Blog Post

Steve Jobs Is Wrong: The iTunes Model Won’t Help Media

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

In his interview with Walt Mossberg and Kara Swisher at the D8 conference (transcribed by All Things Digital and Engadget), Steve Jobs raised the hopes of media executives everywhere — including, no doubt, News Corp. (s nws) CEO Rupert Murdoch, who made some opening remarks before the Apple (s aapl) founder took the stage — by saying he believes people will pay for other forms of media, just as they have been paying for movies and music. This is the closest Jobs has come to endorsing the “iTunes for news” model that many newspaper and magazine publishers have dreamed about. The Apple CEO said:

I think people are willing to pay for content. I believe it for music and video, and I believe it for the media.

And how would this work? Jobs described it this way:

I can tell you as one of the largest sellers of content on the internet to date — price it aggressively and go for volume. That has worked for us. I’m trying to get the press to do the same thing. They need to do it differently than they do it for print.

The vision of an iTunes that served up paid-for newspaper and magazine content to millions of adoring readers has captivated the traditional media for some time. One of the most eloquent pleas for such a model came from New York Times media writer David Carr last year, in a column entitled “Will Someone Please Invent iTunes For News?” Carr described Apple’s success in selling music, and then said he hoped that someone like Jobs would come along and convince “the millions of interested readers who get their news every day free on newspapers sites that it’s time to pay up.”

It seems like a slam-dunk idea in so many ways: If record labels can cut a deal with Steve Jobs that sees music sold through iTunes instead of being downloaded for free, then why couldn’t newspapers and magazines do the same thing with their content? Bundle it up, cut a deal with Apple to create an iTunes for news and watch the cash roll in.

But this vision has two fundamental flaws — one psychological and one economic. The psychological flaw is that news stories and other forms of content that appear in newspapers and magazines (with very few exceptions) are not the same as music or even movies or books, in the sense that users want to keep them forever and read or watch them repeatedly, as media gurus Clay Shirky and Jeff Jarvis have also pointed out. In addition, all of that content is currently available in a completely legal way for nothing, from the websites of the content creators themselves, whereas music and movies are not.

Both of these factors suggest that the price for news would have to be orders of magnitude lower than it is for music — pennies, or even fractions of pennies, instead of dollars. Is that really a viable model for these media entities?

The economic flaw, meanwhile, is that cutting this kind of deal would involve handing over control of a significant part of your newspaper or magazine’s destiny to Steve Jobs. Is that really a bargain that media outlets want to strike? It’s true that Apple has sold billions of songs through iTunes since the store launched, and that has done great things for one company: Apple. Record labels and movie studios, for the most part, haven’t seen truckloads of money come their way from the arrangement. If anything, iTunes pricing has put downward pressure on the prices they charge for CDs and DVDs.

The bottom line is that an iTunes for news might be in Steve Jobs’ best interests — primarily because it might help to sell iPads — but it’s not clear that it would be in media outlets’ best interests, as attractive as it seems. Nor is it obvious that it would even work, if it ever actually came to pass. More than anything, it feels like an industry grasping at any straw it can, in the hope of building a life raft.

Related content from GigaOM Pro (sub req’d):

Post and thumbnail photos courtesy of All Things Digital

81 Responses to “Steve Jobs Is Wrong: The iTunes Model Won’t Help Media”

  1. Franz

    If Murdoch offers unlimited access to all his newspapers for a flat rate of say $12 a month, I might consider it. Murdoch doesn’t need Apple, he has enough media content to have a platform of his own, and you don’t really need a platform for online news article anyway, a browser would be adequate to deliver content and for users to manage subscriptions and search content.

    No one gets their news from one or two publications anymore. If Google (or Yahoo/whoever, I use Google as an example because I use Google reader)can cut a deal with newspaper groups and offer users a monthly flat rate for access to say a category of at least 30 titles, I’m in as well. Don’t even think about something like 20c for one article, if I have to keep track of how many pay articles I’ve read in a month, that’s too much hassle.

  2. Hahish Ikillu Jihadi

    The headline is a bit harsh. Steve may not always be totally right but he is never wrong. His track record speaks for itself. The publishing industry needs to thoroughly embrace his ideas and let him save them from themselves much the way he personally saved the music industry from self-destruction.

    The music industry is having record online sales due mainly to Steve Jobs. He can do the same for publishing and newspaper industry. They need to stop resisting because it is just futile. Steve knows what is best. He has brought pricing stability to the music industry and can do the same for the print industry. The faster they hookup their news gathering organizations to the Apple train the quicker they can return to growth and stability.

