The Industry

How a Premium News Subscription Fits Into Apple’s Larger Plans

As consumers keep their iPhones longer, the company needs to grow its services revenue.

Hundred-dollar bills spill out of an iPhone against a tiled background of Apple News icons.
Photo illustration by Slate. Photos by Apple and Thinkstock.

Apple announced it was acquiring digital magazine service Texture last month, and now we know the company’s plans for the app. Dubbed the “Netflix of magazines,” Texture let readers access a library of more than 200 magazines, such as the New Yorker, Rolling Stone, and Vogue, for $9.99 per month. According to a report from Bloomberg, Apple plans to integrate Texture into Apple News, eventually transforming the app into a premium subscription offering—and growing Apple’s suite of subscription services in the process.

The new Texture-infused Apple News would fall into Apple’s growing services business. Currently, services includes things like iTunes, Apple Music, iCloud, Apple Pay, and the App Store. Apple earned $8.5 billion in revenue in this category in its latest reported quarter, a 13 percent increase over the previous year. While iPhone sales continue to be Apple’s cash cow, the services segment is catching up as our smartphone purchasing habits shift toward a longer renewal cycle. In 2017, services contributed 23 percent of Apple’s revenue growth, but by 2022, Morgan Stanley analyst Katy Huberty expects that number to leap to 56 percent. The Texture acquisition is another push toward the company’s goal of earning more than $50 billion in revenue from its services sector by 2021.

A subscription-based Apple News service isn’t instant cash for Apple, though. Apple will need to build on the successful model Texture has set up. It will also need to drive home compelling reasons for iOS device owners to subscribe to the app. The company’s previous dip into the space, Newsstand, left many iPhone owners frustrated and searching for ways to hide the icon from their home screen. Apple eventually capitulated and revamped Newsstand into what we now know as Apple News. In a way, the Texture acquisition brings this app full circle, once again giving iOS users easy access to a variety of news and magazine titles, but in a potentially more profitable form for Apple.

Texture’s model—granting access to the latest magazine titles for a monthly fee—could also work for some of Apple’s other services. With iOS 11, Apple debuted a redesigned App Store with a heavy focus on editorial curation. The design highlights a variety of new and trending apps for iOS users to discover and download. What if Apple offered access to a handful of these rising apps each month, Humble Bundle–style? For years, this site has offered curated, discounted bundles of games, book titles, comics, and more; with the new look of the App Store, it would make sense to take advantage of that layout with this approach.

There are a variety of such avenues Apple could take to make its services even more profitable. The possibility of an Apple News subscription service underscores the need for Apple to consolidate its many services. It would make sense for the company to offer a media bundle, for example. This could include Apple Music, Apple News, and its upcoming push into television programming, rumored to be yet another subscription service. At $9.99 a pop—what’s come to be the standard rate for many standalone streaming and subscription apps—consumers may be loath to buy into all three separate services. But, for a discounted rate, access to the news, music, and TV apps might be a no-brainer.

Despite the previous accolades of the Texture app, Apple analyst Gene Munster is bearish on the success of the new Apple News model. “People pay for music, they pay for video, and most news services are ad-supported,” Munster told Bloomberg. “If Apple launches this as a similar business to Texture, they likely won’t have many subscribers.” Given the state of the social media landscape, Apple’s subscription-based news and magazine app could land at just the right time that users are willing to pay for such a service. And lumped together with other media options that people are used to paying for, Apple could find itself on its way toward transforming itself from a hardware company into a service-centric business.