What the failure of Star Touch teaches us about a media bailout

The Toronto Star announced yesterday that it was shuttering its flagship Star Touch tablet app, laying off 30 employees and eating something north of $20 million in investment costs.

This comes a week after a group called “News Media Canada” — basically a legacy news media lobbying group — pitched the feds on a plan for the government to give the industry $350 million in support that would include funding 35 per cent of newsroom costs.

Clearly, the failure of Star Touch proves the need for the bailout money, yes?

Actually, no, it proves the exact opposite. Star Touch is exactly why the feds need to leave the news business to its death throes.

Some quick background: Star Touch was an attempt to recreate the walled garden of print in a digital format, to provide a closed environment where readers would come and stick around, paging through the heavily designed and curated app. It was explicitly sold as a multimedia version of a daily newspaper, “complete news experience with your favourite features, sections and columnists, not to mention a few extras you’ll find only in the app.”

Newspapers have been trying this trick for over a decade now, with one god failing after another. Star Touch was based on the app experience sold by La Presse, which has since shut down its print operation and gone digital-only. La Presse has been touting the success of its La Presse Plus app for a few years now, suggesting that they have succeeded where everyone else on earth has failed.

The Star bought the hype, and bought the technology. So props to them for trying, right?

Well, not really. Star Touch was always going to fail, for reasons that were obvious to anyone paying attention. First, if indeed La Presse has made the financials work on their app, it’s for two reasons: First, the Quebec market is unique in North America, perhaps in the world. Second, they went all-in, shutting down weekday print over a year ago, giving their readers no where else to go. That’s how you execute a strategy.

But the Star is not in a unique market, and they didn’t kill their print product. More to the point, they had a very good example of how the walled-garden app strategy would turn out in Postmedia’s Product 2.0/four platform strategy, that we launched at the Ottawa Citizen in 2014, and which launched in a few other locations around the country before sputtering out.

Of the four platforms (print, web, mobile, tablet), the tablet app was the most instructive: it was the nicest of the platforms, the most elegantly designed with the best user experience. It was the one that was closest to trying to copy the print walled garden. And it was very, very expensive and labour intensive to run. As an aesthetic reading experience, it was gorgeous. Our team at the Citizen hit it out of the park, execution-wise. As a commercial product, it was a failure, with shockingly low downloads and readership. The Star’s publisher’s memo about Star Touch (“overall numbers of readers and advertising volumes are significantly lower than what the company had forecast and than what are required to make it a commercial success”) suggests they had similar results.

Ok so surely this shows the industry can’t seem to make anything work, they need a bailout, right?

Again, no. What this shows is that the Canadian news business needs to see a lot more destruction before it will start to get creative.

While the biggest circulation newspaper in Canada was busy pursuing a strategy that failed at the country’s biggest newspaper chain three years ago, the American industry has been innovating like crazy, on four dimensions: Some companies are going for sheer scale, pumping colossal volumes of traffic through an ad filter to squeeze out a business. There are some excellent VC-based startups — Vox, Vice, Fusion. There are niche and specialty publications such as Pro Publica, using a non-profit business model. And there have been billionaire vanity-investments in major national media (Washington Post).

Virtually none of this has happened in Canada, with the exception of some niche outlets (the Tyee) and spunky startups (iPolitics, Canadaland).

Why is that? Partly because Canada is a lot smaller than in the US, and the prospects for scale are limited, there aren’t that many publicly-minded billionaires, and VC money sees opportunities elsewhere.

But a lot of this is because the legacy media continue to dominate the landscape. Think for a second of how Star Touch might have played out if 35 per cent of its costs were funded by the government. Think of the optics of killing off those jobs after $8 million or more in public money had gone into it. Think of how the government, the union, and the public all would have played this announcement.

Star Touch would have gone from being a simple, straightforward, and necessary business decision into a highly politicized choice in which literally everyone would have had a say. This would be a recipe for stagnation, for risk aversion, for baking into place stale strategy and bad hirings. This is not how an industry innovates.

The meteor has slammed into the Yucatan, the sun has been blocked out, and the sauropods are on their last legs. The mammals will take over in due course. But the dinosaurs are asking for a sun-lamp and an oxygen mask to help get them through the nuclear winter.



