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Why Apple’s Pushy Publishing Plan is Paying Off

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Apple (s aapl) is catching a few flies with vinegar, if the slow but steady stream of magazine publishers who’ve opted to accept the company’s new in-app subscription rules is any indication. On Monday, Bloomberg’s Businessweek joined the iPad coalition of the willing, adding its name to a roster that includes the likes of Maxim, Elle and Popular Science.

Why are publishers signing on? One big four-letter word followed by a number comes to mind: The iPad 2 has been, by all accounts, a massive early sales success, and Apple still seems to be having trouble meeting demand. It’s no coincidence that Apple scheduled the mandatory change to its own in-app purchasing system for subscriptions to come into effect June 30. Between the time the new policy was announced and when it goes into effect, we’ll have seen the launch of the iPad (a hit at home and abroad), Apple’s quarterly results (sure to impress and likely show strong tablet numbers), WWDC sold out in no time at all, iOS 5 likely unveiled at WWDC, and even more details about the iPad’s selling success at the WWDC keynote.

Still, the move to accept Apple’s terms — which include a 30-percent share of all subscription revenues gathered through apps sold in the iPhone-maker’s App Store — hardly represents a universal groundswell of support from the magazine industry. In fact, many major publishers are clearly still holding out, possibly in the hope that they can convince Apple to relax or modify its App Store policies regarding in-app subscriptions and the sharing of customer information. But despite noteworthy holdouts like Conde Nast, Time Inc. and Hearst Corp., big fish like the New York Times (s nyt) and now Bloomberg (which says it is actually “very pleased” with Apple’s terms) are a good indicator that in this battle, Apple has the upper hand.

And it doesn’t have to do any talking to bring that point home to publishers. iPad sales, and forecasts like the one issued by Gartner Monday morning, which sees Apple staying on top of the tablet heap until 2015 (though problematic), are argument enough. The iPad provides publishers with access to at least the existing crop of more than 15 million iPad owners, but that number has probably grown already by quite a bit, and shows no signs of slowing. Isn’t that worth a 30 percent cut?

Not to mention the fact that Apple has all the power in these negotiations. While magazines are a nice-to-have feature on the iPad, they’re far from the only draw of the device for consumers. In fact, as Mathew Ingram has repeatedly pointed out on this blog, magazines in general aren’t doing a good job of providing appealing content on the iPad. In short, magazine publishers need Apple more than Apple needs magazine publishers, so if this is a game of chicken, it’s not one which Conde Nast et al. are well positioned to win.

7 Responses to “Why Apple’s Pushy Publishing Plan is Paying Off”

  1. If my experience is anything to go by Time are losing out by not providing a subscription on the iPad. I used to subscribe to the physical magazine but stopped when I saw the first Time iPad app anticipating subscriptions would come soon. I’m still waiting. I refuse to subscribe to the paper version again. Assuming the price is the same or less than the cost of the physical subscription I’ll sign up. I suspect there are many that would and they would get a flood of revenue once they make this available.

  2. Thanks for the article. What’s the latest news on how Apple’s policies might affect the kindle and nook apps (in light of what’s going on with Sony’s rejected ereader app)? I’ve been searching for an hour or two, but I can’t find anything recent on this subject.

  3. jbelkin

    the ipad is the ONLY digital game in town. Until Amazon actually releases a color Kindle, their market for magazines is nil. The whole 30% whining is like the music industry complaining about a new venue that saves them on printing, shippig heavy paper stock and returns – how many idiotic mailings do we get for each subscription? They pretty start mailing a renewal notice after a month – tell me they don;t spend 30% of our sub revenue on trying to get us to reup … they also pay HUGE slotting fees – you know those mags on the reg checkstand – they’re not there because of goodwill – they are there because it costs MILLIONS to be there … or that Costco rack? nearly $500,000 for the priviliedge to sell there … so taht 30% is just a smokescreen. Tell me they cannot put a form on page 10 asking for name & address for a contest entry or to unlock 20 photos of Natalie Portman and gettig a 90% response rate?

  4. Time made a deal with HP to launch subscriptions for the Touchpad, a device that hasn’t sold 1 unit and won’t be out until summer.. I’m still puzzled by that.

