Fox’s cable TV business made up the vast majority of News Corp’s profits for the quarter ending March 31, contributing $993 million of the $1.36 billion in operating income for the period. Total revenues were $9.54 billion, up 14 percent over the previous year.

The overall home video market is up five percent and “we’re up a bit more than that,” Carey said. “The driving force is digital…the overall marketplace continues to grow really well, and digital is becoming a growing part of what we do.” He also said that the DVD business has stabilized, “with Blu-Ray offsetting the decline in the older formats,” and that “really low-priced rentals” through services like Redbox  are “becoming less of a force.”

In response to an analyst’s question about the future of Hulu, Carey said that the service has “great momentum,” and “we’re particularly excited about subscriptions” through Hulu Plus. “There’s an important role for Hulu Classic in the marketplace,” he said, but “we need to develop the dual-revenue side of it.” In a few years, he said, “Hulu will look a bit different than it does today,” partly in response to changes in Netflix’s business: “Netflix talks about evolving their business to somewhat different business models” (he didn’t elaborate on what those are).

When asked to offer general advice to the broadcast networks, Carey said they are still the “viewership leaders,” but acknowledged the networks might need to “be a bit more targeted in the types of series [they] invest in…networks have been more about the volume game, stuck in historical practices…Do you need to break some of those rules? The answer is clearly yes.”

Smith didn’t go into many details about the nature of the offering, but he made it clear that the company had no choice but to try every kind of monetization. “To say the ad model is gonna win over the pay model is foolish,” Smith said. The key would be to unlock multiple revenue streams, not to just put all your eggs in one basket.

Smith got some support for that notion from fellow panelist Raju Narisetti, senior vice president and deputy head of strategy at News Corp. Narisetti’s company may be seen as one of the driving forces behind paywalls, but he stressed Wednesday that News Corp. actually has been experimenting with lots of different options, ranging from tight paywalls for the Times all the way to free sites like All Things Digital. But he also defended paywalls against criticism, saying that newspapers were “courageous” for taking the step to charge for their content. “We have a lot of faith in our journalism,” he argued, including in the notion that people would pay for this kind of content.

Bob Bowman, President and CEO, MLB Advanced Media, strongly voiced support for this perspective. “Any publication out there should have a paid content product,” he said, arguing that all publications have avid fans that are willing to pay for content He asked, “Who are you to say: ‘we don’t want your money?’”

Of course, asking for money doesn’t always need to involve paywalls. That was a point driven home by ProPublica President, Richard Tofel, who revealed Wednesday that his nonprofit organization has received donations from 2,300 supporters last year, with 100 of the contributing on “quite significant levels.”

His prediction for monetizing and sustaining journalism? “Every major city in this country has a symphony,” Tofel said. Eventually, cultural institutions like symphony orchestras, libraries and museums would be complemented by nonprofit press institutions. Having nonprofit press is essential for many areas that can’t be covered by traditional media organizations anymore, he argued, whether those have a paywall or not.

Check out the rest of our paidContent Live 2013 coverage here, and a video embed of the session follows below:

A transcription of the video follows on the next page

Go to page 2 (of 2) on paidContent .

The service offers unlimited access to over 80 magazines on iPad, up from 39 at launch. Users can choose between an “unlimited basic” subscription, which offers access to monthly magazines like Glamour, Wired and Food & Wine for $9.99 per month, and an “unlimited premium” subscription, for $14.99 per month, that also includes weekly titles like People, New York, New Yorker and Sports Illustrated.

Next Issue Media, which started out in 2009 as a joint venture of Condé Nast, Hearst, Time Inc., News Corp and Meredith, was initially only available for Android 3.0 (Honeycomb) tablets before expanding to iPad — and, potentially, a wider audience — last July.

