Why The Daily matters

February 3, 2011: 2:16 PM ET

It's not the end of the struggle to translate print media to a digital platform -- it's just the beginning.

Rupert Murdoch, Chairman and Chief Executive O...

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Among the media elite, obits are already being written for The Daily. The content is unimaginative, they say. The tech is buggy. The numbers don't add up. And it's mostly true, but maybe they're missing the point.

Once again, Rupert Murdoch has launched a large and flashy innovation lab for the future of media. Does it have to be anything more than that?

We've seen this game before. When Murdoch bought MySpace, people called him crazy and then brilliant and then crazy again. News Corp. (NWS) COO Chase Carey announced very publicly in its earnings call this week that the company is considering "strategic options for the business." (Translation: somebody buy it, please!) But for awhile back in 2007 employees sat two-to-a-desk and both users and advertisers signed on in droves. Facebook has now rendered MySpace irrelevant, but that crucial competition early on helped shaped industry thinking about what a social network could and should be and conditioned a generation of consumers to the idea of logging on to the Internet to connect with friends.

Similarly, Murdoch was an early supporter of Hulu. Before Hulu, web TV was mostly grainy video mostly we caught illegally. Backed originally by News Corp along with GE (GE) and NBC Universal, the slick TV site taught a generation of consumers how to watch TV on the web. Kilar developed one of the web's best video players and has experimented with advertisements and now a subscription service to build a business. He has said Hulu will bring in more than $700 million in revenues this year. But its future prospects are dim. Much of Hulu's success will depend on whether it can provide the shows we want to see, and the networks that distribute those shows on Hulu may eventually cave to pressure from the cable companies and pull those shows from the site. In a Feb. 2 blog post, Kilar acknowledged he's in a risky business and, in fact, people call him crazy. He wrote: "That is the nature of innovation."

Editors of The Daily could say the same thing. The numbers don't add up: News Corp is expected to lay down $30 million to keep it running during year one. But this is a company that brought in $33 billion in revenues last year. The startup's sum is barely a rounding error. And like MySpace and Hulu, even if it doesn't succeed, it will teach us something about the nature of a new medium in the process.

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About This Author
Jessi Hempel
Jessi Hempel
Senior Writer, Fortune

Jessi Hempel is a New York-based technology writer for Fortune. She has written extensively about digital media, online advertising and social networking. Before joining Fortune in July 2007, Hempel worked at BusinessWeek and most recently served as their innovation department editor. Hempel is a graduate of Brown University and received a Masters in Journalism from The University of California at Berkeley.

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