Category: Innovation

What Newspapers Should Learn from the Apple and Microsoft Dance

There have been many great moments in the history of Apple.  Some say it was the invention of the Macintosh or iTunes or most recently the iPhone or the iPad.  Others say it was the return of Steve Jobs.  I believe its greatest and most defining moment was when it was on the brink of death, pre or post Steve’s return.  At some point, in some boardroom a switch was flipped and a license was given to innovate and disrupt and a plan was set in motion to win the “post-PC” war.

For those of you who might not remember in the mid and late 90s Apple was quickly losing its already small market share to the Wintel (Microsoft and Intel) juggernaut.  Its luster and cool had been lost as the post-Jobs Apple started following the Wintel playbook by licensing the OS and allowing clone builders to make beige PC-like boxes in an attempt to gain on Wintel.

Apple’s strategy, I’m not a Trekkie but I’ll use this reference, was Kobayashi-Maru – in a no-win scenario change the rules.  Instead of focusing on chasing the PC business, Apple began focusing on defining and winning the post-PC game.  They began not by creating great products but by creating a great ecosystem in the iTunes marketplace.  They knew content drove hardware adoption.  The greatest hardware with nothing to do on it doesn’t inspire adoption.  I recently was convinced that I needed a 7″ Android tablet.  After having 4 iPhones and 2 iPads the thing that jumped out at me when I had an Android tablet was the Android Market is not very good.  It’s better than it was a few years ago where it felt like you were shopping the backstreets of Manila but it’s still not the Apple app store.  Apple also stole a page from the AOL playbook where they realized the new currency was registered users and “cards-on-file”.  If you had someone’s credit card enabled for one-click purchasing you had gold.

In the time that Apple went from near death to owner of the “post-PC” ecosystem and eventually the most valuable company in America, Microsoft existed.  It was never on the brink of death so it never had to reinvent.  It was fat, living on its legacy products and revenue streams.  It had a huge Windows user base who updated every 3 years and a dominant share of the enterprise computing works who are slaves to the cost of switching.  I live 8 miles from Microsoft’s main campus and new towers are popping up all over Bellevue, WA emblazoned with large Microsoft signs.  Microsoft tried to do mobile, remember Windows CE, Windows Mobile and Windows Phone.  It tried to do tablets before the iPad, remember Windows XP Tablet.  It tried to do digital media, remember Windows Marketplace.  Do you see the common thread?  Everything was around protecting the legacy brand and core product.  Rather than taking a new approach and building from the ground up for the platform it branched existing products with a tieback or some motivation to use Windows.  Then again in the non-Windows branded products for every XBox success there was a Zune.  Microsoft thought Windows first.

http://www.collegehumor.com/video/6440954/charlie-and-the-apple-factory

Newspapers are falling into a similar trap with print being Windows.  It’s still the cash cow, like Windows.  When you are so fixated on protecting legacy revenue and legacy brands it’s tough to see the forrest through the trees.  Sometimes those parameters stand in your way of growth and innovation.

As paid content models are evolving much as been said about the current wave of strategies being about protecting legacy print.  That’s true, it’s because that’s where the real dollars are in the overall revenue mix.  The savings dwarfs any digital subscription or ad revenue today.  That won’t always be true.  In an upcoming article and at the next NAA conference I’ll show exactly how to measure the financial benefits of a print retention strategy.  A good strategy manages the pivot well, respecting and maintaining print retention revenue at the same time innovating and taking risks with pure digital growth.  I’ve seen some, maybe too many, publisher price print and digital lower than digital only.  An example, print/digital for $10/month and digital only $11/month.  1) why would you disincent people from buying your most profitable product and 2) if I’m an advertiser or a competitor I would quickly point out that you’re “paying” people $1 to take your print.  Of course as a subscriber I’m going to want the $10 subscription and throw the newspaper in the recycling bin.  The print usage will fall at it’s natural rate, the circ numbers will remain artificially high and the advertiser will see rapidly diminishing response.  ABC will be all over your back and all copies priced that way will be subtracted out of the circulation numbers by advertisers.  What’s the point?  It’s not fooling anyone. The ABC question of wantedness will be resurrected.  I subscribe to a national sports magazine.  For $20/year I get the magazine and access to their premium digital content vs. $6.95/month for digital only.  That’s not a tough decision, I don’t think I’ve looked at a single print issue since I got the subscription.

