Newsday’s Paywall… the Numbers are in

In October of last year I wrote that Newsday’s paywall would fail to attract new revenue and as a defensive pricing strategy it does little.

In the final analysis, this is exactly why it will fail. By creating a pricing plan that defends rather than attacks a market the company is conceding defeat in print and this strategy will have the effect of slowing audience growth online in the one segment that the paper requires, young people. I am willing to give Newsday and Cablevision some credit for being creative with a multichannel strategy that covers TV, print and online, but this pricing plan is a throwback to a subscription model that simply doesn’t work anymore.

[From Destined for Failure with Pay Wall | Venture Chronicles]

Well the numbers are in and after 3 months of running a paywall, Long Island based Newsday has attracted a whopping 35 subscribers to the website… not a typo, 3-5. Of course now management is running with some creative spin saying it’s 35 more than they expected to get and the pricing strategy was, as I exactly opined back in October, a strategy to defend the existing customer base who are getting access to the web site as part of their cable, prompting one Newsday reporter to observe that “we’re the freebie newsletter that comes with your HBO“.

Of course that explanation makes no sense at all because why spend $4m, according to the Dolan’s representative, to redesign and relaunch the website if it’s something extra that subscribers of the core cable service are getting as a freebie? It’ll take them 444 years to recover their investment at this rate.

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Electric Vehicles Revisited

Over the weekend @Devahaz asked me for my thoughts on current status re a post I wrote over 2 years ago lamenting the optimistic projections of newly minted electric vehicle companies.

I realize that I may be guilty of “not getting with the program” on this whole electric car business, but does anyone else scoff at the idea there will be 100,000 Better Place cars on the road in 2010 or Tesla’s at every stoplight anytime soon?

[From It’s Frothy Around Here | Venture Chronicles]

Before getting into specifics, let me say now that I am an enthusiastic supporter of EV technology for many reasons. Aside from reducing our reliance on hydrocarbons as an energy source, EVs are great purpose specific vehicles that could change the way we approach transportation. Despite my enthusiasm for this type of vehicle there are real obstacles to achieving the vision and these obstacles run a broad spectrum of government regulatory powers to the limits of current technology.

There are 3 big issues impeding the development of EVs at this time: 1) the limitations of technology as it relates to range, 2) high cost, and 3) limited infrastructure to support large vehicle fleets.

The technology is proving itself but the fact remains that EVs are limited when compared to internal combustion vehicles, which for better or worse is the standard for power and range that EVs are compared against. Putting all biases aside, you really have to acknowledge that over 100 years of internal combustion engine development has resulted in a remarkably flexible and reliable propulsion technology. You can fill up your tank anywhere, anytime in 5 minutes and go for 300-500 miles on a single tank of gasoline (diesel is even better but let’s skip that debate for the purpose of this post), and modern vehicles are very reliable and repairing them is again, something that can be done anywhere. There is no way that EVs can live up to this standard, but they really should not be expected to live up to that standard either.

The primary enemy that EVs fight is weight and a very simple physics equation that means more weight requires more power which reduces range. EVs come to the party with an inherent weight disadvantage, namely the weight of current generation batteries, which means that corners have to be cut in other areas, like less sound deadening, lighter weight body panels, more expensive composite materials, and most obviously, much smaller vehicles.

Neighborhood Electric Vehicles (NEVs) are successful at getting around the weight issue by taking advantage of a regulatory definition that allows them to do away with bodywork, safety devices, and carrying capacity in exchange for restrictions on how and where they can be driven. This may be a good compromise but the costs of acquiring these vehicles is not insignificant for the average person.

This gets to a second issue, the regulatory framework. It is exciting to think about a new generation of low cost EVs that are purpose specific, e.g. around town errands and single passenger commuter vehicles, that are not required to have safety systems like air bags, light duty drivetrains, and limited bodywork. By driving down the cost of these vehicles it would be possible for families to have multiple special purpose vehicles rather than 1 or 2 general purpose vehicles that are overkill for most day to day tasks.

This scenario runs headfirst into the reality of insuring and licensing/registering vehicles today. Case in point is the F150 that I have… it’s a rubber floor mat basic work truck that I bought new for $13k (can you believe it, a 2008 truck that I bought new) but it costs me a little over $700 a year for insurance and registration. This is a vehicle that in 2 1/2 years just turned 10k miles of use. With these level of operating cost not associated with actual use, I would be hard pressed to justify any additional vehicles in our household that are not general purpose in nature and that is exactly opposite of what we should, as a society, be doing for transportation.

For EVs the cost of acquisition is really steep. I was on the waiting list for a Chevy Volt until GM became Government Motors, after which I simply would not buy a bailout mobile on general principle, but the bigger issue is that the Volt is a $40k electric version of the Malibu and that’s a tough sell to make.

I wrote a post several years ago that I cannot find today but in it I looked at the economics of a Honda Civic Hybrid versus a straight Honda Civic and found that with the average miles driven per year of between 12-15k the payback period for the cost premium that the hybrid commanded was around 12 years. It may well be less today as manufacturers are finding the hybrid sell a lot harder in this economy but the point is the same, if you are looking at cost per mile for the same vehicle in a hybrid and non-hybrid form, you are hard pressed to justify the hybrid on the basis of money saved. Perhaps this is why hybrid buyers flock to the Prius, which does not have a non-hybrid version, as a social statement and why hybrid versions of internal combustion models languish and why already expensive larger vehicles in hybrid version have stalled.

Lastly there is the infrastructure problem… and it isn’t going away anytime soon despite what Better Place and others would have us believe. BPs problem is broadening support with automakers, who themselves have been busy buttressing support for and from battery makers as a competitive differentiator. BP thesis is that a quickly replaceable battery would lead to a new generation of vehicles that overcome the range limitation of existing battery tech. They are right, no question about it, but being right and being successful are two very different outcomes.

BP did just raise $350m so they are clearly doing something compelling but if they only markets they can point to are pilot projects in Israel (a national security issue with deep government support) and Denmark, and the only vehicles you can choose from are what Renault chooses to offer, well it’s going to be a tough sledding. I simply can’t see auto makers signing on to a proprietary technology that locks them and customers into a BP network… it’s anathema to everything that car companies are about, generalization and fungible energy support. As I said in 2007, I believe the notion that BP will have 100,000 vehicles on the road in 2010 is pure fantasy and nothing has developed in the intervening years that suggests I am wrong.

EVs offer a lot of promise but they simply are not read for primetime. Toyota acknowledges this, the Volt will have very modest sales targets, the Nissan Leaf hasn’t been burning up the sales charts, and the cadre of specialty EV producers (Fisker, Tesla, etc.) are focusing on very niche markets for high priced enthusiast vehicles.

As I have often written, energy and transportation are two very complex topics that have a point of intersection with no easy solutions. We do have a number of options that simply don’t get attention because they are not technology centric or politically attractive. Lowering vehicle weight would instantly improve fleet fuel economy but in order to do that we would have to accept lower safety standards, adopting diesel and going a step further with natural gas injection for diesel would not only provide greater fuel economy but improve large truck diesel fleet economy as the same time while tapping a fuel, LNG, that we have in abundance in the U.S., and adapting diesel and hybrid technology for large passenger vehicle use (Mercedes did this with Bluetec and an S class sedan that achieved over 30mpg). We also have biofuel and ethanol options but both have tradeoffs that make them less than ideal.

While manufacturers and politicians will continue to chase the EV dream, the reality is that this technology will remain niche and, as BP demonstrates, dependent upon governmental support for large scale deployment. This technology will continue to develop and by 2015 we should start to see the fruits of those labors on a broader scale than what is achievable today.