  5. For newspaper and magazine publishers, Apple’s scheme isn’t that bad. Apple simply replaces the 30% or more they’re paying for printing and distribution, and it provides them with an online platform, so they don’t have to manage their own. And there’s currently no one, not even Amazon, that dominates digital periodical distribution to offer better terms.

    But Apple’s being quite foolish if it thinks it can get away with applying the same terms to digital book distribution. Publishers (particularly with the new POD technologies) don’t pay shipping costs and both publishers and authors have already adjusted their minds and (in most cases) their retail price to take into account the absence of printing costs. That means Apple isn’t bringing much to the table.

    Publishers and authors are also well aware that it is Amazon that matters in digital book distribution, with Apple’s iStore running a poor third or fourth. All those iPad sales that have the pundits gushing mean nothing. Kindle buyers read books. iPad buyers browse the web and watch videos. And many iPad owners get a Kindle for reading.

    I do have one book in the iBookstore via Smashwords, but I’m not sure I’ll add others, particularly if Apple treats ebooks with the same draconian rules and outrageous slice of the profit, applied to Amazon, Sony, B&N and other iDevice apps, as it’s applying to magazine publishers.

    Keep in mind that Apple isn’t bringing an bookstore to this deal for Amazon and the rest. Reports are that Apple’s magazine software can only handle a few thousand publications. Amazon offers about 3-4 million book titles. If Apple tries to grab 30% of Amazon, Sony etc. sales made on iDevice apps, it won’t be providing a store. The sale and the ebook will still be provided by Amazon and the rest. Apple will be taking 30% for doing nothing more than processing a credit card transaction. That stinks. If I lived in Cupertino, I get a band of teenagers and roll Steve Jobs house some rainy evening.

    The truth is that for ebooks Apple simply doesn’t have the muscle to be a bully. I’ve seen sales figures that show that several online ebookstore outsell Apple’s and that Amazon is leagues ahead of everyone else. In fact, I lose more by not being on Sony than by not being on the iBookstore. If I’m going to get pushed around, at least it ought to be by an 800-pound gorilla that can make me lots of money.

    There’s an additional advantage, as a publisher and a writer, for going with Amazon but not Apple. Both Amazon and Apple are obsessed with control. Both want to dictate how and at what price I sell my books even via my own store. Legally, it makes sense to have only one company dictating these insane, ‘do this or hear from our lawyers’ rules. Sign two such agreements, and I’m likely to end up in a box where following Amazon’s dictate means breaking Apple’s or vice-versa. Besides, from what I’ve seen, Amazon’s lawyers may not be nice, but Apple’s behave like they strangle a kitten every morning before breakfast just for the fun of it.

    Of equal importance, I see no evidence that Apple intends to spend the money to make itself a top-notch, world-class ebook platform. (One reason is that Steve Jobs doesn’t seem to like books.) And even if iPad ebook sales improve, all I need do to get on iPads is remove the DRM. My customers can then put my ebooks on any device they like, much like Amazon sells and installs music on iPods.

    I fear that the success of iTunes has made Apple arrogant and over-confident. They and many of the pundits think Apple is fated to win the ebook competition. I see no evidence of that. In fact, if Apple yanks Amazon, B&N, and Kobo apps in June, I’ll see it as clear evidence they feel they can’t compete on a level playing field.

  6. Podesta

    Are people really eager to give publishers their personal information so it can be resold to advertisers and data merchants? This is what the dispute is really about. I have seen Etherington say really foolish things before, so I am not surprised he is taking that position. But, I am doubtful most consumers agree with him. More likely, they appreciate Apple protecting their right to privacy.

  7. Laughing_Boy48

    Apple is providing a ready-made platform for the content providers. It certainly involves overhead to run iTunes and it certainly seems a plus for content providers to reach iTunes massive client database. I don’t see these content providers getting a better deal, so far. If the content providers want to go to Android, good luck with that fragmented mess that really doesn’t even have many tablets to view content. 30% taken from sales is a heck of a lot better than having almost no sales at all. The iOS platform is very stable and the devices are well controlled by Apple. I understand the content providers complaining because they don’t want to give up that much of a cut. I’m not sure why Apple couldn’t have lowered the percentage cut by 5% or so, but Apple has to show that it has the upper hand.
    Apple might not get all the top providers, but hopefully, Apple can hold onto what it has.