink technology. But unlike Kindle's small, hardback reader, Hearst plans to employ the technology on a flexible screen almost as big as a tabloid paper. The e-paper can be updated by simply touching the screen. Hearst, owner of the Seattle Post-Intelligencer, is an investor in E Ink, along with Seattle Times minority owner McClatchy, Intel, and Motorola.
Richards correctly notes that there is a huge revenue gap between print and online. Will Kindle and other such devices narrow the gap in terms of slashing distribution costs? He worked through some scenarios (read the whole article for details).
... Using an extremely optimistic set of projections for revenue growth, and matching those projections against the fixed cost of running the B-I's e-paper — $35.1 million, remember? — in a half-dozen years our hypothetical paper would be very profitable.
Using more realistic projections — the latest 21 percent revenue gain for newspapers' online revenue versus a 9 percent drop in print advertising — the timeline to profitability gets considerably shorter for our B-I. In fact, by those projections, if Kindle is a winner and E Ink technology takes hold, it makes more financial sense for the B-I to stop the presses and go all-online right now.
There are other considerations, of course. For one, Amazon is asking $399 for Kindle. Hearst says it can get the cost of its e-paper wireless screen below the price of an annual P-I subscription — less than $185. Our B-I might do even more aggressive marketing, given the gloomy prospects for its print paper. How about offering the e-paper screen free for a two-year B-I subscription. Verizon does it, why not us?
(The Poynter Institute's) Edmonds, who was skeptical at first, is starting to do the math now. "If you change the business model," he says, "that is something I would want to explore if I were a newspaper company."
New technology, of course, is a gamble. "There are lots of things that sound neat and have interesting benefits," Edmonds points out, "but for various reasons don't catch hold."
Still, he adds, "Are newspapers waiting for breakthrough technology to reconfigure the business model and re-invent circulation revenue gains?"
The answer, he says, is yes.
"If they do that," says Edmonds, "it's a new day."