The News Biz Glimpses a Cable-TV Model in the Booming iPad News Apps
On Dec. 9, Apple (AAPL) announced that Flipboard is the iPad "Application of the Year" for 2010. It's an innovative news app that aggregates content other people in your social media stream are reading and delivers it in a magazine-like format. SkyGrid, another highly touted news-aggregation app, has pulled in north of 1 million users. And a similar app called Pulse is, like Flipboard, at the 500,000-user mark.
Naturally, publishers are now scrambling to line up deals with the news aggregators as they glimpse what could finally be an Internet-based business model that actually pays for content. Think cable TV. These three applications, among others, act in many ways like a Comcast (CMCSA) or a Time Warner (TWX) does, pulling in disparate content streams and making them easy for consumer to find.
News readers for the Internet and smartphones also accomplish this task, albeit in a more heavy-handed and less usable manner. Smartphones are still very small for heavy written-word consumption. Laptops are heavy and hard to deal with compared to magazine. But iPads and other tablet computing products split the difference quite nicely and, by many accounts, are leading to significantly increased news consumption.
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And that last point is stoking interest from both big media companies and big advertisers, which see the aggregation of loads of highly engaged users onto a handful of application platforms as a potentially deep pool for advertising. Sources inside the online advertising segment say ads on these aggregation platforms could carry a stiff premium compared to ad spots on individual news properties. In that sense, the bundling of news is again similar to what cable TV has done by packing dozens of channels together and then charging advertisers to access the bunch.
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For the cable companies, bundling has been a controversial notion. The Federal Trade Commission has ruled that cable subscribers must be allowed to "unbundle" their subscription packages and pay a la carte for programming if they so desire. But very few Americans have taken that step. Likewise, while much has been made about consumers cutting the cable cord and going to the Internet for video consumption, that's hardly happening. Cable companies are seeing cancellation rates of less than 1%.
This acceptance of bundling could be very good news for news companies because aggregation appears to be a well-accepted vehicle for media consumption, which may be exactly what the flagging news business needs. Granted, a handful of iPad news apps will hardly prop up a multibillion dollar industry. The news industry itself is struggling with copyright implications of the iPad news aggregators (Flipboard, in particular, has run into trouble).
But they do provide a glimpse of a new sort of news model: a modern-day digital newspaper and magazine bundled together by a software company and delivered in convenient form to consumers.
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