Publishers have tough choices ahead with Apple's new subscription program

With the unveiling of The Daily, we got our first look at Apple’s new iTunes-based periodical subscription service. The feature has been long awaited by publishers, but its implementation is likely to leave many unsatisfied.

To its credit, Apple has made it as easy to purchase a weekly newspaper subscription as it is to purchase a hit single for your iPod. In The Daily's case, the 99-cent weekly price (after a two-week sponsorship by Verizon) is even the same.

But print publishers probably will question the new (or at least newly enforced) restrictions on their business strategies that accompany this new subscription tool. The The Daily, as a tablet-only publication, faces fewer of those challenges.

What we know about Apple's subscription service

Purchasing is handled entirely within the app and is billed to the credit card tied to your iTunes account. This replicates the frictionless “one-touch” purchasing that consumers are accustomed to for app and music downloads.

The key is that these are recurring subscriptions that automatically renew each week or year. This is a big win for publishers; until now, iTunes only allowed users to buy one issue at a time or get a subscription that didn't renew.

Apple has updated its terms of service to give publications the ability to gather subscriber information, including the name, e-mail address and ZIP code connected to an iTunes account.

But users have to opt in to that disclosure, despite publishers' insistence that full access to customer data is a business necessity.

At this point it appears Apple will retain its standard 30 percent royalty on subscription revenues sold within iTunes.

Publications question Apple’s business policies

The most important question is when the recurring subscription option will be available to other publications. On Wednesday, Apple’s Eddy Cue said only that an announcement is forthcoming.

The larger question for publishers is what terms Apple will enforce on publishers.

Last month, rumors spread among the European press that Apple planned to prohibit newspapers from providing free iPad editions to print subscribers. That controversy was exacerbated this week by Apple’s rejection of the Sony Reader iPhone app, which handles book sales via its website — outside iTunes.

As John Paczkowski reported Tuesday, the dispute boils down to this: Apple plans to require publishers to offer in-app purchasing via the iTunes store even if they already handle purchases via the Web. This is apparently not a new policy, but it is being newly enforced, catching some, including Sony, off guard.

A paper — such as Rupert Murdoch’s Wall Street Journal — that has already enabled iPad subscriptions via its own e-commerce system, must now build that functionality into its app.

The Journal and other publications use the Web for payments so they can bundle print and tablet subscriptions and collect customer data. They also avoid having to pay Apple 30 percent of each sale.

Last year I described three different approaches for publishers to sell their content outside iTunes. As best I can tell, all of those strategies will still be permissible in the future, as long as those publishers also enable users to buy inside the app.

What are the options?

Publishers must now answer three questions:

  • What is the business case for (or against) exclusively using Apple’s in-app purchasing system?
  • Given the ease of the in-app purchase, will consumers largely ignore external subscription options?
  • If customers subscribe using the in-app function, how can they be convinced to opt-in to share their personal data?

There is no single answer. Small publications are much more likely to accept Apple's terms — and 30 percent royalty — in order to take advantage of the growing tablet and smart phone market.

For larger organizations, offering an external subscription option will now mean competing against Apple for their own subscribers and revenue. That requires publishers to create new value for readers by focusing on a "read anywhere" bundling strategy.

Allowing access to print, Web and mobile platforms, all for one prince, is an obvious value that only publishers can offer. Otherwise, the ease of Apple's now mandatory one-click subscriptions will quickly prevail among readers.


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