Apple Gives Media Companies a Carrot, Tied to a Big Stick

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After much rumor and speculation, Apple has finally launched its subscription service for publishers, and like many things the company does, it 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 every time they download a new issue. At the same time, however, Apple is taking its usual 30-percent cut of any sales via the platform, which is a big chunk — and it has also put up walls to keep users buying from within apps instead of on the web, which could have a significant impact on some publishers, including Amazon.

As Darrell Etherington explains, Apple has made some concessions to publishers with its subscription offering, which comes on the heels of the recent launch of Rupert Murdoch’s iPad newspaper The Daily, the first to use the new subscription feature. While initial reports indicated 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, email addresses and zip codes (although users can also opt out of providing this). And 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 also 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 also offer those deals on their websites, but they must offer exactly the same deal through their app (which prevents publishers from jacking up prices to cover the 30-percent take that Apple removes). The important line in the news announcement is:

[P]ublishers may no longer provide links in their apps (to a web site, for example) which allow the customer to purchase content or subscriptions outside of the app.

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

The reality here is that Apple knows it has most publishers over a barrel, just as it did with the music industry when it first launched iTunes. Amazon may have other options since it owns its own platform, but magazine and newspaper companies are desperate to find some way of charging their readers, and Apple provides the easiest method of doing so. But the walled garden that Apple gives them access to, while very inviting and pleasant and well-maintained, comes with some serious trade-offs, as I tried to explain when Apple’s subscription plans were being discussed a few weeks ago. There’s a pretty attractive carrot, but there’s also 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 some other publishers such as Conde Nast have made it clear they’re looking for other options, by signing up to offer their publications via Android devices as well as Apple’s iOS devices. Market dominance is a powerful thing, however, and 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 access to that carrot.

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Post and thumbnail courtesy of Flickr user Giuseppe Bognanni

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