Will Apple News Cannibalize Traditional Media the Way iTunes Did Music Labels?

Available to WrapPRO members

Apple is “laughing at the publishers,” magazine expert Samir Husni says of the tech giant’s plans

Apple CEO Tim Cook launched the tech giant’s new Apple News+ magazine subscription service on Monday with typical fanfare and an offer that seemed to good to be true: For $9.99 per month, customers can read more than 300 magazines, digital publishers, and leading newspapers like The Los Angeles Times and The Wall Street Journal. That sounds like a boon for U.S. readers: Roger Rosner, Apple VP of Applications, said it would cost $8,000 per month to individually subscribe to each magazine on the app. But can magazine and newspaper publishers still maintain their readership, and revenues, under such a disruption to their ordinary way of attracting readers and converting paying subscribers? Some media experts are skeptical. “They’re laughing at the publishers,” Samir Husni, director of the Magazine Innovation Center at the University of Mississippi, said of Apple. “They’re saying, ‘You don’t value your content, so why should we?’” Apple News+ looms as “the next abusive relationship” for publishers, added Gabriel Kahn, a journalism professor at USC Annenberg and former Wall Street Journal bureau chief in L.A., saying this was the latest example of a major tech company taking advantage of the industry’s business woes. “These big platform partners have always made promises that have to do with their huge audiences and then they’ve just pivoted or turned on a dime. They’ve never approached this with any type of concerns for the longevity of the publishing business,” he said. Apple News+ subscribers will have access to a who’s who of top publishers, including The New Yorker, National Geographic, The Atlantic, Vogue and Rolling Stone. Up to six family members can share an account. And customary for Apple, it’s sleek and easy to navigate, allowing users to scroll through a slew of pristine covers before clicking and having the latest articles at their fingertips. The plan comes with some restrictions — and no wonder, since a Wall Street Journal digital-only subscription runs about $37 per month. Apple News+ users will only get select U.S. and international news stories from the Journal for up to three days, while the paper’s own subscribers “will continue to have exclusive access to the rich business reporting and analysis which they are so passionate about,” William Lewis, chief executive of Dow Jones, the WSJ’s parent company, said in a memo obtained by TheWrap. An Apple employee familiar with the service said it will offer full access to its slate of magazines, with back issues of monthly magazines available for a year and those of weeklies for six months. Outlets like Conde Nast’s The New Yorker were quick to note that Apple would only offer stories from the most recent print editions — all past stories and digital content, including exclusive videos, would require a traditional magazine subscription to access.  Despite the content limitations, publishers may have a lot to fear from the disruption to their business models. “Any time there’s a new shiny object, [outlets] have to go and retool their operation,” Kahn said. “All these things never materialized in the way that they’re promised and yet they required so much investment and change on the part of the publishing industry. It’s always been, ‘Hey, here’s our new thing, and you guys accommodate us,’ rather than, ‘Hey, let’s sit down together and work through a plan that’s going to be in both of our interests.’” He continued: “It’s basically these [major tech companies] dictating the terms and the publishing industry either signs on the dotted line or goes away. That’s the abusive relationship part. It’s never consensual, let’s put it that way.” There’ve been plenty of “new shiny objects” in the last two decades, with Facebook and Google being the clearest examples. While publishers have struggled to adapt to a digital-first landscape, Facebook and Google have continued to grab an increasingly large chunk of online ad revenue. Facebook and Google combined last year to pull in 60 percent of all U.S. digital ad dollars, and brought in more than $170 billion combined in international ad sales. Meanwhile, media layoffs have hit a 10-year high, with more than 15,000 journalists losing their jobs last year alone. “The media industry didn’t learn its lesson with Facebook and now they’re putting their faith in yet another tech company,” Husni said, incredulously. For Kahn, Apple’s relationship with its first set of publishers amounts to “iTunes redux.” After Napster scared the crap out of the music publishing business by allowing free downloads of songs, Steve Jobs offered a solution: unbundling the $15 album and letting fans buy songs for 99 cents each. While the move likely saved the recording industry from extinction, it came out the other side black and blue. In the decade after iTunes debuted, music sales in the U.S. plummeted from $11.8 billion in 2003 to $7.1 billion in 2013, according to the Recording Industry Association of America. Now, at a time when many Americans have come to expect their content to be free, publishers are looking at Apple News+ as protection from the barbarians at the gate. In addition, Apple is taking a 50 percent cut of revenue from publishers, according to The New York Times (which pointedly did not partner with the service). At the same time, it’ll pay publishers based on how may eyeballs their articles pull in — similar to how Spotify or Apple Music operates. Publishers also will not have access to subscriber data, limiting their ability to gain reader insights and build their own audiences. The lack of data access is critical, even if outlets are only putting a subset of their content on Apple News+, according to New Scientist editor Conrad Quilty-Harper. “What use is a subset if you don’t have their email address to sign up to the full package?” Quilty-Harper tweeted Tuesday. The arrangement has caused some major outlets to “recoil,” as the Times put it, including the Washington Post and the New York Times. Husni added News+ fails to accurately capture the magazine “experience,” something that’s fundamentally different than quickly listening to a song or watching a movie on an iPhone. “With magazines, there’s a life cycle, one issue after another. It’s more like a soap-opera experience.” This doesn’t translate as well to a service that automatically displays a new digital edition each week or month, Husni said. What Apple does offer publishers is something similar to the social network — a massive audience. Apple has 1.4 billion connected devices around the world. Publishers could be looking at Apple News+ as a sort of “gateway drug,” Kahn said, that solidifies a long-lasting relationship between readers and their content. And for larger outlets, there’s also the promise of additional revenue from the partnership. Wall Street Journal editor-in-chief Matt Murray, in a memo to staff on Monday, said the partnership will lead to more jobs. “We will be hiring. As our journalism needs increase, so will our staff,” Murray said.  “We plan to hire several dozen people in the coming weeks, including reporters in politics, US News and features, as well as editors. Success will mean more to come. I expect that more platforms, and more audiences, will mean a greater need to deepen coverage to serve all types of readers.” As for consumers, there are legitimate concerns about whether subscription fatigue is setting in. But Apple may be more immune to the issue than most. Its U.S. customers have proven to be more likely to pay for subscriptions than non-Apple customers. Research provided by Ampere Analysis shows American Apple Music subscribers pay for 4.2 streaming video services on average, compared to 2.6 monthly subscriptions for non-Apple customers. “Clearly, consumers have been eager for something like this,” Kahn added. “The question is, is Apple the model that’s going to make this work for publishers? The terms of this deal raise serious questions about that.”