The Windows 8 launch is “the first time we’ve worked closely with a platform partner,” CEO Morgan Guenther told me. The app integrates features like “snap view” and multitasking from Microsoft’s interface; the software giant is also providing marketing and will feature the app in the Windows App store. “We saw the importance of moving beyond the tablet,” Guenther said, and Microsoft was a “motivated partner.”

Next Issue hopes that users will use the platform across devices. A single subscription can be authenticated on up to five devices. “With greater choice as to where, when and how they access their magazines, users can seamlessly switch from their tablet at home, to their Ultrabook on the road, to their company PC,” John Richards, senior director of Windows app marketing for Microsoft, said in a statement.

Less than half of Next Issue’s users pay

Discovery remains “an issue” on iPad, Guenther said, partly because the Next Issue iPad app isn’t available through Apple Newsstand. The company projects that by the end of this quarter, it will have about 120,000 total users — 50,000 of whom are actually paying for a subscription. Of that 50,000, about 60 percent have a premium subscription, Guenther said, and 40 percent have a basic subscription. The remaining 70,000 or so users are “authenticators” — users who already have a print subscription to a magazine and are accessing the print version through next Issue’s app.

In the next quarter, Next Issue plans to add Facebook integration and social sharing, followed by the integration of “clipping” technology that would let users virtually save individual articles or images from magazines. Guenther also says the library will expand to about 100 titles in the next couple of months.

Though Next Issue originally launched on Android, that platform hasn’t been much of a priority, Guenther said — to the extent that there are only 36 magazines available, less than half the number of titles available for iPad and Windows 8. In the next few months the company will “refresh” the experience on Android, Guenther said. It also plans to expand to Android smartphones and iPhones.

As Arment explains in his blog post about the change, the need to open up his magazine’s content more for sharing was brought home by the response to a recent piece he published by Jamelle Bouie on the topic of race and technology writing. As with most of the essays in The Magazine, the writer was free to publish on his own blog as well, which he did — and while The Magazine’s version got plenty of readers, the response to Bouie’s piece after it appeared on his own site was substantially larger:

“We allow authors to republish their articles on their own sites (or anywhere else) just 30 days after we publish them. Bouie did exactly that, as many of our authors have. Only then did his article explode into the huge discussion I suspected may result from it — and The Magazine wasn’t a part of it.”

The magazine was cut off from the social web

The Magazine wasn’t part of this broader web and social-media discussion because Arment initially showed only a short excerpt at the website — as well as a download link for the iOS app — when readers shared a story. As the publisher points out, since his magazine doesn’t rely on advertising at all but gets its revenue entirely from subscriptions, a web presence with full content seemed like a fairly low priority, if not an outright negative. Arment calls this “the biggest mistake I’ve made with The Magazine to date.”

“You’d share a link, and everyone would just see the truncated teaser. Some of them would subscribe and see the rest, but most would get turned off by the truncation and just abandon the effort, as we web readers tend to do. Most people with big followings would quickly realize this and, understandably, avoid linking to our articles.”

This is similar to the problem (one of many) that News Corp.’s iPad-only magazine The Daily ran into when it launched: it didn’t even have a website, per se, so initially users who followed a shared link from a subscriber would get a static page. In the early days of the app, in fact, readers were actually sent to an image of the page from the app — something that was impossible to click on or otherwise interact with. The sharing experience was so broken that many likely never bothered.

Where should the freemium line be drawn?

Arment’s problem is a microcosm of the tension that publishers everywhere are experiencing, from the New York Times to the smallest local paper. While some media companies — including News Corp. with some its British papers — have chosen to go with what are called “hard” paywalls, where virtually no content is provided to readers for free, almost everyone else is trying to find a happy medium between that and no subscription barrier or paywall at all.

The NYT started by providing 20 free articles, and giving anyone who came in via a link on social media a free view, a so-called “porous” paywall approach many other newspapers have adopted. But the paper recently cut the number of free articles in half. Andrew Sullivan, meanwhile — who recently launched a standalone blog funded solely by subscriptions — has made virtually of his content free via RSS, but imposed a click-through wall for readers on the site.

