‘Bundles always dilute the brand’: Publishers grapple with Apple’s new subscription service

Apple wants to create a Netflix for magazines, but not every publisher is ready to hop on board.

On Monday, Apple plans to unveil a paid subscription product that includes access to dozens of magazines and reportedly at least one national newspaper, The Wall Street Journal, for $10 per month. Apple will keep 50 percent of that revenue and divide the remaining half among publishers based on readers’ “dwell time,” or the amount of time they spent reading a given publisher’s content, according to several publishing sources.

Those terms, plus the fact that Apple will control the customer relationship and most of the data about who is reading what content, have been enough to turn off several publishers, including The New York Times and the Washington Post. Some publishing executives, notably The New York Times’ CEO Mark Thompson, have also argued that having their content lumped together with dozens of others, at a price far lower than a typical newspaper subscription, sets a dangerous precedent.

“It totally commoditizes news and undermines publisher pricing,” said an executive at one publisher that is not participating in the product. “Bundles always dilute the brand visibility and brand narrative of a publisher by dint of being thrown together with everyone else. It will not be a ‘sticky’ read for any one publisher.”

Publishers are not entirely opposed to bundling strategies, especially as they seek to grow consumer revenue. Yet with so many feeling like they haven’t captured all of their potential subscribers yet, some publishers are worried that Apple could stunt one of their biggest growth opportunities — and are willing to wait to sit out of Apple’s flashy new product, for now.

Apple did not respond to a request for comment by press time.

Many of the publishers involved in Apple’s forthcoming subscription service did not have much of a choice.

Last year, Apple purchased Texture, a service that offered unlimited digital access to nearly 200 magazines, plus a daily news digest from Reuters, for up to $15 per month. Many of the publishers that were part of that version of Texture — which included titles ranging from Cosmopolitan to Bloomberg Businessweek — were locked into long-term agreements with the service, said one source familiar with the matter. This spared Apple the trouble of having to start negotiations from scratch.

But Apple has also had to negotiate new deals with some of those publishers since the Texture acquisition, that source said. In some cases, those negotiations have led to shorter terms. The New Yorker, for example, has the ability to exit the Apple product early because of its own highly developed digital subscriptions business, according to a report in Business Insider. One source said that Apple reps did not even bother trying to sell the source’s publication on a multiyear deal.

Those short terms may be needed because Apple is not offering revenue guarantees, multiple sources said.

And publisher sources say there is a lot to dislike about the metric that Apple will use to calculate revenue payouts. Dwell time, Apple’s version of time spent, doesn’t account for the effort or cost that goes into making content; and the metric puts visual publishers at a disadvantage compared with those that publish long reads or essays. Some see the possibility that dwell time, as a metric, could create perverse incentives that change the kinds of content publishers include in the service.

“We’re going back to a scale play where publishers will chase eyeballs and traffic to be No. 1,” one publisher source said. “We’re welcoming an era of metrics that are a bit murky. It’s awful for publishers. It’s a different type of a race to the bottom.”

Proponents of Apple’s service highlight the fact that Apple could offer a free trial of the product to hundreds of millions of iPhone owners instantaneously. Yet others see the size of Apple News, Apple’s most recent foray into distributing news and publisher content, as cause for concern.

U.K. publishers, for example, question how meaningful this reach would be for publishers with subscription strategies. Apple News is used by around 85 million people globally, out of a potential 1.4 billion Apple device users — and it’s growing less than 1 percent a month, according to a publisher.

News publishers typically convert less than 1 percent of their audiences into paying customers, with real standouts getting closer to 3 percent, said Matt Lindsay, the founder of Mather Economics, a firm that helps develop consumer revenue strategies for publishers.

If Apple landed somewhere in the middle and got 2 percent of Apple News users to subscribe to this product, it would mean a total pool of less than 2 million people to monetize.

Even if Apple’s product manages to convert an unprecedented percentage of Apple News readers into customers, publishers see even more risks down the line.

Publishers and other industry observers expect that Apple will eventually combine this product with some of its other media services, including Apple Music or Apple TV, into a kind of mega-bundle. This could be sold either directly by Apple or through telecommunications companies such as Verizon.

“They’re going to look to create a kind of lifestyle bundle to compete with Amazon Prime,” said Gautam Mishra, the CEO of Inkl, which sells access to ad-free versions of dozens of newspapers and magazines for $10 per month. “They’re going to go into services to offset the slowing growth if iPhone sales.”

Though Apple has not discussed that prospect with publishers – Apple’s reps would change the subject when asked, one source said – such a move would likely make the economics even more unpalatable, several sources said. Music and TV shows are pricier than text, and arguably more important for Apple.

Some publishers said that over time, Apple’s subscription service might function less as an alternative to subscriber revenue and more like a better version of Apple News. Some publishers are now beginning to regard Apple News as more of a showroom than a standalone source of revenue because of its persistent monetization issues.

There is some confusion among publishers about how this forthcoming product relates to a second one, also associated with Apple News.

Apple has told some publishers participating in the product that they can share just some of their content on the platform, but not all of it, one source said.

This could mean that, over time, publishers will be able to identify what kinds of content their direct subscribers read, and how that differs from what other audience segments enjoy. In this way, publishers could use Apple’s new product to their advantage, said Matt Lindsay.

“In the future, [publishers] won’t put all their content in it,” Lindsay predicted, who said that over time, he expects that publishers will use processes, likely automated ones, to determine which channels to distribute their content through to maximize consumer revenues.

For years, publishers have fretted that platform distribution dilutes their brands and is a dangerous trend for those looking to build direct connections to their readers and an unacceptable risk for those trying to turn those readers into paying customers.

Yet not every publisher is sitting out of Apple’s new service. Vox, for example, whose parent company Vox Media announced plans to add a membership to its product later this year, will be part of the program, according to a report in Bloomberg. For Vox and other publishers with less developed consumer revenue operations, the prospect of gaining a revenue stream without putting forth much effort is intriguing. Vox Media did not comment on that report.

“Every story about this service treats [publishers’] relationship with their subs business and Apple the same,” said a source at one publisher that’s participating. “For someone that doesn’t have hundreds of thousands of subscriptions, why not take a chance?”


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