The biggest threat to newspapers has nothing to do with the fall in circulation revenue, a drop in ad revenue or the stagnation of digital revenues. It has nothing to do with falling circulation. It has everything to do with three letters:

A-O-L.

You remember America On Line? Nice little company that once was the buzz among digital sites but has been overshadowed by Google, Yahoo, MSN, etc. Folks, AOL is back — with a vengance.

AOL has hired 500 full-time journalists and another 1,500 freelancers, according to the much respected TechCrunch.  As the report shows, AOL has hired some of the nation’s biggest and most recognizable names, all of whom worked for journalism giants.  AOL wants to buy up media brands and expand on its existing content in an effort to become a content goliath.

And why not? AOL’s numbers were down in 2008, but on a full year basis, had revenue of $968M and OIBDA of $405M, according to published reports.  With publishers in a cutting mode, AOL looks to fill the gap in two ways — by providing content to its customers and jobs to seasoned professionals with name recognition.

Can AOL get into hyper local community journalism? Probably not. There’s probably not mch money in AOL reporters scouring the local fire department or city council for news. But there is money in financial and sports news, and other specialty coverage. Could AOL go the ESPN route — create a stable of names that customers will easily pay to read?

Might others follow suit? Again, why not? These search-related businesses might find it easier to hire content producers — and there are plenty available — the battling publishers demading money for their origianl content. If AOL can do this, others can too, and that’s a scary proposition.

The views expressed on this blog are mine alone. Please read my  blog at www.raymarcano.com

Amazon has announced that it would knock $60 off its Kindle 2, bringing the new price to $299. Much of the coverage stopped there. and didn’t provide much context into why this is an important development for publishers.

Forget about the price drop; that’s secondary news. The bigger news: it appears that Amazon is adjusting to the competiton, which is repidly releasing cheaper reader alternatives. In addition to the competition,  Amazon is having trouble breaking into some lucrative European markets, according to multiple reports. That inability puts pressure on Amazon to find more revenue streams.

Amazon made a lot of news with the Kindle DX, and the release kept the Kindle brand in the public consciousness. But look at everything that’s happening in the e-reader market:

• Crunchpad by Techcrunch should be demoed next month, and it has a promised price of $299 or less.
• The Ditto Book and Cool-ER e-readers are now available, at $249.
• The Smart Q7, which is along the line of the Jointech device, sells for $189

And thsoe are just a few developments. Taken in context, Amazon had to make a move in these price-conscious times. And that’s GREAT for publishers, who are trying to figure out which reader is best for its market, and how they can make money by utilizing readers in lieu of expensive ink, paper, and distribution costs. The further manufacturers drive down the price, the better chance publishers have to recoup their upfront costs and make a profit.

Over time, you can expect these devices to drop in price further. When a manufacturer can figure out how to sell a color wireless reading device for $199, then I think you’ll see adoption take off. And, at that price, publishers can afford to buy them and give them to their customers, provided they buy a subscription to the information they produce. That will help the health of the industry.

I’m a digital media professional, and the news expressed on this blog are mine alone. Please read my blog at: www.raymarcano.com.