Editorial: Apple's demand for 50 percent of news and magazine revenue is either bold or ve...

Posted:
in General Discussion edited February 14
It's believed that if you're a publisher signing up to the forthcoming Apple news and magazine service, you will have to agree that the company keeps half the revenue from the service, and pays out the other half in aggregate to all publishers. If that's true, it's either going to give publishers a great deal more money than they had before, or force further painful contraction in the industry to the benefit of nobody but Apple.




Printed newspapers used to be in decline, now they're practically free-falling. Online newspapers have had a lot of bad years but in some cases like the New York Times, they are recovering through subscriptions. They've been through all the experiments with hard paywalls and freemium subscription models, and now, finally, newspapers are doing better than they have for a long time.

And yet here comes Apple, trying to take away half their revenue. Or so they say.

We don't actually know specifically what deals Apple is offering the publishers it wants to contribute to its forthcoming news subscription service, and we will surely never know all the details. Yet, it's likely that there is a typical figure, a base for negotiations, and according to the Wall Street Journal, the deal is a 50/50 split.

The service that is rumored to be called "Apple News Magazines" is probably going to charge readers $10 a month and basically Apple will keep $5 of that. The rest will be divided between all the publications that each reader actually reads.

No doubt, Apple sales people have been going around all the major publications and trying to wow them with slide presentations about how much money they're going to earn. They're probably also subtly suggesting that failing to sign up is going to cost publishers more in the long term.

Yet even with those presentations being nicely done in Keynote, there's no disguising that this is guesswork, because it has to be. Apple probably has drawn parallels to how the music industry balked at its iTunes service, and is now life-support-dependent on that plus the newer streaming Apple Music.

This isn't the same. People aren't pirating the news and aren't just crying out for a simple subscription where they can read what they want and pay a decent amount for it. There is no Napster where you can download the sports pages from the Washington Post.

Newspapers and magazines put all their content online for people to find. Maybe that made sense when publishers believed that an online presence was just an advert for the printed version. But it devalued the work and the material of news publications -- and it trained people to expect these things to be free.

That's why it's proven so hard for newspapers and magazines to survive the leap into an online-only world. That's why they've spent years experimenting with paywalls, freemium models, and even donations. It's why the New York Times and the Wall Street Journal keeps offering you discounted and easy subscriptions online, but forces you to phone in to cancel that sub.

In absolute terms, the industry is not doing well for myriad reasons. However, it's doing better than it has for a very long time. For all of the hugely important publications that have died or been swallowed up along the way, there have been survivors.

There have also been other aggregators where many magazines and newspapers have come together. Right now there's Zinio, which offers around 6,000 different magazines. You can buy individual issues easily enough and you can also subscribe to a particular magazine, though that's easier on Macs than iOS for some reason.

Even Apple had a go at this when it introduced Newsstand in 2011, and ultimately dropped it in 2015.

Apple's old Newsstand app. You never looked at it.
Apple's old Newsstand app. You never looked at it.


That failed for a number of reasons, including that it was cumbersome and somewhat ugly. But it mainly crashed and burned because publishers either didn't join it or, more often, didn't stick with it.

Back then, Apple was this juggernaut that was offering to bring all the owners of its iPhones and iPads to publishers. Those owners did not come to Newsstand in sufficient numbers. And instead of paying to read magazines, people have either tended to read through free news apps or just not read news at all.

Everything changes

Today, everything is different -- or at least it is in scale. The Apple juggernaut is vastly bigger. Today you can expect that this modern-day version of Newsstand will be better designed.

Apple is very good at design and it is very good at getting customers. So the prospect of your title looking fantastic on the screens of a billion active iOS users has got to make any publisher drool.

Yet it's still the case that they didn't read Newsstand, we cannot know whether they'll read "Apple News Magazines". So, Apple's demanding 50 percent could just mean that publishers end up with half of nothing.

Only, this isn't all that publishers have to think about. It's not a closed system where it's Apple's way or it's nobody's. If you get money from a reader of this Apple service and they would never otherwise have come to you, that's gold. Yet there will be readers who might have subscribed to your title directly but don't because they can get it cheaper through Apple.

Publishers have to make this kind of guess now in much the same way that Apple is predicting otherwise. They have to assess what the potential losses are as well as gains, absent of actual data.

And if you're talking losses, money is not the only issue here. There is also the fact that a magazine you directly subscribe to knows who you are. In comparison, it appears that Apple will not give publishers any details about its readers.