  3. I guess if Steve is wrong about digital media…… Then stay off the digital media, keep printing papers and see how that works for you

  4. Bruno Belotti

    Jobs said “price it aggressively and go for volume”, and that’s a basic rule.
    If you sell 100 printed copies at 1$, you earn 100$. But if you sell 500 digital copies at 20p, you earn 100$ as well (and more, actually, because there aren’t print costs). That’s true with music, with software, with games. AppStore prove it. And can be true with magazines as well, but media have to change their strategy radically, changing platform, bringing their awesome quality content to the digital world, and it’s sure that people will buy that content.
    Shouldn’t be great to have a specific application rather than jump trough websites, looking for quality content?
    It’s just matter of time, and iPad (but tablets, smartphones and ebook-readers in general) is just accelerating the process.
    I think media have fear, because their world is changing so quickly… but they can’t wait anymore : they have content, they have tools, now it’s just matter of DO something.
    Of course that is Apple & Jobs best interests, but not because they force the World to follow them, but because they have already understand where the World is going.
    (Sorry for my awful english, but I hope the concept is clear…)

  5. News did indeed go free on the web, but that has primarily been in desktop browsers. Music more or less went free for a while too, but that industry turned around.

    But there may be other avenues to explore, and we certianly are at the beginning of the journey. Newspapers may be able to price their subscriptions for volume, and incentivize them with things like delivery or greater access for mobile devices, interactivity, removing ads, and other value additions. Just look at what GigaOM and Ars Technica are doing with their premium subscription services. Doesn’t GigaOM offer article PDFs? I know Ars offers PDFs, no ads, and the ability to participate in chats with industry figures.

    There’s a lot more that a publication can do besides simply put up a pay wall. I’m a bit bummed that Jobs didn’t bring up any of these ideas, but I hope news orgs are smart enough to start experimenting with them.

  6. I’d like to see a source or a link for the stats that the media companies aren’t making good money from the iTS. Apple had to drag at least the music industry into the 21st century with a new business model and distribution system, and the labels enjoy the lion’s share of every song and album purchase. The iTS is often cited as a savior of the music industry, and everyone from Amazon to Microsoft followed suit. I have a hard time believing that going digital (which eliminates a number of high costs of the physical distribution system) is not making these companies more money, or at the very least, matching current revenues from old ‘n busted distribution.

    • David, it’s true that iTunes has brought in revenue for the music industry, but not huge amounts — $7-billion over seven years for the entire industry is not a lot — and it hasn’t changed their cost structure that much, because they still have existing businesses to support. So revenue from online has helped, but not very much.

  7. Well I for one would pay for electronic news, because I pay for a paper most days (I know how retro is that?). What I want is rich immersive content that a physical paper cannot provide. It’s not that difficult. I think many would pay for it, if it provide more than newspaper websites.

    Hate to say it, but SJ is right, make it compelling – content and price.

  8. Matt,

    I would argue newspaper and magazine are in the business of selling content not ads.Yes in physical print media they used to partially subsidize the paper cost by ads.But as technology changed from physical paper to digital they have to change the model .I would argue that some form of paid content business is way forward .but I do agree with you that iTune model paying for single article is not way forward.

    My bet would be some kind of digital content aggregation model like cable TV is way fwd i.e I would pay annual subscription of say $100 to get access to selection of my fav papers say 5-10 .comare that to same amount i pay for wsj alone .

  9. I subscribe to about a dozen mainstream business and tech magazines, and the only one I still read regularly is Wired. The fundamental business model for newspaper and magazine companies is broken. Their cost of production outweighs the value they provide to me as a reader. I spent much more of my time reading niche news sites like GigaOM, or super niche sites my local tech blog site TECHdotMN (http://www.tech.mn). These smaller content sources cover the topics of interest to me more cost effectively and in much greater detail than the big bureaucratic newspaper and magazine companies do. Let’s take another example outside of tech, and consider sports. The NFL draft just passed in April. My friends NFL draft website Draft Countdown (http://www.draftcountdown.com) did a far better job covering the event than the mainstream stories coming out of ESPN and other sources. Why? My friend covers the NFL draft full-time year round. His quality of thinking is much higher than some beat reporter covering it for a couple of weeks. I’m not a big fan of nichebuster strategies for all businesses, but for news, niche makes sense.