Publishers Flinch At Apple's News Subscription Plan Based on Revenue Split and Subscriber Data Access

Apple Likely to Keep 50% of Revenue Profits in News Deal Without Sharing Customer Data with Publishers

Image via Apple

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.

Image via Apple

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.

Subscriptions are sold by Apple across its devices to services and third-party services. 2019 subscriptions and service revenues are estimated.
Sources: Apple, FactSet. Images via WSJ

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.

Image via Apple

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.

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How To Set Up Unique Alerts for VIP Emails on Your Mac

Learn how to set up unique alerts when your emails are received from your VIP contacts on your Mac.

Currently, you receive new message notifications from VIPs in the native Mail application in macOS by going into your Mail's Preferences and selecting VIPs in the New message notifications dropdown list. This process works, but prevents you from receiving notifications for all other messages coming into your inbox.  Another way to do this is to set up a rule in Mail that will play a specific sound or will bounce the Dock icon when you receive a message and the sender is in your VIP list. Let’s take a look how to do this.

1. Launch the Mail app on your Mac.

2. Select Preferences from the Mail menu bar.

3. Select the Rules tab.

4. Click Add Rule.

5. Give your rule a name in the Description field.

6. For ‘If’, select Any.

7. For the first condition, select Sender is VIP from the first dropdown list.

8. Under Perform the following actions, select Play Sound from the first dropdown list. (You can alternatively choose Bounce Icon in Dock also.)

9. Under Perform the following actions, choose a sound to play from the second dropdown list.

10. Click OK.

11. Click Apply.

You are done! With this new rule set up, you will now receive a unique alert for every VIP mail you receive that you'll be able to distinguish from regular new message notifications as they come through. 

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Apple's New Media Bundle Could Raise to a Trillion Valuation Again, Says Morgan Stanley

Morgan Stanley predicts that Apple can reach a trillion valuation if the company launches a media bundle in 2019.

Image via Apple

While Apple recovers from its earnings call prediction earlier this year, many financial analysts are doubtful that the Cupertino tech giant would ever be able to repeat its feat of a trillion dollar valuation again. Morgan Stanley’s financial analyst Katy Huberty, who accurately predicted prior valuations, sees things differently.

Huberty shared her views on CNBC that Apple could see large growth if the company launches a media bundle this year consisting of music, television streaming and its new Texture news subscription. The bank targets Apple’s 12 month share price at $211 (AAPL).

This past Friday, Apple’s stock ended the week a little over $166 with a $785 billion market cap. Shares were roughly $206 apiece when the company reached its first $1 trillion valuation.

AAPL as of Friday closing, February 1.

The bank estimates that a new Apple media bundle could bring in another 2 percent annually to Apple’s growing services revenue to “drive a 5 percent revenue and 12 percent earnings per share (EPS) annual growth rate through 2023.” Apple’s ‘media bundle’ has been discussed in the media for a while, starting with a report in June 2018 via The Information claiming that Apple would be offering a possible one subscription model that included music, TV and news. The Texture built-into Apple News has been called a “Netflix for magazines.” Bloomberg reported in December however that the new magazine option had not been welcomed by advertisers.

On Tuesday of this week, Apple announced its earnings for the 2018 holiday season and last quarter, reporting $84.3 billion in revenue and $19.97 billion in profit.

Morgan Stanley predicts an increase in stock buybacks. This active buyback program along with a better knowledge of "the stabilization path for iPhone and impact of new services" will catapult Apple's valuation back past the $1 trillion mark. Huberty has previously commented on Apple’s services business back in November, predicting that Apple will expand its services division as the global hardware market contracts. She pointed out that Apple is "more engaged iOS user base and broadening portfolio of Services," compared to its competitors. Apple is thus expected to maintain 20 percent annual growth over the next five years overall due to the growing Services division.

“After repurchasing $8.8 billion of stock in the December quarter, below the prior $20 billion run-rate, we see a more active buyback program helping re-rate shares, as investors better understand the stabilization path for iPhone and impact of new services.”

— Katy Huberty, Morgan Stanley financial analyst

Huberty expects that iPhone growth will return and that replacement rates are at mature levels.

“iPhone replacement cycles now stand at mature levels suggesting a stabilization of growth is in the cards over the next year [commenting on Apple CEO Tim Cook’s remarks]. Management’s commentary that demand improved in January is similarly encouraging.”

— Katy Huberty, Morgan Stanley financial analyst

Huberty forecast $101 billion in Services revenue alone in 2023, a large increase from 2018 revenue of $37.2 billion. To understand these numbers in context better, it is helpful to look at Apple’s iPhone sales in the same year period. In 2018, Apple sold $112 billion in iPhone hardware in the U.S. alone. Hence, it is clear that the Services division is growing significantly.

Morgan Stanley has accurately predicted Apple's Services revenue growth over the last six quarters, more precisely than both Rosenblatt and Merrill Lynch who under-estimated Services revenue. Apple’s growing Services sector is expected to include video content, benefiting from Apple’s existing large subscriber base.

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