Does Murdoch even know how to use his game-changing iPad?

Raymond Snoddy on paywalls: “Everyone in the media business, with the possible exception of immediate rivals, is praying that somehow, against all odds and conventional wisdom, the Murdoch hunch will prove to be right and that the public can be persuaded to pay for general news online…”

Once upon a time there were exciting price wars in the UK national newspaper industry as Rupert Murdoch tried to drive the Daily Telegraph out of business by charging 20p for The Times.

An up-to-the minute, and very different, digital price war is now about to break out between the two papers.

Murdoch has discovered the iPad and declared it a “game changer”, though whether he actually knows how to use one himself is a different matter.

Still, the battle lines have been drawn in the modern manner. A free app delivers the Daily Telegraph and the Sunday Telegraph – or at least a large selection of their articles.  You can have 30 days access to The Times on your iPad from next month but only for £9.99.

It is yet another iteration of what has become the most basic fault line in the economics of the newspaper industry: charging or not charging for online.

As he announced News Corporation’s annual profits of $2.5 billion this week, Murdoch started dreaming about “hundreds and hundreds of millions” of iPads or similar tablet devices out there.  Why, argued Murdoch, we’ll even have young people reading newspapers, albeit electronically.

At last, the future of the newspaper is assured, though the News Corp chief executive did concede that more work would have to be done on how the news was actually presented on such smart devices.

Alas, if it all sounds too good to be true, that’s because it almost always is too good to be true.

First there is the obvious problem of substitution. The Daily Telegraph is not the same as The Times but if it’s free it might very well pass muster. And you can be sure that eventually there will be free full news iPad versions of The Guardian and the Daily Mail when enough of their readers get them.

Then there remains the small matter that The Times is charging £9.99 for the content that paper subscribers are paying around £32 for.

Murdoch, and many others, may like the tactile quality of printed newspapers but some of the more miserly existing Times subscribers might decide to subsidise the cost of their iPads by going for the £9.99 option.

The disparity between the pricing models highlights a dilemma emphasised by work published this month by Enders Analysis.  The issue, according to Enders, is not whether enough people will sign up for the Times online but the devastating verdict that The Times would be uneconomic to produce if almost everyone actually did so.

The stark reality, which has been highlighted before, is that online subscriptions generate only about a quarter of the revenue of print readers.

Even when Benedict Evans of Enders throws in the savings of not having to print physical papers and ship them around the country, the revenue per online buyer is still around 70% lower.

To make matters worse, in the real world The Times will have the economic nightmare of footing the bill for most of the fixed costs of producing a paper edition despite falling circulations for years to come as you gradually substitute new online readers worth a quarter of the old.

Taken to its extremes, in such a scenario, national newspapers would have to be produced by a 200-strong team of journalists rather than 500. The danger of the downward spiral is obvious.

So is it good news – or bad – for Murdoch when he claimed that sales of the online Times and Sunday Times were “going well?”

What would be really good would be to get some hard numbers, something that the News Corp chief executive is resolutely refusing to provide at the moment.

The ABC circulation bureau has all the numbers but News International, as is its right, has been taking a wee holiday on publication of the figures.  You can be sure that if sales were really “going well” a press release would have been issued long ago.

The only “hard” numbers to have leaked so far apply to the performance in the first few weeks of charging for The Times online. No denial was issued when it was claimed that the initial take-up was around 15,000 – a less than spectacular initial result.

Now we have the News of the World going behind the paywall (£1.99 for a four-week subscription). The iPad will follow with a separate weekly charge of £1.19.

Everyone in the media business, with the possible exception of immediate rivals, is praying that somehow, against all odds and conventional wisdom, the Murdoch hunch will prove to be right and that the public can be persuaded to pay for general news online.

But even if that should happen, and it is a very big ask, there remains the Enders Conundrum hanging in the air – so far largely unanswered.

Perhaps some light will be shed on all these issues at MediaTel Group’s Future of National Newspapers seminar on October 1st.

Apart from Claire Enders, founder of Enders Analysis, we will also be hearing from Dominic Carter, trading director of News International.  Let’s hope he brings some nice optimistic numbers with him.