Apple Likely to Keep 50% of Revenue Profits in News Deal Without Sharing Customer Data with Publishers
Apple’s proposed subscription plan for publishers on Apple News where Apple takes a 50 percent cut of all publisher revenue and does not reveal customer data to publishers, has been a topic of frustration for many large publishers. It’s also apparently the issue that is halting the full launch of the expected new subscription service, according to a report from the Wall Street Journal.
Apple News gives news organizations and publishers access to millions of upscale new customers. Apple has pitched publishers that it will help them expand their subscription base significantly. Since it acquired the digital magazine provider Texture, Apple has been considering offering a new subscription service. The first beta iOS 12.2 suggested the upcoming launch of a new “Apple News Magazine.’ Texture is an app that allows users to read an unlimited amount of magazine content for a single $9.99 monthly subscription. Apple is expected to emulate this model, while integrating Texture into Apple News as a premium product.
The current proposal according to the Wall Street Journal, is for Apple to keep half of publisher revenue via the $10/month subscription for individual consumers. The remaining income would be distributed among publishers based on user engagement with content. Financial terms seems to be at the heart of negotiations, although some well known publications such as the New York Times and the Washington Post also have concerns about licensing content with other requirements.
In a standard subscription, a publisher would have access to data about individual subscribers such as credit card details, email addresses and more. Publishers then build their own detailed customer databases that are used to market additional products and services to subscribers. Discussions are still underway so some changes may occur to this proposed deal.
As Apple iPhone Sales Slow Down, Service Revenue Expected to Pick Up the Slack
Given that Apple’s iPhone revenue has dropped in the first fiscal quarter by 15% due to more expensive iPhone models, customers holding on to their iPhones longer and a more mature smartphone market, Apple is expected to find alternate sources of steady income such as its booming services revenue business. Apple’s accelerating services business includes app-store sales, streaming-music subscriptions and mobile payments. The company has a growing subscriber base with over 56 million subscribers for Apple Music reported last summer.
A Morgan Stanley analyst estimated that Apple could reach a trillion dollar valuation again if the company chose to offer a new media bundle offering, tying in its subscriptions such as Apple Music, new proposed Apple News and original TV programming via Apple TV. Apple is expected to launch a new video subscription service in March. Previously, Apple CEO Tim Cook had said that Apple would be part of the breakdown of the cable bundle.
Apple is also seeking to grow its paid subscription services across all devices to 500 million by 2020. Currently, subscriptions stand at 360 million today. The subscription service may also lean on Apple’s iCloud services to back up and save purchased content.
The news industry has faced numerous challenges and woes in the last 15 years with the rise of large technology companies. Facebook offered large traffic for publishers for many years, but with the change to its News Feed, has increased audience and revenue losses for some companies. Previously, Google came under fire from publishers as it allowed readers to avoid digital paywalls. This practice has been stopped since then.
Some publishers like Time significantly benefit from digital subscriptions. The Times charges $15/month, while the Post charges $10/month and the Wall Street Journal charges $39/month and taxes. Moving to Apple News might end up lowering value for these companies, creating lower-revenue Apple subscribers and affect their existing profitable revenue streams.
Despite these concerns, tech platforms offer a significant opportunity. Apple News comes installed on iPhones and is a free service. It allows users to choose news based on a topic or publication. This opens up access to millions of news consumers, who have the freedom to choose what they wish to read and engage with at any time. For publishers, this is a large opportunity to tap into new markets of upscale consumers.
On the existing Apple News platform, news publishers already distribute some of their articles for free. The news organizations keep 100% of all revenue generated from any ads they sell for these articles and 70% of revenue from ads appearing by articles that they do not sell. Apple’s new subscription service would expand access to these outlets, adding new content that currently is only accessible behind digital paywalls.