David Carr details the ongoing battle between news publishers and Apple over subscription plans:
Digital subscriptions, a grail for the mainstream media that often seemed more like a mirage, took on some firm if not altogether friendly dimensions last week.
Traditional print publishers have spent the past few years cast in the role of the nice old-fashioned girl in high school who was ignored while more recent arrivals got all the attention. But last week, print was suddenly the popular girl, with not just one but two of the big men on campus — Apple and Google — stepping up with digital subscription plans. Publishers, who have been stuck selling single issues rather than subscriptions since the iPad came out last April, suddenly had a way to electronically replicate their subscription business with the hope of bringing in much needed revenue from digital consumers.
Apple came knocking on Tuesday with a plan that did not so much offer terms as dictate them in granting access to Apple’s vast installed base of consumers in the App Store and growing cadre of readers on the iPad. In return, publishers would give up 30 percent off the top, control over pricing of their digital product in other realms (no undercutting the Apple price) and their direct relationship with consumers. With its enviable tandem of products that everyone wants and a store where everyone buys, Apple believes it has the leverage to tell publishers: They are our customers. You can rent them, but they will remain in our custody.
The very next day, Google unveiled its One Pass plan. It included a 10 percent cut on transactions but allowed publishers to set prices and terms. It also would enable consumers to use a single user name and password for access to content they’d paid for on a variety of devices. Publishers would share in the data supplied by consumers and be free to include any number of options — subscriptions, day passes, metered access, pay-per-article plans, multi-issue packages. One Pass has been hailed as a do-over for publishers, but it could also be a bit of a make-over for Google, which historically has not been on great terms with publishers. The company did, after all, play a primary role in turning expensive content into a free commodity. In the Google approach, the customers would be shared with the publishers.
For publishers, all this was, and is, a moment of reckoning. The new subscriptions would be lovely but dear. Apple demands a steep share of the revenue, but also denies publishers precious consumer data. Before the Web, print advertisers had to live with the fact that they were buying some share of an audience they didn’t want. That world has changed. Now advertisers are looking for more accountability and targeting from all forms of media. Apple was essentially offering the same terms to publishers who had spent decades building brands that it extended to any teenager who came up with an app a few months ago.
True enough, Apple said that if publishers were able to see a digital subscription on their own Web site, they could keep all the money and data, but by not allowing links to the publisher from the app itself on the iPad, that’s a big bag of empty. Anyone who has been near an iPad will tell you that the chances of people leaving that one-tap purchase environment to trundle over to a publisher’s Web site are tiny. (Those terms of engagement and the power over pricing were onerous enough to draw the attention of the Justice Department and the Federal Trade Commission. According to a report in The Wall Street Journal, both agencies had taken a “preliminary” interest in whether Apple’s approach to selling digital subscriptions was anticompetitive.)
When Apple opened the door to subscriptions on Tuesday, publishers mostly stood pat, offering up only a few magazines — Popular Science, Elle and Nylon — as experiments. Apple’s announcement included no major partnerships, and big publishers like Time Inc., Hearst and Condé Nast were muted or silent in their responses.
It makes sense in a way. Mindful of the power of precedent when it comes to control over pricing — the music business is a most vivid object lesson — publishers are in no big hurry to hold hands with the folks from Cupertino.
“If you are a publisher, it puts things into a tailspin: The business model you have been working with for many years just lost 30 percent off the top,” said David Wertheimer, chief executive and executive director of the Entertainment Technology Center at the University of Southern California. “It will be a battle of wills.”
Because the iPad created an entire new category, in this case one that makes old media dazzle like new, it is difficult to tell how much of the market Apple will end up owning once it matures. Is the iPad analogous to the iPod, which essentially owns the category, or more like the iPhone, with which Apple opened a commanding lead only to have Google, through its Android software, close the gap through cheaper and more open alternatives? Significant competition among tablet makers could give publishers some room to negotiate.
“If I were a publisher, I would definitely take my time,” said John Squires, a consultant and former executive at Time Inc. and Next Issue Media, the industry consortium that was set up to create a digital newsstand. “Why agree to terms that you can’t live with in the future?”