Apple is reportedly planning a new service that could help to solve one of the biggest problems in online journalism—if it’s done right. But a new Wall Street Journal report suggests the company may be treating it more like a land grab.
The service, as described in media reports, would let Apple users pay a single monthly fee—perhaps $10—to read articles from a range of news outlets and magazines that would otherwise require separate subscriptions. It has been billed as a “Netflix for news,” although as industry analyst Ben Thompson points out, its business model sounds more like Spotify’s. That’s especially true if it ends up being part of Apple News—a paid tier on top of a free product, like Spotify Premium. Screenshots uncovered by the blog 9to5Mac suggest that’s likely.
In an ideal world, a solution to what ails the news industry might look a lot like this. It supports the notion that good journalism is worth paying for and makes it easy for casual readers to do so without having to manage multiple subscriptions to different paywalled sites. At the same time, it bolsters paid subscriptions as a business model, which encourages publishers to prioritize quality over clicks. That would be a welcome development, helping to end the ugly era in which free access to online news spurred media companies to chase clicks worth fractions of a penny by peddling bogus headlines and pandering to readers’ biases.
Of course, this isn’t an ideal world. It’s the tech platforms’ world, and publishers are just trying to survive in it.
If the WSJ’s reporting is accurate, Apple fully grasps the leverage it has over news organizations and appears to be intent on exploiting it. The company is said to be asking for a 50 percent cut of all the revenues from its subscription news service, leaving its media partners to compete for the scraps. That demand has been a sticking point for publishers such as the New York Times and Washington Post, which so far have not agreed to participate, the Journal reports.
Fifty percent is an awful lot for the company that’s not producing any of the content that its users would be paying for. Perhaps Apple feels like it can get away with that in an era when digital media companies are struggling to make ends meet—and in which platforms like Facebook, Google, and, yes, iOS command massive audiences. Google and Facebook are commonly cited as the villains that have commoditized online news. Apple seems to expect that it will be greeted as a savior for taking a more thoughtful, hands-on approach with Apple News, which foregrounds the role of human curators—even if it isn’t making publishers much money.
This may also be a sign that Apple is feeling a squeeze of its own (albeit one that any media company would trade for in an instant). Sales of the iPhone, which have driven the company’s unprecedented run of success, are finally slowing. To offset that trend, Apple is looking to squeeze more money out of each iPhone user by selling them subscriptions to services. In addition to the paid news service, CNBC reports that Apple is close to launching a streaming video service. It could announce both at a special event this spring that focuses on services, rather than hardware.
Apple, of course, has the right to wring as much money from a paid news product as it can get. It’s not obligated to be charitable to its media partners (although rivals Google and Facebook are increasingly treating journalism as a charity in a literal sense). Its own experience with iTunes and record labels has taught it that playing hardball with content owners can pay off handsomely.
But in this case, squeezing news publishers could backfire. Whereas the top record labels were under equal assault from piracy by the time iTunes came along, the top publishers today—including the Times and the Post—have fast-growing subscription businesses. Those outlets charge readers $8 to $10 per month for basic digital access. Not only do they keep all of that money, they also form a direct relationship with their subscribers, which breeds loyalty and allows them to keep track of what people are reading. That in turn helps them improve their products.
Apple’s service would help these news outlets reach new readers who don’t already subscribe. But these new readers wouldn’t be anywhere near as lucrative. For each one, Apple would keep half the monthly revenue, and each participating publisher would receive a (presumably small) fraction of the other half, based on the amount of time readers spend on their articles. So now we’re talking maybe a dollar or less per subscriber. And Apple would control the relationship with the reader, including behavioral data.
Throw in the likelihood that some readers will choose an Apple News subscription instead of subscribing directly to the publisher, and it starts to look like a losing proposition. Thompson also points out that, for serious news organizations, the subscription model holds appeal partly because it’s based on reader loyalty; Apple’s subscription would put publishers back in the position of competing for shares of readers’ attention.
Without the likes of the Post or the Times, a premium Apple News service could still work. It might look more like Texture, the startup that Apple acquired a year ago that focused on magazines rather than hard news. But that’s a much less exciting proposition—one that does little to address the crisis in online news, for either publishers or readers. Magazines that focus on sports, entertainment, lifestyle, or business have their own problems, but they’re less critical to the workings of a pluralistic, democratic society.
Apple News won’t save the news industry by itself, no matter how well-conceived or well-executed. (For one thing, there are still more people using Android devices than iOS.) But if Apple were to settle for, say, 30 percent instead of 50, it might end up with a far more valuable product for readers and publishers alike. Perhaps that is Apple’s plan, and the 50 percent figure was just an aggressive start to negotiations. Maybe the leak to the Wall Street Journal was some savvy publisher’s attempt to bring public pressure to the table.
But it’s also possible that Apple really won’t settle for less because its own incentives have changed. As long as success for Apple’s business lies in iPhone sales growth, the company could use services like Apple News as a loss leader to sell hardware. If, however, Apple’s growth must now come from elsewhere, its services have to become cash cows in their own right. That said, if Apple is suddenly relying on journalism to drive significant profit growth, it’s in worse shape than we thought.
