Apple Offers Publishers a Carrot and Stick

Following much rumor and speculation, Apple has finally launched its subscription service for publishers. As with many things the company does, this has caused equal amounts of enthusiasm and consternation. The enthusiasm stems from the fact that magazines, newspapers, and other content companies now have an easy way to sign up users, instead of forcing them to pay each time they download a new issue. At the same time, however, Apple is taking its customary 30 percent cut of any sales via the platform, which is a big chunk. The company has also put up walls to keep users buying within apps, instead of via the Web—which could have a significant impact on some publishers, including Amazon.

As Darrell Etherington explains, Apple has made some concessions to publishers in its subscription offering, which comes on the heels of the recent launch of Rupert Murdoch's iPad newspaper, The Daily, the first to use Apple's subscription feature. While initial reports indicated that Apple wasn't going to give publishers any information about the people who sign up from within an app, the company says publishers will get names, e-mail addresses, and zip codes, unless users opt out of providing the data. Moreover, if someone signs up on a publisher's website, that company gets to keep 100 percent of the subscription revenue. Publishers can also offer free subscriptions, something Apple had seemed to be cracking down on, at least in the case of some European newspapers.

That's the good news. The bad news for publishers is that Apple now requires that all subscriptions be offered via in-app purchasing. Companies can still offer deals on their websites so long as the terms are equal to those of their app offer; publishers can't jack up app prices to compensate for Apple's 30 percent take. The important line in the news announcement is: "Publishers may no longer provide links in their apps (to a website, for example), which allow the customer to purchase content or subscriptions outside of the app."

Putting Apple's App Front and Center

This seems certain to affect Amazon, which currently allows users of its Kindle app on iPhone and iPad to click a link and be taken to the retailer's website to finish a book-buying transaction. In effect, Apple has put up a roadblock that makes it hard for publishers to circumvent the in-app purchase. It increases the likelihood that users will opt for the simplest choice, which is to buy the item through the app itself. Although publishers can try to convince users to do otherwise by putting call-outs to go to the website or by downplaying the in-app purchasing option, many consumers are likely to choose the easiest route. That means a quick, 30 percent payoff for Apple.

Apple knows that it has most publishers over a barrel, which is just where it had the music industry when the company first launched iTunes. Amazon may hold further options because it owns its platform, but magazine and newspaper companies are desperate to find some way to charge their readers. Apple provides the easiest method of doing so.The walled garden Apple gives them access to—however inviting, pleasant, and well-maintained—comes with significant trade-offs, as I tried to explain a few weeks ago, when Apple's subscription plans were being discussed. This pretty attractive carrot comes with a big stick.

That leaves publishers to ask themselves: How much is it worth to let Apple handle your sales for you? Rupert Murdoch has decided with The Daily that he's willing to make the trade-off, but Time Warner and such other publishers as Conde Nast have made it clear they're looking for further options by signing up to offer their publications via Android devices, as well as Apple's iOS devices. Market dominance is a powerful thing, though. So far, Apple has the customers that publishers want to reach. For better or worse, they'll have to submit to the stick if they want to taste that carrot.

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