TechMan: Apple's newspaper, magazine subscription policy shortsighted
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Apple's new policy for subscribing to newspapers and magazines on the iPad is a garden of gotchas.
The plan has managed to alienate many publishers who would like to sell subscriptions through apps. In addition, I would argue that Apple's new policy is bad for Apple and for the future of digital news.
Objections to Apple's policy revolve around two issues: money and control of subscriber information.
Under Apple's plan, if a publisher sells a subscription through iTunes, Apple gets 30 percent of the revenue. For its cut, Apple handles the billing and processing.
Compare that 30 percent to the 2 to 3 percent that credit card companies charge for similar processing. Gotcha.
If a publisher sells a subscription on its own, it gets valuable information -- subscriber's name, e-mail, ZIP code, credit card number and any other information the customer is willing to provide. The publisher can use this information to maintain a relationship with the reader.
If a subscriber goes through iTunes, Apple gets that information but will share with the publisher only the name, e-mail and ZIP code -- and only if the subscriber opts in. In these days of privacy paranoia, not many subscribers are going to allow their information to be shared. Gotcha.
Apple's subscription plan should have been a boon for publishers. While some publishers sold subscriptions on their own, before the plan the only way a publication could be purchased from within an app was one issue at a time. Publishers really want to be able to sell subscriptions within apps with one click.
The new Apple rule that grates most is that only iTunes subscriptions can be sold with one click from inside the app (thus giving Apple its 30 percent).
Publishers can still sell subscriptions themselves and avoid the 30 percent Apple tax, but customers would have to leave the app, navigate to the publisher's website, make the purchase, then download the content. Four or five clicks or one click: Which do you think people will pick? Gotcha.
Why not just sell content cheaper outside the app to attract customers? Publishers could cut the price by 20 percent and still make out by not having to pay 30 percent to Apple.
But Apple dictates that the price of the subscription in the iTunes store must be the same or less than the publisher is charging otherwise. Gotcha.
An example of how things will change:
In the Kindle e-reader iPad app, there is a button that says, "Shop in Kindle store."
If you click, you are taken to the Kindle store, where you can buy the book and have it downloaded to your iPad without leaving the app.
After June 30, that will no longer be allowed. Any button within the app will have to say, "Shop in iTunes." Purchases from the Kindle store would have to be made outside the app.
So it's clear why Apple's plan is not good for publishers.
Why isn't it good for Apple? It's a matter of immediate profit versus future business.
Tablets computers are widely seen as the best way to read digital newspapers and magazines. Last fall, iPads represented 95 percent of the tablet market.
But with dozens of tablets coming to market based on Google's Android operating system, that market dominance won't hold. Apple's share has already slipped to 75 percent.
At the same time that Apple announced its subscription plan, Google announced its one-click service. You can bet that button will be in Android apps on every tablet. And Google takes only 10 percent and shares all subscriber information.
Beyond giving its competitors an opening, Apple has created a lot of ill will in the publishing community. And The Wall Street Journal reported that antitrust enforcers are looking at the policy.
As viable alternatives to iPads become more available, content providers will remember Apple's rapacious ways. If you want to see an example of a device that didn't have buy-in from content providers, just look at Google TV, a total failure.
How has Apple harmed the future of digital publishing?
As newspapers and magazines fail left and right, the business has become a race to find ways to make digital news profitable. For some, the solution won't be found before they collapse under the weight of printing and delivery costs coupled with declining ad and subscription revenue.
It is in Apple's interest to have as much content produced for its devices as possible. So it should help content providers survive.
Instead, Apple's subscription scheme is a pothole on the road to survival.
First Published February 20, 2011 12:00 am