Apple leaves print subscribers to publishers, targets the growing audience on mobile devices

With its new iTunes subscription service, Apple is aiming for control of a rapidly growing mobile audience, leaving traditional publishers to chase after readers who prefer a print-centric “read anywhere” bundle that includes access to Web and mobile platforms.

Publishers pursuing their own e-commerce strategies, including those I wrote about last year at The Columbus Dispatch and The Oklahoman, must decide how to compete with Apple when, as Erick Schonfeld puts it, Steve Jobs now holds pricing power over the entire industry.

The long-awaited subscription feature, officially announced Tuesday, will require publishers to offer subscription options favoring Apple’s own iTunes payment system, even if the publication already handles the transactions via its own website.

For iTunes-based in-app subscriptions, Apple will keep its customary 30 percent royalties. For subscriptions generated outside of the app, publishers keep 100 percent of the revenue but the pricing must be consistent with the in-app charges.

Phil Pikelny, vice president of digital at The Dispatch, questioned Apple’s justification for keeping 30 percent of all in-app generated sales. He noted that the royalty applied not just to new customers, but also to every renewal payment made by those readers in perpetuity.

Nevertheless, he said the paper would update its app to comply with the June 30 deadline dictated by Apple.

“The audience using their iOS platform is large and offers us significant opportunity,” he said. But, “If Apple can’t maintain their over-sized market share of device users, they’ll be hard-pressed to maintain their revenue share demands.”

Adding to the current challenge for publishers, the terms of the subscription service also forbid apps to link to outside payment systems. So, the iTunes purchase option will be both simpler and far more accessible to users.

According to a statement by Apple, publishers will be able to set the price of a subscription and the length, including weekly, monthly, bi-monthly, quarterly, bi-annually or annually. For iTunes subscribers, Apple will share some customer information, including name, e-mail address and ZIP code, on an opt-in basis. Publishers will be allowed to request more information from users within the app, but that request must be accompanied by a warning that those additional shared details are not covered by Apple’s privacy policies.

Publishers will also be allowed to sell mobile-only access via external payment systems, or provide free mobile access to existing print subscribers. But, publications will not be allowed to favor outside-the-app mobile subscriptions by offering them at a discount of the in-app cost.

This policy change will require many newspaper and magazine publishers to reconsider their mobile strategies, and at the very least, as The Dispatch is doing, update their apps to include the iTunes in-app purchasing option.

A likely strategy, already being pursued by some publications, is the multi-platform subscription bundle. A reader pays one fee, and is provided access to the publication’s content on print, Web and mobile devices. That packaging of content, especially for current print readers, is a primary advantage publishers still hold over Apple.

David Thompson, president of OPUBCO Communications Group and publisher of The Oklahoman, told me in November that the paper developed its own iPad app and handles its own e-commerce, with the specific aim of being able to connect with its readers on any platform.

At the time, he said maintaining a direct relationship with subscribers was a “high priority” for the company. “That doesn’t just mean offering a product on specific devices. It also means being able to connect that customer to their profile on our website, [or] to their subscription account for the newspaper.”

Ken Doctor argued Tuesday, that similar “all access” strategies are correctly focused on readers. “Well-executed,” he wrote, they offer “the chance, a new one by the pre-tablet standards of two years ago, to move print customers to paid digital reading experience — and get into play for a new audience.”

I spoke with Ben Edwards at the U.K. app developer PageSuite on Tuesday morning, as Apple’s announcement was being made.

Edwards said that offering both in-app and external payment options is the best solution for readers. “It is offering customers the ultimate choice,” he said. “And, it is up the customer to decide how they want to proceed.”

“The 30 percent [royalty] is a hit but the process is so simple it makes up for and justifies the 30 percent,” he said.

And from a business perspective, Edwards argued, iTunes offers a better revenue generating opportunity than publishers would have on their own.

“Speaking to other vendors,” he said, “they see higher re-subscription and single issue [purchase] rates through iTunes,” than through external payment systems.

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