As a reader, you might like that a magazine doesn't know to target you with ads, but as a publisher, you're ceding control of your operation to someone else's sales team.

Apple's News app on Mac
Apple's News app on Mac


App developers have long had the same problem of being denied information by Apple and there it has caused issues. While this particular one has been fixed, for the longest time an app developer could do nothing about someone's complaint about their software on the App Store. Even if they could fix a user's problem, they couldn't reach that user.

And if you ever doubt that details of your customers is valuable information, just remember that Apple hangs on to it all for a reason.

The solution

It's a difficult decision to join Apple's new service, and there is one thing that Apple is doing which makes it painful -- that demand for half the income. This is even more than the 30 percent that companies may be used to, learned through apps, movies, and so on.

Half the revenue is a psychologically hard sell, and it's getting harder. App developers who complain about Apple's 30 percent cut of their fees tend to be ones who've never sold software retail. If you've sold software in a box, you know it cost you an awful lot more than 30 percent on each sale.

Except, there are decreasingly few developers who have sold retail in any large percentage recently. Today, online sales are the norm for everyone and publishers have no prior model to compare.

For that reason, if Apple is really demanding half the income, and the Wall Street Journal isn't trying to squeeze more out of the deal with negotiating in the press, that's got be enough reason to make publishers shy away from the deal. It's really a complicated decision, but you can look at that 50 percent and easily decide minus information that it's too much, and too big a gamble to the existing subscriber revenue base.

Except for one thing. There's a second psychological issue in play here and it's that maybe asking for 50 percent says that Apple is very confident of success. You can be as confident as you like and still fail, plus we really do not know how Apple is describing its deal to publishers.

Yet maybe that 50 percent is bold. Maybe asking for half the profits is a way that drives home to publishers that there will be profits.

We can only hope so.



Keep up with AppleInsider by downloading the AppleInsider app for iOS, and follow us on YouTube, Twitter @appleinsider and Facebook for live, late-breaking coverage. You can also check out our official Instagram account for exclusive photos.
«1

Comments

  • Reply 1 of 35
    I’m assuming that there will be advertising within the magazines and newspapers and that the magazines and newspapers will keep 100% of that add revenue making that $5 fixed cost negligible.
    ronn
  • Reply 2 of 35
    asdasdasdasd Posts: 5,312member
    If Apple can bring more people who would otherwise not buy the NYT or whatever then it is extra revenue,  but thats a tall ask for people willing to pay 10 a month. They must be interested in premium content by definition.
  • Reply 3 of 35
    lkrupplkrupp Posts: 7,164member
    Supply and demand, baby, that’s what it’s all about. Print media is circling the drain and Apple is taking advantage of that "rock and a hard place” to squeeze them. Of course the usual suspects here will castigate Apple for being greedy and evil and all manner of Naziism. Meanwhile, while I won’t subscribe to the WSJ individually, I might just jump on board if it’s part of a conglomerate of news sources in a subscription service. The article doesn’t go into the potential savings for publishers if they sign on. Apple will be acting as both “printer” and “distributor” and thereby saving the publishers the cost of producing a hard copy of their product. There is a false narrative in tech blog comment sections that hosting digital content is basically cost free. We still hear this when it comes to music subscriptions. “Oh, it doesn’t cost Apple anything to maintain the business end of Apple Music” it is said, thinking that once the hardware and software is in place it’s all pure profit from then on. Not! But the bottom line is that publishers will either get on board with Apple or they won’t. It’s their decision. Right now they don’t seem to be very successful at getting people to subscribe individually to their product.
    imergingeniousAppleExposedhmlongcololliver
  • Reply 4 of 35
    This subject is near/dear to me, albeit leagues above my subscription bracket: After 20 years toiling in a Hatehouse Media heckhole, I became founding editor of a weekly two years ago, and bought the paper (business, not a copy of the paper) a couple of weeks ago. Print Forever!*

    *or at least 20-25 years until I retire
  • Reply 5 of 35
    Apple can do whatever they want but I can't imagine who would even pay for this stuff. It's no wonder magazine empires are shrinking.
  • Reply 6 of 35
    I believe apple will be successful this time. I love the current Apple News app. So well designed on iPods, iPhones & iPads. 
    acejax805
  • Reply 7 of 35
    eightzeroeightzero Posts: 2,443member
    I turn on my local TV news station, and what do I see? The "reporting" is a Pretty Person in front of a screen displaying Facebook and other social media to show what is going on in the community. I another story, they show video of a local fire taken from "a viewers' cell phone."

