Editorial: Apple's demand for 50 percent of news and magazine revenue is either bold or very foolish
It's believed that if you're a publisher signing up to the forthcoming Apple news and magazine service, you will have to agree that the company keeps half the revenue from the service, and pays out the other half in aggregate to all publishers. If that's true, it's either going to give publishers a great deal more money than they had before, or force further painful contraction in the industry to the benefit of nobody but Apple.
Printed newspapers used to be in decline, now they're practically free-falling. Online newspapers have had a lot of bad years but in some cases like the New York Times, they are recovering through subscriptions. They've been through all the experiments with hard paywalls and freemium subscription models, and now, finally, newspapers are doing better than they have for a long time.
And yet here comes Apple, trying to take away half their revenue. Or so they say.
We don't actually know specifically what deals Apple is offering the publishers it wants to contribute to its forthcoming news subscription service, and we will surely never know all the details. Yet, it's likely that there is a typical figure, a base for negotiations, and according to the Wall Street Journal, the deal is a 50/50 split.
The service that is rumored to be called "Apple News Magazines" is probably going to charge readers $10 a month and basically Apple will keep $5 of that. The rest will be divided between all the publications that each reader actually reads.
No doubt, Apple sales people have been going around all the major publications and trying to wow them with slide presentations about how much money they're going to earn. They're probably also subtly suggesting that failing to sign up is going to cost publishers more in the long term.
Yet even with those presentations being nicely done in Keynote, there's no disguising that this is guesswork, because it has to be. Apple probably has drawn parallels to how the music industry balked at its iTunes service, and is now life-support-dependent on that plus the newer streaming Apple Music.
This isn't the same. People aren't pirating the news and aren't just crying out for a simple subscription where they can read what they want and pay a decent amount for it. There is no Napster where you can download the sports pages from the Washington Post.
Newspapers and magazines put all their content online for people to find. Maybe that made sense when publishers believed that an online presence was just an advert for the printed version. But it devalued the work and the material of news publications — and it trained people to expect these things to be free.
That's why it's proven so hard for newspapers and magazines to survive the leap into an online-only world. That's why they've spent years experimenting with paywalls, freemium models, and even donations. It's why the New York Times and the Wall Street Journal keeps offering you discounted and easy subscriptions online, but forces you to phone in to cancel that sub.
In absolute terms, the industry is not doing well for myriad reasons. However, it's doing better than it has for a very long time. For all of the hugely important publications that have died or been swallowed up along the way, there have been survivors.
There have also been other aggregators where many magazines and newspapers have come together. Right now there's Zinio, which offers around 6,000 different magazines. You can buy individual issues easily enough and you can also subscribe to a particular magazine, though that's easier on Macs than iOS for some reason.
Even Apple had a go at this when it introduced Newsstand in 2011, and ultimately dropped it in 2015.
That failed for a number of reasons, including that it was cumbersome and somewhat ugly. But it mainly crashed and burned because publishers either didn't join it or, more often, didn't stick with it.
Back then, Apple was this juggernaut that was offering to bring all the owners of its iPhones and iPads to publishers. Those owners did not come to Newsstand in sufficient numbers. And instead of paying to read magazines, people have either tended to read through free news apps or just not read news at all.
Today, everything is different — or at least it is in scale. The Apple juggernaut is vastly bigger. Today you can expect that this modern-day version of Newsstand will be better designed.
Apple is very good at design and it is very good at getting customers. So the prospect of your title looking fantastic on the screens of a billion active iOS users has got to make any publisher drool.
Yet it's still the case that they didn't read Newsstand, we cannot know whether they'll read "Apple News Magazines". So, Apple's demanding 50 percent could just mean that publishers end up with half of nothing.
Only, this isn't all that publishers have to think about. It's not a closed system where it's Apple's way or it's nobody's. If you get money from a reader of this Apple service and they would never otherwise have come to you, that's gold. Yet there will be readers who might have subscribed to your title directly but don't because they can get it cheaper through Apple.
Publishers have to make this kind of guess now in much the same way that Apple is predicting otherwise. They have to assess what the potential losses are as well as gains, absent of actual data.
And if you're talking losses, money is not the only issue here. There is also the fact that a magazine you directly subscribe to knows who you are. In comparison, it appears that Apple will not give publishers any details about its readers.
As a reader, you might like that a magazine doesn't know to target you with ads, but as a publisher, you're ceding control of your operation to someone else's sales team.
App developers have long had the same problem of being denied information by Apple and there it has caused issues. While this particular one has been fixed, for the longest time an app developer could do nothing about someone's complaint about their software on the App Store. Even if they could fix a user's problem, they couldn't reach that user.
And if you ever doubt that details of your customers is valuable information, just remember that Apple hangs on to it all for a reason.
It's a difficult decision to join Apple's new service, and there is one thing that Apple is doing which makes it painful — that demand for half the income. This is even more than the 30 percent that companies may be used to, learned through apps, movies, and so on.
Half the revenue is a psychologically hard sell, and it's getting harder. App developers who complain about Apple's 30 percent cut of their fees tend to be ones who've never sold software retail. If you've sold software in a box, you know it cost you an awful lot more than 30 percent on each sale.
Except, there are decreasingly few developers who have sold retail in any large percentage recently. Today, online sales are the norm for everyone and publishers have no prior model to compare.
For that reason, if Apple is really demanding half the income, and the Wall Street Journal isn't trying to squeeze more out of the deal with negotiating in the press, that's got be enough reason to make publishers shy away from the deal. It's really a complicated decision, but you can look at that 50 percent and easily decide minus information that it's too much, and too big a gamble to the existing subscriber revenue base.
Except for one thing. There's a second psychological issue in play here and it's that maybe asking for 50 percent says that Apple is very confident of success. You can be as confident as you like and still fail, plus we really do not know how Apple is describing its deal to publishers.
Yet maybe that 50 percent is bold. Maybe asking for half the profits is a way that drives home to publishers that there will be profits.
We can only hope so.