The issue for everyone from Sullivan (who will be appearing at our paidContent Live conference in New York in April) and Arment to the New York Times is how much they need to be part of the social web vs. how much they plan to rely on reader subscriptions. A hard paywall essentially means a publication will be supported solely by existing readers, plus a few new sign-ups here and there — but newer or smaller publishers need the word-of-mouth that sharing brings in order to build awareness (and older brands might as well).

As traditional advertising continues to decline in value — something that has taken both the New York Times and the Financial Times to the point where subscription revenue now exceeds advertising revenue for the first time — more and more publishers are going to have to confront this tension between paying and sharing. And in all likelihood, there is no single right answer.

Post and thumbnail images courtesy of Flickr user Giuseppe Bognanni and Shutterstock / Daniilantiq

According to Reuters, the contract between AllThingsD and News Corp is up at the end of the year and relations between the two entities are “amicable but stressed.”

A spokesperson for News Corp said by email on Friday afternoon the company declines comment.

The sale of AllThingsD would have implications not just for the media industry, where tech blogs are a popular property, but for the technology scene as a whole. Companies in the sector frequently drop important leaks to figures like Mossberg and Swisher whose pronouncements on companies like Yahoo and Apple ripple widely.

Sources told Reuters that Conde Nast, Hearst and Yahoo are among possible suitors for All Things D. AOL came up as a more remote possibility.

AllThingsD is supported by advertising but also by events like the “Dive into Media” hosted in Southern California this week that attracted a gaggle of tech bigwigs from companies like Dish and Google.

AllThingsD is an autonomous unit within News Corp but the corporation owns the website and the name. This would, in theory, limit Mossberg and Swisher’s control in the outcome of the sale talks; however, Reuters reports that their contracts give them approval authority over a sale.

In recent years, star journalists have increasing leverage over the publications with which they work, in part due to portable social media followings. This year, for instance, popular blogger Andrew Sullivan left the Daily Beast to start his own website where he’s asking readers to voluntarily donate $19.99 a year to read him.

To see Andrew Sullivan and learn about the latest shifts in the media industry come join us at paidContent Live this April in New York.

According to an SEC document filed on Friday, news operations, which make up about 80 percent of the restructured News Corp and include the flagship Wall Street Journal, made a 2012 operating profit of $939 million after special items. The books division, which includes publisher HarperCollins and accounts for 14 percent of the new company, had a profit of $86 million.

These figures are the EBITDA (“earnings before interest, taxes, depreciation, and amortization”) — the number investors examine closely when looking at the health of a company. Other reports today say News Corp’s publishing business is “losing money,” but that is only the case when one-off items like restructuring costs and payments related to the hacking scandal are included. The EBITDA is the more important number.

So what does all this mean for a nervous news and book industry? The good news is that the publishing operations have a fighting chance to flourish on their own. Recall that the split came about in part because many investors believed the newspaper and book businesses were a drag on the company’s money machines like Fox TV and movie studios. Until now, though, it was unclear what cash and assets the new company would be given to start its new life.

The new SEC filing clears up some of these questions by showing that “new News Corp” will have around $1 billion in cash on its balance sheet and little debt. And, in a surprise sweetener, the company will hold on to Fox Sport Australia, which will provide it with a cash cow in the future.

Going forward, though, the company’s news operations are still overly reliant on advertising, a business that is declining dramatically. While the New York Times‘ revenue is now roughly evenly split between advertising and circulation, the ratio at the News Corp properties are closer to 3:2.

The new filing, unfortunately, does not break out financials for individual newspaper properties such as the Wall Street Journal, which has a robust digital subscription model, or The New York Post, which is reportedly losing millions of dollars a year.

Overall, the bottom line is that News Corp’s publishing operations have been thrown out of the nest with a fair parachute. If certain positive trends continue — including the growth of ebooks and the Dow Jones brand — the company will be fine for a few years at least.

