Time Inc.’s iPad Problem Is Trouble for Every Magazine Publisher
Time Inc. likes to show off its iPad apps as a symbol of the company’s future. But inside the publisher, the digital editions have become a source of hair-pulling frustration.
That’s because the magazine giant has been unable to get Apple to let it sell and manage subscriptions for its iPad apps–much to Time Inc.’s surprise.
Last month, the publisher was set to launch a subscription version of its Sports Illustrated iPad app, where consumers would download the magazines via Apple’s iTunes but would pay Time Inc. directly. But Apple rejected the app at the last minute, forcing the Time Warner (TWX) unit to sell single copies, using iTunes as a middleman, multiple sources tell me.
Since then, Time Inc. executives “have been going nuts,” trying to figure out how to get Apple (AAPL) to approve a subscription plan. One of the more desperate suggestions, which apparently didn’t get traction: Pulling the publisher’s apps out of the iTunes store altogether.
Subscriptions, whether they’re for ink-and-paper magazines or their digital editions, are a big deal for Time Inc. and every other magazine publisher. They value them in part because they provide recurring revenue, but primarily because they provide a treasure trove of data.
The ability to control digital subscriptions also gives publishers the ability to make their existing print subscriptions more valuable, by bundling the two together. Imagine a scenario where existing Time or Sports Illustrated subs get the digital version free, or at a very steep discount.
No other magazine publisher has approval sell their own iTunes app subscriptions, either. But Apple and Steve Jobs had made a point of reaching out to Time Inc. executives and editors before the iPad’s launch, and encouraged them to build digital editions for the platform.
And Time Inc. executives tell me they had been communicating with Apple throughout the spring as they developed their subscription plans, and had been told that Apple approved.
So what happened? The Time Inc. insiders I talked to don’t have a clear answer, presumably because they can’t get one from Apple itself. One theory: Apple is concerned about the publisher’s plans for the consumer data it would collect with each subscription. A darker one: Steve Jobs loves the idea of digital magazines and wants to control the market for himself.
Time Inc.’s official comment on the topic is oblique: “We are working with a number of partners and potential partners and hope to offer in-app subscriptions some time later this year.” And so is Apple’s: “We have two platforms that we support for apps of all types, including magazines: HTML5 provides an open platform for developers to create and distribute whatever they want, and the App Store which is a curated platform offering customers the largest offering of apps for any mobile device with over 225,000 apps and 5 billion downloads.”
Confusing the issue even more is that Apple already allows a handful of app makers–like Amazon (AMZN) and the Wall Street Journal, which like this Web site is owned by News Corp. (NWS)–to bill customers directly. Amazon itself, meanwhile, has been sparring with publishers over subscriptions for its Kindle platform. Jeff Bezos keeps most of the data and money that those transactions generate, too.
Industry trade magazine Folio: first reported on the Sports Illustrated app’s rejection.
As far as I can tell, Time Inc.’s competitors have yet to even submit subscription apps to Apple. Hearst says it plans to sell iPad subscriptions to its Esquire and Oprah magazine apps when they debut later this year, but they’re not really subscriptions in a conventional sense. Instead, the publisher will sell a bundle of magazines as a one-time purchase, and iTunes will keep 30 percent of the purchase price and all of the billing data.
Hearst Magazines Executive Vice President John Loughlin says he’s not happy about the arrangement, but says it will have to do for now. He hopes that competition from the likes of Google (GOOG), which has announced plans to sell its own magazine apps, will force Apple to relent.
Condé Nast, meanwhile, hasn’t talked about subscription plans except to acknowledge that it has some. Newly appointed President Bob Sauerberg says the company may have more to say about the matter within a month. But others at the company say the problem is a vexing one. One executive at the publisher offers this summary: “Don’t get me started.”
Comments
Very interesting – and very difficult to see how Time could be so deep in the dark given their coverage of Apple in the past.
Posted by MurphyMac at July 28th, 2010 at 11:55 amI don't understand, Peter: Why do publishers want to sell magazines as apps through the iTunes store? Why can't they just get everything they want by developing a GUI for a digital subscriber that makes use of the iPad's graphical functionality but just uses a web connection and also goes through their data-mining process?
Posted by Elle at July 28th, 2010 at 12:05 pmThey do want to sell digital mags through other venues — Google, for instance, and they're partners in a joint venture which is supposed to create a sales outlet owned by several big publishers.
But: For now, and for the foreseeable future, digital magazine market = iPad app, and only way to get onto iPad is via iTunes.
Posted by PKafka at July 28th, 2010 at 12:53 pmA brighter answer: Apple does not have any idea how to make subscription works without impact to the App Store model. On the other hand, there is API for in-App-purchase, or one can fire up web page or download updated content inside the App, which mean in-App-subscription is technically feasible even without Apple's help.
Posted by dpgj at July 28th, 2010 at 2:19 pmIsn't the Wall Street Journal iPad app essentially offering a subscription model and using their own payment gateway to transact it? Any idea what the difference is here in Apple's eyes?