    While I have some questions about some of the legal issues presented in doing this, it seems kinda clear the book on journalism is being rewritten. 
    edited February 14
  • Reply 8 of 35
    They purchased Texture recently who was already very successful using this model with magazines. They are just integrating and expanding it to include newspapers. 

    It’s a partnership or joint venture. This is a product that Apple will be managing the look and feel of and marketing the crap out of it. The publishers get to keep any ad revenue they generate themselves. The same for if they draw people directly to their in house developed app. 

    I think would be wise to jump onboard and figure out an ad strategy, because people are starting to get subscription burnout. I know I am. I subscribe to this and that for one article  show or movie that’s important to me at that time. Then I have to go back and cancel it. So I’m willing to bet their churn rates are awful. 

    This concept allows for for a steady income  stream while potentially exposing you to hundreds of millions of readers who aren’t going to sign up for your 7 day trail to read that one article and cancel right away, because they have access to other content as well. 


  • Reply 9 of 35
    lkrupplkrupp Posts: 7,164member
    Apple can do whatever they want but I can't imagine who would even pay for this stuff. It's no wonder magazine empires are shrinking.
    My wife is an avid quilter and she subscribes to four different quilting magazines. I’m an amateur astronomy fan and subscribe to two of the most popular magazines on the subject. If just these magazines would become available on Apple’s news service we would save money. I can think of a number of magazines I would like to see in such a service, like National Geographic for example. So I can imagine lots of people who would “pay for this stuff.” 
    AppleExposedlolliver
  • Reply 10 of 35
    No one would read their drivel otherwise. It’s a fair deal. 
  • Reply 11 of 35
    eightzeroeightzero Posts: 2,443member
    Dead_Pool said:
    No one would read their drivel otherwise. It’s a fair deal. 
    Skipping the polemic, there is a grain of truth here. This opens the door to starting up journalistic sources nearly instantly. I think people will pay for content they believe is valuable. 
  • Reply 12 of 35
    There is nothing bold about corporate greed.
    dougdAppleExposedhucom2000
  • Reply 13 of 35
    asdasdasdasd Posts: 5,312member
    lkrupp said:
     The article doesn’t go into the potential savings for publishers if they sign on. Apple will be acting as both “printer” and “distributor” and thereby saving the publishers the cost of producing a hard copy of their product. There is a false narrative in tech blog comment sections that hosting digital content is basically cost free. We still hear this when it comes to music subscriptions. 
    Im pretty sure none of these large news companies want this subscription model to replace print, or even replace their own digital distribution systems. Getting a small percents of $5 p/m isn't going to cut for those guys, unless it is additional revenue. 

    Smaller outfits with no paywalls might like it.

    I assume that the individual content producers can track an ad on their own website? They would need to show advertisers that people are landing and clicking on ads, of course. 
    edited February 14
  • Reply 14 of 35
    asdasdasdasd Posts: 5,312member
    lkrupp said:
    Apple can do whatever they want but I can't imagine who would even pay for this stuff. It's no wonder magazine empires are shrinking.
    My wife is an avid quilter and she subscribes to four different quilting magazines. I’m an amateur astronomy fan and subscribe to two of the most popular magazines on the subject. If just these magazines would become available on Apple’s news service we would save money. I can think of a number of magazines I would like to see in such a service, like National Geographic for example. So I can imagine lots of people who would “pay for this stuff.” 
    Good for you, not sure of the benefit for the quilting magazines or NG here. 
    AppleExposed
  • Reply 15 of 35
    croprcropr Posts: 955member
    This is a foolish idea.  Apple acts as an intermediary who wants 50%. This could make sense if Apple could make the magazine market to grow by a factor of at least 2.2, which won't happen.  Typically content owners want to cut the intermediary out of the value chain, if the intermediate does not bring real added value.  Look at what Netflix is doing for the subscription via the app store.  Other content owners will just follow the path of Netflix.
    muthuk_vanalingamAppleExposed
  • Reply 16 of 35
    MplsPMplsP Posts: 1,569member
    Like many business decisions, whether this move is 'bold' or 'foolish' will depend how it turns out. If it flops they were idiots. If it flies then they were brilliant visionaries. 

