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Apple Tablet May Provide Media Companies a New Economical Model

Source: NY Times

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Posted on 27 Jan 2010

With the widely anticipated introduction of a tablet computer at an event later this morning, Apple may be giving the media industry a kind of time machine — a chance to undo mistakes of the past.

Almost all media companies have run aground in the Internet Age as they gave away their print and video content on the Web and watched paying customers drift away as a result.

People who have seen the tablet say Apple will market it not just as a way to read news, books and other material, but also a way for companies to charge for all that content. By marrying its famously slick software and slender designs with the iTunes payment system, Apple could help create a way for media companies to alter the economics and consumer attitudes of the digital era.

This opportunity, however, comes with a sizable catch: Steven P. Jobs.

Mr. Jobs, the chief executive, made Apple the most important distributor of music by imposing its own will on the music labels, bullying them into accepting Apple’s pricing and other terms. Apple sold lots of music, but the music labels claimed that iTunes had destroyed the concept of the album and damaged their already deteriorating bottom lines.

With the new tablet, media companies could be submitting themselves to similar pricing restrictions and sacrificing their direct relationship with customers to Apple.

For now, at least, the technology and media industries are looking at the brighter side. “Steve believes in old media companies and wants them to do well,” said a person who has seen the device and is familiar with Apple’s marketing plan for it, but who did not want to be named because talking about it might alienate him from the company. “He believes democracy is hinged on a free press and that depends on there being a professional press.”

Part of the media industry’s high hope for the tablet comes from descriptions of the device from analysts and others who have been briefed on it.

It will run all the applications of the iPhone and iPod Touch, have a persistent wireless connection over 3G cellphone networks and Wi-Fi, and will be built with a 10-inch color display, allowing newspapers, magazines and book publishers to deliver their products with an eye to the design that had grabbed readers in print.

Their optimism for the tablet also stems from consumers’ willingness to spend money using mobile devices. In the last decade, while people downloaded music illegally to their desktop computers, they happily paid small amounts of money on their cellphones to download ring tones and send text messages.

The iPhone has provided further proof that the economics of mobile devices are unique: the Apple App Store is expected to generate an estimated $1.4 billion this year, according to an analysis by Piper Jaffray.

“The iPhone was a harbinger,” said Trip Hawkins, a founder of Electronic Arts and now chief executive of Digital Chocolate, which makes games for cellphones. “When you have a device that is this convenient and fun for consumers to use, you can get a lot more people interested in paying for and engaging with the content. Big media companies should be all over this like a cheap suit.”

Indeed, they already are. The New York Times Company, for example, is developing a version of its newspaper for the tablet, according to a person briefed on the effort, although executives declined to say what sort of deal had been struck.

On Monday, The Times also announced that its media group division had created a new segment for “reader applications,” and named Yasmin Namini, the senior vice president for marketing and circulation, to head it. Executives said the timing was coincidental, prompted not by the Apple device specifically, but by the growing importance to The Times of electronic reading devices in general.

Two magazine publishers, Condé Nast and Time Inc., have also created mockups of their magazines for tablets, even before such devices have hit the market. “Apple upended the smartphone market with the introduction of the iPhone, and it’s likely that they will, if they enter the tablet market, lead the pace there,” said Thomas J. Wallace, editorial director of Condé Nast. He said that “2010 is going to be the year of the tablet, and we feel we are in a very good position for it.”

To successfully sell their material on the coming wave of tablets from Apple and other hardware makers like Hewlett-Packard, media companies may first have to adjust other parts of their digital strategies — so consumers don’t simply use the tablet’s browser to get the same content free on the web.

Such shifts are under way.

In October, The Wall Street Journal, which is owned by the News Corporation, began charging for access for certain elements of its iPhone application. Esquire and GQ have taken steps toward charging for digital content, offering iPhone versions of their magazines for $2.99 for each issue.


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