What the failure of Star Touch teaches us about a media bailout — 12 Comments

  1. But it will take 50 million years for those mammals to get going. And then they will destroy the planet in less than 1,000. Give the poor dinosaurs a heat lamp.

    Just joking!

  2. A neat take from the libertarian/neo conservative perspective. I would give it more weight if the writer’s journal, or any conservative journal, actually funded investigative journalism. Bark on Mr. Coyne. I wouldd definitely support subsidizing journalistict (sic) watchdogs. Can’t buy your premise that corporate control of editorial content is less evil than government control. You know this. you

  3. “Star Touch was an attempt to recreate the walled garden of print in a digital format”

    I’m sure this is exactly how it was thought of, but that’s not how print works. Never has.

    A couple of people at work bring their morning paper and read it at lunch time. They’re happy to have co-workers read sections they’ve finished with. Each paper gets 3-5 readers.

    People bring a paper to a diner to read over lunch. When they finish their meal, they leave it, and the next customer glances at it while they wait for their meal to arrive.

    A tradition I grew up with was a long Saturday breakfast with the kitchen table covered in newspaper sections, family members passing the jam and the news to each other, reading bits of articles out loud, arguing about topics everyone had read up on.

    Papers are always shared, and therefore near free. That’s why people tolerate advertising in them.

    Swap that for an app where I gotta have a tablet and an Internet connection? No thanks.

  4. I’ve worked with several “legacy” companies trying to build products in the digital space, and they all make similar mistakes. Building a digital experience is not a huge infrastructure project, and managers have a hard time understanding that you cannot conceive of an idea and then build it without deep user research and validation of the business model. Successful startups come out of nowhere because the cost of entry *can* be next to nothing when done properly.

    There is no reason that the Star should have spent $20 million building a flagship app before testing the business model and whether it solves a real need. Making great products is not magic, and it’s not (completely) luck. With the right staff, that money could have been used to design a product that was validated in the market.

    As you pointed out, the problem would have been worse with public investment and oversight, but there is clearly already a problem of “stagnation, for risk aversion, for baking into place stale strategy and bad hirings”. “Let’s build an app!” is the most common and most naive solution for every industry being disrupted.

  5. What if Koch boys or Murdoch had bought wapost? Vox has ex-wapo core

    Can’t mammals rise amidst dinosaurs? Silicon Valley and Seattle seem to demo crowding-in effect where large-caps introduce talented people to skills and to each other, and provide safety net for failed ventures. Big corps r also useful clients

    Look at moral/pplitical centrality of auto industry or steel industry. Still shows lots of job cuts, entry, innovation

  6. take a look at the UK. start with the Guardian, whose app was one of the best a year or two ago, but now asks for “donations” to support it. then look at the very reputable Economist, whose app limits free access to three articles (but often only provides one). noting the existence of the very new IMPRESS org, one wonders whether it will be able to monitor / influence / regulate the newest ‘non-legacy’ media. my newest read is “theconversation.com”.

  7. “First, the Quebec market is unique in North America, perhaps in the world.”…I was looking forward to an elaboration of this point, but then again, the lack of discussion of Quebec may have been a good thing.

    • I should have been clearer on this point in the post, since a number of people have remarked on it. What I was trying to say that IF La Presse has made the $ work on their tablet strategy, THEN it implies that the Quebec market is unique in the world. That is, the only way it would work is if the Quebec market is amazingly unique.

      But I actually deny the antecedent — I don’t think they are making it work; I think the Star got sold a bill of goods on the basis of a lot of smoke and mirrors from La Presse.

      So to be clear: I don’t think the Quebec market is unique in a manner that would allow La Presse+ to succeed as a news app.

  8. I think maybe comparing the change to the end dinosaurs and the rise of mammals may be extreme. What I have been pointing out to people is that one of the big questions which arose when cars first arrived is how do we keep them from scaring the bejesus out of cart horses and in so doing significantly increasing the number of accidents. One might have thought that making a less noisy car would have been on the social agenda, but the thing that actually happened was that we essentially got rid of almost all horse-drawn carts. That may well be what is happening with print newspapers. They are being replaced by a better kind of news media and nothing is going to save them.

    • Thank Stephen — I’m not sure we disagree, both metaphors seem apt to me.