Apple's digital subscription model likely to backfire
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Apple's digital subscription model likely to backfire

Apple may have finally bitten off more than it can chew with its "my way or the high way" approach. This week Apple unveiled its new subscription model for the Apple App Store, confirming that magazine and newspaper publishers will be forced to pony up 30% of their cover price.

It's nice that Apple is making it easier for consumers to buy subscriptions and may help publishers find new subscribers. But 30% is too steep a fee and is almost certainly going to squash any hopes of a digital publishing revolution that will "save" newspapers and magazines. The margins for digital content are simply too thin for this to be acceptable to a majority of publishers.

There are other drawbacks to Apple's plans as well. A publisher can learn the name, e-mail address and zip code of in-app subscribers only if the user agrees to share that information. Most of us won't do that, but, traditionally, publishers have used this info to, among other things, target advertisers. Also, publishers can no longer provide links in their apps (to a web site, for example) that allow the customer to buy content or subscriptions outside the app.

Of course, magazine and newspaper publishers have had years to come up with their own distribution methods to deal with the digital age. However, like the music and movie industries before them, they kept their heads in the sand, pretending that there was no change in the wind. By that reasoning, perhaps Apple is giving 'em what they deserve. But I don't think Apple's subscription method will meet much success. There's too much opposition to it.

The Online Publishers Association (http://www.online-publishers.org/) -- a not-for-profit trade organization "dedicated to representing high-quality online content providers before the advertising community, the press, the government and the public" -- says (http://macte.ch/4q2tf) its members — which includes Time Inc., Hearst, Conde Nast, Bloomberg, National Geographic and Forbes -- are worried the new regime doesn’t give them the flexibility they need to serve their customers.

Pam Horan, publisher of the Online Publishers Association, says one problem is that publishers can’t include links in apps that drive users to external web sites to make a purchase, any subscription deals offered within the apps have to be digital only (the only kind Apple sells). This even though users might well prefer to buy a subscription that bundles a print edition. “Why not let the consumer decide how they want to access it?” she says.

Also, NewspaperDirect (http://www.newspaperdirect.com) -- a digital publication delivery service -- has issued guidance for publishers facing a new world now that Apple requires them to employ in-app purchasing of content offered through news apps in the App Store. The organization isn't happy about Apple's move, calling it a "money grab"; you can read all about it at http://tinyurl.com/4mv53nw .

"In a world where personalization is becoming more and more important, publishers must be able to tailor content to the preferences of their subscribers," says Newspaper.Direct. "Under Apple’s policy, this will not be possible. And what is even worse is that publishers will not be able to count these subscribers in their audited circulation."

Finally, "Silicon Alley Insider" (http://macte.ch/AhYkK) notes that music subscription service Rhapsody says that Apple's new rules for subscriptions for iPhone and iPad apps are "economically untenable" and it has teamed up with other music services to consider options, possibly including legal action.

The new rules put music services into a tough spot because unlike magazine publishers they're already paying substantial fees to record labels and music publishers, says "Silicon Alley Insider." Rhapsody doesn't even offer in-app purchases as an option on its iPhone app -- when users want to sign up, the app opens Safari to Rhaspody's Web site, where they can go through the sign-up process.

The new rules allow Rhapsody to continue doing this -- and to keep all the money from subscriptions purchased through Rhapsody.com -- but it also must offer in-app subscriptions for the same price and give Apple its 30% cut. According to "Silicon Alley Insider," Rhapsody says it can't continue to "offer our service through the iTunes store if subjected to Apple’s 30% monthly fee versus a typical 2.5 percent credit card fee."

-- Dennis Sellers
dsellers@applecentral.com

 

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