How The Daily Could Have Worked: Journalism as Loss-Leader

Moneybox
A blog about business and economics.
Dec. 3 2012 10:45 AM

How The Daily Could Have Worked: Journalism as Loss-Leader

1354549530198
It's like a website, but without any content!

Screenshot of The Daily's website.

My colleague Will Oremus dances on the grave of The Daily, Rupert Murdoch's iPad-exclusive newspaper, arguing that "narrowing your focus to a single device limits your audience far more sharply than it limits your expenses."

This is true. On the other hand, journalism is a lousy business in general, so it's not like forfeiting some Android and Web revenue is obviously a terrible idea. The problem for Murdoch is that he didn't get enough in exchange to make it work. Let's think about, say, Microsoft. As everyone knows, Microsoft has struggled to get people to buy Windows Phone products, and Windows 8 tablets are as of yet an unproven commodity in the marketplace. The Surface is not exactly getting glowing reviews. And there's a famous chicken-and-egg problem here. Until people develop great apps for Windows mobile platforms, it's very hard for a Windows Phone to credibly say it's superior to the competition. But if nobody buys Windows 8 mobile products, then who's going to write apps for them?

Advertisement

That said, bad news for Microsoft is stories like "first-quarter net income fell to $4.47 billion, or 53 cents a share." Compare that to, say, the New York Times, whose total corporate operating costs last quarter were $430.5 million, much of which is related to businesses other than the core New York Times property.

So suppose Microsoft offered to pay the New York Times company $470 million per quarter in exchange for making a proprietary Windows 8 app its exclusive digital offering. No website. No iOS or Android app. You either subscribe to the print paper, or else you buy a Windows phone and read it for free. That'd be a risk for both companies. Microsoft could lose a few billion dollars to no advantage. And the New York Times could gain much-needed revenue at the expense of killing its brand's long-term potential. But it'd definitely get some people giving Windows devices a seriously look. They'd sell more of them. And if it's genuinely true that Microsoft's devices are excellent and primarily hampered by a lack of first-mover advantage, selling some extra phones and tablets on the basis of the NYT exclusivity would be just the thing to get the ball rolling downhill. And at this point, is it so crazy to think that a big risk is exactly what Microsoft needs?

Now a much smaller version of this is Marco Arment's new startup, The Magazine, which is an iOS exclusive that's simply operating on a much smaller scale with lower costs than The Daily. From Arment's perspective, one advantage to going iOS exclusive that he alluded to in a recent podcast is that as an app maker you want to make apps that Apple wants to promote. By going exclusive, you give up some revenue opportunity, but you not only simplify your own business, you hope to attract some marketing cross-subsidy from Apple. But this is a strategy that doesn't really scale very well. The Daily was far too big and ambitious to be getting so little from exclusivity. But exclusivity itself isn't a crazy idea; it's just that you'd need to be attracting a large cross-subsidy for it to make sense.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.