    The article is right, though. News outlets made the mistake of training everyone that news stories are free on the internet and now can't figure out how to get out of the hole they've dug. As someone who believes in the importance of a healthy and free press to democracy, I hope this helps.
  • Reply 17 of 35
    cropr said:
    This is a foolish idea.  Apple acts as an intermediary who wants 50%. This could make sense if Apple could make the magazine market to grow by a factor of at least 2.2, which won't happen.  Typically content owners want to cut the intermediary out of the value chain, if the intermediate does not bring real added value.  Look at what Netflix is doing for the subscription via the app store.  Other content owners will just follow the path of Netflix.
    Netflix is ungrateful. Their mobile growth was build using Apple’s platform and Apple highlighting them in the store and making signing up easy. They always had the option to drive their own traffic to their website, sign the customers up for a subscription, then link them to the app to download. App would get zero dollars and they would have free app support. They would have to manage the whole subscription themselves though. 

    Why did they choose the other route? They needed Apple’s marketing to make it all work. 
    Its disengenous of them to claim otherwise now. 

    ronnAppleExposedradarthekatlolliver
  • Reply 18 of 35
    Three things:

    First, as Kruegdude suspected, the publishers will get to keep 100% of their advertising revenue if they sell it. (And 70% if Apple sells it) Adding several more million readers to their base rate will either increase what they can charge or make them much more attractive to advertisers. In addition, there are whole categories of advertisers who wouldn't advertise in a partiuclar magazine but would if was on an Apple platform. (fwiw, this is also currently the deal on Apple News)

    In contrast,

    Apple Music sellers get 70% of the pot, but no advertising revenue.

    App developers also get 70% but have to split ad proceeds 70/30.

    So Apple to Oranges to Blueberries.

    Second, newspaper and magazine publishers get a worse cut when they sell their physical product through a third party (45/55 typically) Yes, those with an established online presence keep 100 percent of that revenue, but half of a likely much larger number  may be more attractive in terms of revenue and reach. 

    Third, publishers who don't get on board risk losing readers as folks migrate to the Apple platform.






    tmayronnlolliver
  • Reply 19 of 35
    ronnronn Posts: 330member
    kruegdude said:
    I’m assuming that there will be advertising within the magazines and newspapers and that the magazines and newspapers will keep 100% of that add revenue making that $5 fixed cost negligible.
    Bingo! Don't know how this editorial missed this obvious incentive. Magazine publishers are more likely to join in, as will maybe smaller newspapers. The largest newspapers (especially the regional and national conglomerates) may be reluctant given all their recent efforts to monetize subscriptions. But I think they have lots to gain from this Apple partnership.

    I imagine the advertising would be dynamic and possibly location based, potentially creating a ton of revenue where. My family already subscribes to a few magazines for $1-2/issue in print. Depending on the magazines included, I would gladly pay $10 to greatly expand the list of titles available on iOS devices. 
  • Reply 20 of 35
    lkrupp said:
    Supply and demand, baby, that’s what it’s all about. Print media is circling the drain and Apple is taking advantage of that "rock and a hard place” to squeeze them. Of course the usual suspects here will castigate Apple for being greedy and evil and all manner of Naziism. Meanwhile, while I won’t subscribe to the WSJ individually, I might just jump on board if it’s part of a conglomerate of news sources in a subscription service. The article doesn’t go into the potential savings for publishers if they sign on. Apple will be acting as both “printer” and “distributor” and thereby saving the publishers the cost of producing a hard copy of their product. There is a false narrative in tech blog comment sections that hosting digital content is basically cost free. We still hear this when it comes to music subscriptions. “Oh, it doesn’t cost Apple anything to maintain the business end of Apple Music” it is said, thinking that once the hardware and software is in place it’s all pure profit from then on. Not! But the bottom line is that publishers will either get on board with Apple or they won’t. It’s their decision. Right now they don’t seem to be very successful at getting people to subscribe individually to their product.
    The predatory tactics you describe is how monopolies grow which history has proven are bad for our economy, population, diversity within the economy , etc...  I fear the concentration of information as much as the concentration of wealth in this country and other parts of the world. Apple's demands of 50% share is outrageous and dangerous to freedom of speech. Apple will censor anything product that could reflect badly on Apple and it's squeaky clean, sanitized image. I think Apple makes great tech products but I wish they would stay out of entertainment and journalism, 
    muthuk_vanalingamhucom2000
Sign In or Register to comment.