Publishers cry foul at Apple's terms in new subscription service - AdAge.com

Apple's upcoming Spotify-style magazine subscription service, an offering with all-you-can eat access to dozens of publishers, will only pay the media partners 50 percent of the revenue, according to two senior publishing executives from different companies with knowledge of the deal.

Apple plans to take half of the proceeds from $10 monthly subscriptions to the magazine service, leaving publishers to split the rest based on how many people read their stories. "It's a shitty deal," said one publishing executive, who spoke on condition of anonymity. "It seems greedy."

Publishing executives spoke on condition of anonymity for this story because they were not authorized to speak publicly about the deal terms. Apple did not return a request for comment.

Apple's new subscription media service is expected to launch in the spring, an outgrowth of last year's acquisition of Texture, an app that was jointly founded by traditional media giants, including Condé Nast, Hearst and Meredith. Texture gave digital subscribers full access to hundreds of magazines laid out as they appear in print. Apple is redesigning the experience, and is expected to make it more dynamic, like Apple News. As of now, Texture isn't much more than a digital recreation of the print product.

"It feels like a punch in the nose, to hear those [revenue sharing] numbers," says Jason Kint, CEO of Digital Content Next, a trade organization that advocates for traditional media companies. "There is significant concern around how platforms are squeezing the oxygen out of the media ecosystem."

Apple's terms come to light in a time of mass layoffs in the digital media space. In just the past month, BuzzFeed, Vice and Verizon Media, which owns HuffPost and other sites, cut about 2,000 jobs. In the past year, Texture originators Condé Nast, Hearst and Meredith have all had to reduce staff, too.

Condé Nast, Hearst and Meredith all declined comment for this story, but they are expected to be a part of the new Texture.

The challenges to the publishing industry are well documented--with the dominance of Facebook, Google and Apple as the main distribution points, traditional media has become beholden to them for their audiences and advertisers. Apple is trying to position itself as friend to the publishing world, and CEO Tim Cook has been blasting Facebook over data collection and user privacy issues.

Apple has taken a different approach to how it presents news and sells digital ads. In Apple News, for instance, it limits data collection and ad targeting, and it maintains editorial oversight of what is presented there.

"We've appreciated Apple's thoughtfulness and leadership on a number publisher concerns over the last year," Kint says. "It would be good to see them take some actual leadership on the economics of the industry and recognize the value of the news and entertainment they help distribute."

Some publishers say they doubt that Apple can deliver the money and audience it has been promising for the subscription service. The skeptical publishers point to the original Texture—it didn't work--as proof the concept is shaky. The publishers say the revenue was meager, and the app itself sputtered through several incarnations before being sold off to Apple.

But Apple claims partners could make 10 times more than what they were making with the old app, according to the publishing executives. One publisher said Apple estimated it could make about $2 million in the first year, which seemed "wildly optimistic."

"I don't see how they get that kind of engagement to get that much revenue," the publishing exec says.

Apple is thinking about bundling the magazine service with other media subscriptions, because it also has Apple Music and it plans to unveil a new streaming TV service in the spring, too. Apple has suggested that the multiple services can be promoted together, according to the publishing execs.

Still, the publishers are wary of committing to the magazine app for a number of reasons, not just the 50 percent split.

For one, Apple is a mysterious company, and it has not quite explained the formula for how it will calculate which publishers get what portion of the revenue. Apple also keeps user data close to its vest, and the publishers won't get the direct relationship with the reader.

Publishers want to grow their own subscription base and not split it with other publishers and Apple. Publishers already have Apple News, which is not quite a big moneymaker, but there is a large audience there.

Apple News attracts about 90 million readers a month, and it is still unclear how News and the subscription service will interact. For now, the subscription service appears geared toward the magazine industry, while Apple News features content from digital-only publishers, newspapers, TV news sites and magazines. However, Apple has asked newspapers like The New York Times to participate in the subscription service too, accoridng to the publishing executives.

Apple News evolved recently, as well, giving publishers more flexibility to sell their own ads and to manage their content like they do on their own websites. For instance, publishers can set paywalls in Apple News, cutting off readers after a certain amount of articles and then they receive a prompt to subscribe.

If readers sign up for the Apple magazine subscription, and a publisher puts its content there, readers would have little incentive to also pay for subscriptions to the publisher's own property.