It’s easy to forget now, but when The Daily was first launched a little less than two years ago in February of 2011, there was a tremendous amount of attention paid to it. Apple’s iPad was still relatively new, and many publishers were hoping it would become a kind of magic carpet that would whisk them all out of the doldrums and into the promised land of revenue-generating digital content — and Murdoch was seen by some as leading the way. Obviously, the tablet newspaper failed to do anything of the sort, and in that sense its failure is just part of a gradual process of publishers waking up from their dream about apps.

Are tablet-only publications an impossible dream?

Reuters writer Felix Salmon, in fact, argues in a post on The Daily’s death that it proves tablet-only publications may actually be impossible:

“I think that The Daily has taught us all an important lesson — which is that tablets in general, and the iPad in particular, are actually much less powerful and revolutionary than many of us had hoped… the tablet is basically just one of many ways to see material which exists on the internet; it’s not a place to put stuff which can’t be found anywhere else.”

The @daily bet traditional business/editorial assumptions would work in a new medium that resists them. Is that innovation?

—
John McQuaid (@johnmcquaid) December 03, 2012

In many ways, the seeds of The Daily’s demise were (or perhaps should have been) fairly clear from the start: in my initial review of the app, I mentioned that the two most obvious things about it were that it ignored the web almost completely — showing anyone who came to the website via a shared link what amounted to a photograph of the relevant page from its app — and the content seemed rather disappointingly dull, in a traditional newspaper sort of way. Both of these criticisms have also been echoed by many of those who responded to its death notice on Monday.

Why did it have to be daily?

In addition to criticizing The Daily for choosing to go with a paywall for product that was unknown to most of the market it was trying to reach, journalism professor and author Jeff Jarvis says the iPad venture also took a flawed approach to news:

“Finally, there was the absolutely befuddling decision to make The Daily daily. News was only ever daily because it was forced into that limitation by the means of production and distribution of print. The internet freed us from those shackles of time. Why put them on again? Nostalgia?”

@carr2n @mathewi @Penenberg Innovate? No, it tried to shoehorn an old business & product model into a new device built on pay wall zealotry

—
Jeff Jarvis (@jeffjarvis) December 03, 2012

Alexis Madrigal at The Atlantic notes that The Daily failed in part because it was aimed at a “general news reader” instead of a niche, but also says it ignored the fact that media outlets no longer control the distribution of their content, regardless of whether they have an app-only approach. By divorcing the product from what Om has called the “democratization of distribution,” The Daily doomed itself, he says:

“There’s not much anyone on your Internet’s favorite websites can do aside from stick a story on the homepage, tweet/Facebook/tumble/Reddit/LinkedIn it and then pray. We do not control the distribution of our work. Period. It’s horrible and bizarre and it is also the way that the media world works now. You can’t push; the content has to pull.”

Peter Ha, an early employee at The Daily who now writes for Gizmodo, echoes this point in a post he wrote about his experience with the iPad paper. Great content, he says “doesn’t do much good if there’s no good way to share it… The Daily had every chance of flourishing and succeeding, but operating independently of the Internet as a whole was clearly a huge mistake.” And another former employee, Trevor Butterworth, summed up his view of the venture’s cause of death in a posting on his Facebook page:

“You can’t create an entirely new brand and take it behind a paywall after 4 weeks, while limiting its footprint on the Internet, and then expect people to buy it. Where was the marketing? Second, it simply added more average-reader content to a market saturated with free average-reader content.”

If you are tablet-only and paywalled, it better be good

The Daily was never an "experiment," it was an expensive, stupid, business decision.