So what can newspapers learn from Apple and Microsoft?

Respect the legacy cash cow but not at the expense of innovation and moving into new markets – Windows is not cool, newspapers are not cool but they still make a ton of money.  I was just on a college campus last week and saw fewer Windows-based computers than I saw people reading newspapers.  You can build and innovate but it doesn’t need to be tied to legacy.  Use legacy product’s and assets when needed – trusted brand, content engine, established relationship with consumers and advertisers but don’t use it if it will get in the way of growth.  BTW, the Zune and Windows Phone are actually pretty cool from a technology, functionality and value perspective but even here in Seattle it’s kind of embarrassing to be seen with one.  A few months ago a friend of mine was embarrassed that he had an older Blackberry in a world of iPhones and wanted to get a Windows Phone.  I told him a Blackberry says “I made a bad decision 2 years ago”, a Windows Phone says “I just made a bad decision”.  Friends don’t let friends buy Windows phones.

Kobayashi-Maru – The Gretzky metaphor of skating to where the puck is going to be is so appropriate here.  Don’t try to win the print advertising and circulation and even online advertising battle.  It’s not winnable.  Focus on what it will take to dominate in the post-print and next generation local media world.   Get your content under management, get your users under management and prepare to easily distribute across platforms.  Focus on what Apple, Amazon and Groupon have proven – the biggest asset going forward are registered users and cards-on-file.

There are great ideas already out there, pairing your assets with them can be game changing – Apple didn’t invent the mp3 player or the digital media store, they made it better with their secret sauce.  Well it’s not that secret, because of their loyal and somewhat fanatical user base the iPod had a built in audience at launch.  Because of their size, remember in 2001 there were very few standards in digital media, they could create standards.  Apple had also established itself at the top of the price/quality matrix enabling them could charge a premium price that a sizeable audience was happy to pay (and stand in line the night before for that privilege).  The first iPod when introduced in 2001 cost $400 and came with a massive 5gb that people had a hard time filling.  The built in customer base and large margins on their product gave Apple a snowballing advantage over lesser known mp3 player manufacturers fighting the battle on price.  By the way if you had bought Apple stock instead of that iPod you would have almost $11,000 today.

Another note on finding great ideas.  Look around outside of the newspaper industry and in the app store.  Most innovative ideas and products are created by technologists who don’t have the marketing expertise, brand credibility or ability to create content to make it successful.  Most newspapers have all of those things without the ability to create technical innovation.

We all trusted Steve – Steve was a face we all knew and trusted.  We knew him since the 80s.  We watched him grow up and there was very few aspects of his life we didn’t know.  He didn’t give us what we asked for, he gave us what he knew we needed even if we didn’t know at the time.  He was almost always right.  Very few entities have that kind of trust established through a proven track record.  Most newspapers still have that level of trust today.  The public expects the local newspaper to deliver next generation information products and services.  The window is closing quickly.  New entities are trying to establish inside of your communities.  Many don’t have sustainable models like local blogs but others like Patch are backed by deep pockets.

Today newspapers are stuck between Microsoft’s and Apple’s positions.  Many still have a cashcow in print (Windows) but that’s changing quickly.  Some have been pushed to the brink of death and died.  Others have been pushed to the brink of death and had that defining moment Apple had where the current trajectory was so dire they had to change the rules.  Not long ago people followed the well documented New York Times story as it was forced to reinvent itself and has pivoted to become one of the largest digital media companies with the advantage of still having a billion dollar plus print business.  On the local media front I don’t see anyone who has truly figured it out.  That day will come soon when a local media company will reinvent itself with a truly unique model that will sustain its on going business operation.  Newspapers can’t be followers.  If you follow, and are wrong it will take 18 months before you realize it.  Many don’t have 18 months to waste.