Apple Sub Plan Might Mean War

When Apple announced its iPad subscription plan for newspapers and magazines last week, publishers should have jumped for joy. It was the announcement they had been waiting for, after all. Instead, it seems the news has only deepened the divide between Apple and the industry, and brought them closer to open war.

“They’re the beautiful girlfriend you had in high school who was a bitch for no apparent reason,” grumbled one publishing executive, who like most won’t criticize Apple on the record. “They’re putting publishers on a very tricky path by making no promises and moving at a glacial pace. They’ve chosen to make it as difficult as possible to execute. They’re frenemies, for sure. You have to hope at some point the FCC or someone here begins to look at it.”

(In fact, federal antitrust law enforcers are looking into Apple’s new terms for content sellers, The Wall Street Journal reported.)

While it seems the industry is getting what it’s long wanted—the ability to sell subscriptions, not just single copies—Apple has rigged the game. Most sales will go through its App Store, and Apple will take a 30 percent cut of every transaction there. Plus, consumers who go through the App Store will have to volunteer their information to the publishers, and it’s unlikely many will do so. Also, Apple has decided that publishers can’t undercut the prices offered in the App Store, which means they can’t play around with special deals for print the way they have in the past.

Any hopes that the iPad would be the industry’s savior has faded, and months of dealing with Cupertino since the tablet was introduced last April have left publishers disappointed and frustrated. While praising the company’s products and consumer orientation, they complain of unexplained delays by Apple’s gatekeepers in getting apps approved, one-line rejection messages and an anti-nudity policy that was applied arbitrarily. And policies seemed to change with maddening regularity. One publishing company head called a guideline “the Tuesday rule,” knowing that by the next day, it might have changed. The newly announced subscription rules added insult to injury.

Or maybe it’s injury added to insult, because Apple’s new policy could put a serious dent in publishers’ bottom lines.

Newspaper publishers may have even more reason to be upset. Like magazines, they’re annoyed with the app approval process and subscription terms. But their industry is in worse shape, and they have the added loss of control over having to hand over sales of subscriptions to a third party (something magazines are used to). While Google has emerged as a rival to Apple, offering publishers better conditions to sell their digital content—its One Pass allows publishers to keep 90 percent of their revenue as well as subscriber information—observers say Apple is likely to dominate the high end of the market with its iPhones and iPads for at least a year.

But this fight isn’t just about publishers versus Apple—it’s also divided the publishers themselves. In one camp are big players like Time Inc., Condé Nast and Hearst, who have a huge stake in selling subscriptions and collecting information on their customers and, so far, haven’t accepted Apple’s new terms. On the other side, there’s News Corp., whose iPad-exclusive paper The Daily pioneered Apple’s subscription model, and a few smaller players like Hachette Filipacchi Media U.S. and Bonnier Corp., which jumped aboard immediately with Elle and Popular Science, respectively—and, in some people’s eyes, sold out the rest of the industry.

“The brands who submitted to Apple on day one are the equivalent of France in World War II,” a publishing exec fumed. “They’re the same ones who fold on cheap rates.”

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