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Apple Could Be Making an Offer Newspapers Can Refuse

Apple Could Be Making an Offer Newspapers Can Refuse

Publishers are likely hoping that tablet computers like the iPad will reinvigorate interest in reading and subscribing to daily newspapers, but they might not be willing to experiment with the model on Apple's terms. The company reportedly plans to launch such a service for the iPad, but it would demand a healthy cut of subscription and advertising revenues.

By Sidney Hill MacNewsWorld ECT News Network
09/16/10 10:59 AM PT

Reports that Apple soon will allow users to subscribe to newspapers through their iPads highlight just how bumpy the road continues to be for traditional print publishers trying to make the transition to the digital age.

The San Jose Mercury News broke the story of a possible iPad newspaper subscription service on Wednesday, saying Apple is likely to take 30 percent of all revenue generated from newspaper subscriptions sold on the iPad and a 40-percent cut from any advertising revenue newspaper publishers generate on the platform.

Other media outlets published stories containing those same figures, which the Mercury News attributed to Roger Fidler, a newspaper industry consultant and program director for digital publishing at Donald W. Reynolds Journalism Institute.

Clarifying the Numbers

"What those initial stories didn't clarify is those numbers reflect agreements that Apple has in place with existing partners," Fidler told MacNewsWorld.

"Thirty percent is what Apple gets from any application sold through the iTunes App Store. It gets 40 percent of all revenue generated on iAd (Apple's mobile advertising platform)," he pointed out.

"The assumption is that the same terms would apply to newspaper publishers, but the publishers don't particularly like that idea. They would prefer to pay a flat fee," Fidler added.

Though they don't favor sharing revenue with Apple, some publishers have suggested they might compromise on that point if Apple would agree to share information on people purchasing subscriptions with the publishers, Fidler said.

Can Publishers Sidestep Apple's Fees?

The publishers could use that customer information -- which Apple typically guards very closely -- as a bargaining chip when negotiating rates with advertisers, which might lessen sting of sharing subscription revenue with Apple.

It's possible the publishers could avoid sharing ad revenue with Apple by placing and selling ads within their own content streams, and thus sidestepping the iAd platform, Fidler suggested, though it's not likely that Apple will let the publishers skate on the 30-percent subscription surcharge.

The New York Times Co. is preparing to launch a platform called "Press Engine" that will give newspaper publishers access to application templates they can use to deliver content to Apple iPhones and iPads. Publishers would pay the New York Times Co. a one-time licensing fee to purchase the application, plus monthly fees for application maintenance.

We're Just Selling an Application

Several newspapers -- including some not owned by the New York Times Co. -- are expected to adopt applications from the Press Engine platform when it's released later this year. Those publishers will not be required to share any subscription or ad revenue with the New York Times Co. It's not clear, however, whether they will be able to sell subscriptions on iPads or iPhones without going through Apple's App Store, and thus paying the 30-percent surcharge.

"It's my understanding that anyone selling anything on an iPad or iPhone has to do it through the iTunes App Store," Fidler declared.

Apple didn't respond to requests to clarify this point, and a New York Times spokesperson was unable to answer the question.

"We're simply selling an application for newspaper publishers to deliver content on the iPhone and iPad," said Kristin Mason, a spokesperson for the New York Times Co. "The individual publishers will decide whether to use the application to offer paid subscriptions or to sell advertising."

When asked if publishers might be able to avoid paying Apple a 30 percent cut of subscription revenue by using Press Engine -- rather than a proposed Apple subscription service -- Mason said "there's not enough information available at this point to make that call."

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