This one is slightly off-topic but one that is close to my heart - Apple's policy on subscribing to newspapers and periodicals through iTunes. I have an iPad and one of the things I love is being able to read all manner of magazines on it - particularly overseas mags such as Wired that I can get on the iPad for $4.99, instead of paying $15-20 for an imported print copy. If I lived in the US, I could get a print subscription for very little but the international subscriptions are fairly pricey. So I've been looking forward to being able to subscribe on the iPad and get the benefits & discounts over the per-issue cost.
Apple finally released their strategy for magazine subscriptions through iTunes this week. And it's a little bit controversial. On the surface it looks great and in the usual Apple way, they are making it as easy as possible to make a purchase. You will be able to download the publication's app through iTunes / App Store, then hit a button and subscribe to the publication using your Apple ID and iTunes account. All good so far. The controversial part is that they will take 30% of the revenue and pass on 70% to the publisher.
On a per-issue basis, 30% is probably not unreasonable for the store front and distribution - be it iTunes or your local paper shop. But subscriptions work differently. Normally if you purchase a magazine subscription - particularly from the bigger publishers - you engage the company directly. Subscriptions are usually an economical way of getting every issue at a fair discount below the cost price. Part of this 'discount' is due to the fact that there are less middlemen involved in the transaction. In the modern age of free information on the internet, that is the preferred way for the publishers to go in order to thrive and survive. Subscriptions and sales of newspapers and magazines are down considerably on a few years ago - google for magazine circulation figures and you can find plenty of examples.
Apple's 30% cut will mean that either subscription prices go up or the publishers profits go down. Either way it isn't great for an industry starting to struggle. But this is only part of the problem. Publishers will give you cheaper subscriptions because they will capture your personal data, which they will use to advertise other products and services to you, or sometimes sell to third parties. This data is pretty valuable these days. When a company has free access to this information and knows your habits and preferences, they can target advertisements and special offers to you, making marketing and selling that bit cheaper (in theory at least). With Apple's subscription model, they will have this data and not the publishers. Another example of why they will either need to increase prices or reduce profits.
Well why don't the publishers go direct, you say? Because Apple won't let them. OK, not strictly true. While the publishers can market and sell directly to you, part of their agreement says they must still pay 30% to Apple. Wow! I understand Apple should still be able to take some cut for handling the distribution but if they are not having to do any marketing, financial transactions, etc then 30% becomes very greedy indeed.
So what's the answer? I think that what we will see is publishers creating web readers, so they can sell you these subscriptions directly and you can view the magazine on any web browser. That way they can manage the costs. There could well be an issue with security / piracy with this model but I can imagine that development is already in hand to address these. Normally what Apple wants, Apple gets and this will be the case at least initially. Ultimately this will cause a lot of pain to publishers but let's hope they use this pain to motivate them to provide some better, where consumers can pay a little less and they can make a little more, cutting out the middleman.
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