—
  (@dansinker) December 03, 2012

John Abell of Reuters also says that regardless of whether you believe an iPad-only app like The Daily could have survived, it was doomed in part because the content was so underwhelming. He writes that he “grew increasingly annoyed at the extent to which I was reading wire service copy… In other words, I couldn’t find any reason to turn to The Daily as a news brand, and that has to be the absolute baseline requirement for a publication.” Peter Kafka at All Things Digital made the same point:

“The Daily’s key issue was a conceptual one. While the app boasted lots of digital bells and whistles, in the end it was very much a general interest newspaper that seemed to be geared toward people who didn’t really like newspapers. You can’t make that work no matter what kind of platform you use.”

For his part, Josh Benton of the Nieman Journalism Lab says that despite the issues with content and the paywall and ignoring the web, he believes that the biggest issue was the structure of The Daily — in other words, its sheer size and its daily-newspaper style approach to a digital business:

“The Daily had over 100,000 paying subscribers. That ain’t nothing! With most subscribers paying $39.99 a year (others paid 99 cents a week), minus Apple’s cut, that’s around $3 million in annual revenue — and that’s before you add in advertising revenue… You can absolutely build a real online news organization on that kind of revenue. You just can’t build one that has 200 staffers. Or 150 staffers. Or 100 staffers.”

Any analysis of The @Daily's fall that doesn't begin and end with it having a staff of more than 100 is useless on arrival.

—
Michael Roston (@michaelroston) December 03, 2012

A bold experiment, yes — but still doomed

A number of observers, including Benton, say that despite all of its flaws, Murdoch and News Corp. should be given some credit for at least experimenting with something like The Daily at a time when many newspaper companies are content to just cut costs by laying off staff. Benton said that News Corp. “made a pretty big bet on an idea. It didn’t work out. But at least they tried.” David Carr, media writer for the New York Times (which has just announced a new round of layoffs — its fourth round in five years — had a more visceral response on Twitter:

@mathewi @Penenberg Y'all kill me. You say dinosaurs need to innovate. News Corps tries something really new that flops, you grave dance.

—
david carr (@carr2n) December 03, 2012

In a sense then — to answer the question posed in the headline of this post — The Daily was both a bold experiment and doomed from the start. It was bold from the point of view of a major media empire with little or no understanding of the web or mobile, and a lot of other media companies without Rupert Murdoch’s deep pockets were watching it closely to see whether they should jump, and if so how to proceed. But then many of the lessons that could be learned should have been obvious even before The Daily launched: don’t ignore the web, don’t make your content platform-specific (unless it is unique), and don’t put a paywall around something no one has ever seen before.

Post and thumbnail images courtesy of Flickr user Stephen Brace

Reports say media giant News Corp is about to acquire a 40% stake in the YES Network, a group of stations partly owned by the Yankees that pipe the team’s games into about 15 million homes in the Northeast. The deal, set to conclude on Friday, is expected to result in YES hiking the $2.99 month fee it currently charges cable and satellite providers to distribute the channel. News Corp’s role will also provide leverage to demand more money because the company owns a group of regional Fox Sports channels that it can offer (or withhold) as part of negotiations.

The YES deal shows again how live sports are becoming evermore value in the age of fragmented audiences and cord-cutting. As The Verge reported yesterday, sports leagues and ESPN have the power to distribute the games online and to mobile devices but have few incentives to do so because of the lucrative cable market.

Miller, a former CEO of AOL, joined News Corp in 2009. He was tasked with developing a digital strategy for a diverse set of properties that included everything from MySpace to Photobucket at the time. He was also asked to make digital a priority across the company’s many news and entertainment divisions.

Miller’s parting was amiable, according to All Things Digital, which first reported the story. That sentiment was echoed in a News Corp announcement in which the company said he would stay on as an adviser and CEO Rupert Murdoch praised him as “a visionary in the digital media industry.”

The departure appears to be related to News Corp’s impending split. Lucrative entertainment assets like Fox and BSkyB will be spun off into one company and the publishing properties into another.

