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Why Apple Backed Down in Fight With Publishers

Tech giant capitulates over pricing plan

Steve Jobs

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Maybe Apple isn’t so untouchable after all. The device maker, which has been locked in a battle with publishers, made a surprise concession recently, dropping a pricing requirement for its App Store that irked publishers. Before, publishers couldn't undercut the subscription price they offered in the App Store—the new guidelines do away with that requirement.

The previous guidelines, issued in February, seemed aimed at ensuring Apple had a pricing advantage. They also presented a complication for publishers who are used to testing various price points to hook new subscribers and reward existing ones.

Apple doesn’t say a lot about why it does what it does. But while it had gotten a few big publishers to agree to its subscription terms, it’s had pushback from companies over its terms, including the 30 percent it skims off App Store purchases and its refusal to share customer data, and it's likely this move is related to that. Other devices are coming to market, presenting new competition for Apple, and loosening the stranglehold that the company has had over content producers to this point. Plus, publishers are exploring browser-based apps that would skirt the App Store altogether. This week, The Financial Times made waves when it did just that after having rejected Apple’s subscription terms.

Outsell’s Ken Doctor believes other publishers, like The New York Times and Wall Street Journal, marquee brands that are important to Apple, see the FT as a potential model to imitate at some point. “Plainly, it’s a change of course for [Apple],” he says. “Apple knew there was dissatisfaction.”

As for the practical effect, publishers can be expected to explore different subscription prices for digital editions. Condé Nast, for one, is already selling digital subscriptions on its own sites as well as in the App Store.

”It will allow publishers flexibility in meeting the demands of their long-term readers and some creativity in offering packages combining digital and print,” says Gregg Hano, vice president of publishing at the Bonnier Technology Group, whose Popular Science was one of the first magazines to sell a digital version on the iPad.

Look for publishers to test higher prices in the App Store to offset Apple’s 30 percent cut, Doctor says. “What they all need is this new stream of digital circulation revenue,” he says. “They want to keep that pricing as high as they can.”