While presiding over News Corp’s far-flung digital assets, Miller made sensible moves such as offloading MySpace, which the company had acquired for $580 million in 2005. The divesture was consistent with a statement in News Corp’s 2012 annual report that its digital strategy is no longer acquisition-based.

Miller’s other activities included supervising News Corp’s $45 million investment in streaming device maker Roku and working with Hulu, where he was a bord member.

Miller is also an active angel investor with deep contacts in the media space. He joined us at the paidContent 2012 conference, and you can hear his thoughts on digital media here:

According to a report at Capital New York, the executive editor of Huffington magazine — former New York Times editor Tim O’Brien — told the publication’s staff at an all-hands meeting this week that the company had decided its content should be free of charge. As writer Joe Pompeo notes, this was the original concept for the magazine to begin with, in part because it was originally seen as a collection of existing content from the Huffington Post website, presented in a different format. As it took shape, however, the site decided to create custom content and that made it seem worthwhile to charge a subscription fee. As O’Brien put it at the time:

“We feel it’s a premium product and it deserves to carry a price with it in order to access all the value we’re giving people.”

Although a Huffington Post spokesman told Capital New York that the company was “thrilled” with the reception the app has gotten (O’Brien apparently told the staff meeting that it has had been downloaded 115,000 times) it couldn’t have been all that thrilling, or the AOL unit would presumably have continued charging for it. The spokesman said asking users for money “was inconsistent with the Huffington Post itself, which has never charged for content,” and that could be part of the problem — i.e, a mismatch between what readers have come to think of as the HuffPo’s core brand value (namely, free content) and the new magazine app.

I think there is more to it than just that, however. As I’ve tried to argue before in posts about the HuffPo launch and the all-in-one magazine newsstand offered by Next Issue Media, I think dedicated magazine or even newspaper apps in many cases don’t jibe with the way that increasing numbers of people consume content.

Dedicated apps don’t fit the way content works any more

Whether media companies like it or not (and they mostly don’t), much of the news and other content we consume now comes via links shared through Twitter and Facebook and other networks, or through old-fashioned aggregators — such as Yahoo News or Google News — and newer ones like Flipboard and Zite and Prismatic that are tailored to mobile devices and a socially-driven news experience. Compared to that kind of model, a dedicated app from a magazine or a newspaper looks much less interesting, since by design it contains content from only a single outlet, and it usually doesn’t contain helpful things like links.

The Daily suffers from this problem and plenty of others, in my view. Not only is it content from a single entity, but it doesn’t even offer a website where readers can find or easily share that content — and while that may have looked to some observers like an ambitious bet on a mobile-only model when the paper launched, for many readers I expect it is merely a hassle. Publishing veteran Jean-Louis Gassee Frédéric Filloux put it well in a post at The Monday Note about The Daily’s flaws, saying:

“It is everything and nothing special at the same time. It’s not a tabloid, but it doesn’t carry in-depth, enterprise journalism either. It’s a sophisticated container for commodity news — i.e. the news that you can get everywhere, in real-time and for free.”

Now The Daily has laid off almost a third of its staff, as my paidContent colleague Laura Owen reported earlier this week, and there continue to be reports that the lifespan of the digital-only newspaper could be short — especially since News Corp. is going through a somewhat tumultuous restructuring that will see the media assets severed from the entertainment assets. The fact that The Daily has only managed to sell 100,000 or so subscriptions in the 18 months since it launched (compared with the 500,000 that News Corp. said it would need to break even on the publication) certainly doesn’t bode well for the future.

The dream that many publishers seemed to have was that the iPad would create a market for their individual apps, and that legions of readers would happily download and pay for them, creating a brand new stream of significant revenue. With a few exceptions, however — such as The New York Times and other publications that have strong brands or are targeted at a very specific market — that doesn’t seem to be the case. Some publishers, like Jason Pontin of MIT’s Technology Review, are waking up from that dream, but whether anyone else takes the hint remains to be seen.