Posted by Nathanial Trienens at July 28th, 2010 at 2:28 pmThat's exactly what the Time Inc. folks asked Apple.
Posted by PKafka at July 28th, 2010 at 2:37 pmI am an Apple fan. Have been for 20 years. I really do not like content creators being bullied by distributors. Digital was supposed to change this and I am surprised Apple is not helping the matter.
Posted by Marcos at July 28th, 2010 at 2:45 pmThe publishers can create an app – much like the Kindle app. It is simple. Amazon cut out Apple as the middle man for books bought through the Kindle service. Time can do the same.
Within the app, for example, Time can show a webkit-based browser that directs the user to Time's own special website so that the user can then purchase subscriptions for the magazine on that website. The subscription information is then both shown and emailed to the users a a receipt. The subscription information is then captured by the the app.
This allows the app to then download individual editions of the magazine to their magazine app, just like the Kindle app does.
Then everyone is happy. The user purposely gives their data to Time via an online website. They can then download to their magazine app's directory the magazine, which they can read via the app. Time can then track their subscriptions.
Posted by JamesKatt at July 28th, 2010 at 2:48 pmIt seems to me that magazine publishers want “business as usual”. They want that subscriber list because there is big money in selling it, I would guess. It may be their big money maker. The magazine is just the lure, to get the big list they sell to marketers who fill your mailbox with junk mail and call you at supper time.
Posted by zato at July 28th, 2010 at 2:50 pmTime Inc's mission is to continuously grow the subscription bases of its portfolio of magazines, thus maintaining a steady stream of revenue. They seek innovative, financially advantageous (to Time Inc) channels of distribution…who has been in a Best Buy only to be hit up by the cashier with a 6 – 12 month subscription for only $X. The costs are minimal but the potential revenues are huge for Time Inc. Even if the cost per transaction are slightly more by distributing via iTunes, scale will lower those cost per transaction in the long run thus making the investment very profitable to Time Inc. It will just take a little longer to realize those profits.
Posted by RayzorAim at July 28th, 2010 at 2:52 pmAnd if Apple refuses to allow this app?
Posted by rbradbury at July 28th, 2010 at 3:11 pm“download the magazines via Apple’s iTunes, but would pay Time Inc. directly.”
Maybe this has something to do with it? I would imagine that other apps that do have in app shopping that they control (Wall Street Journal, Zinio, Amazon, etc) are serving up the purchased content and handling all the transactional and customer info through their own infrastructure. Sounds like maybe Time is trying to get off on the cheap by using Apple's infrastructure, but pocket all the data and money.
Posted by mturro at July 28th, 2010 at 3:18 pmNo, that's the point of the story. Apple didn't allow Time to structure an app this way, even though it does so for other developers, including Amazon and the WSJ.
Posted by PKafka at July 28th, 2010 at 3:18 pmI pretty sure music labels could have told Time this was coming.
Posted by kylekramer at July 28th, 2010 at 3:21 pmIn-app purchase already includes a subscription function, although it's primarily designed for access to features rather than delivery of individual content packages (“issues”) over time. However, you could use it to do so.
The big issue isn't subscriptions, though, but ownership of customer data: Apple's in-app purchasing keeps all the customer data to itself, sharing nothing with the vendor. For magazines, which thrive on customer data, this is a big issue.
The reason that print magazine subscriptions are so much cheaper than individual issues is purely down to this data. The more you know about the demographics of your readers the higher your advertising page rates. No data, no discount on subscriptions.
Posted by Ian Betteridge at July 28th, 2010 at 3:23 pmFrom what I've heard from developer/Apple sources, the (unwritten) rule appears to be that if you're selling content that's already being sold in the same form, and you're using your own existing back-end fulfillment system, Apple will be OK with it. So Amazon is selling the same Kindle-format books, with its existing back end, so that's OK. The FT has an existing subscription system, which is selling access to the same content, so that's OK.
What they don't want you to do is to build a new fulfillment system just for content which is only delivered by iPad/iPhone – effectively, replicating the features that are already available via in-app purchasing.
Posted by Ian Betteridge at July 28th, 2010 at 3:29 pmDoesn't Apple need Time and other content creators to really sell the iPad to the mainstream? Eventually as pointed out by other commenters Apple will not be the show in town. I think a 5 year forward view of the porters 5 forces model would be interesting in this space
Posted by Tony D at July 28th, 2010 at 3:30 pmAs the, now popular, saying goes: you gotta be flexible when dealing with Apple, because you have to bend over often.
Posted by intosh at July 28th, 2010 at 3:36 pmThe question of whether or not Apple's position here is wise is debatable – I surely don't really know or have an opinion on that. Though it's hard to argue with their logic based on past performance.
Posted by mturro at July 28th, 2010 at 3:36 pmI think you're on to something, Ian – I've heard the “existing system” argument as well. But that seems a little arbitrary — why are systems built prior to the iPad launch OK, but not new ones? More practically, if that is really Apple's stance, why be crystal-clear to all publishers in advance, and let them know they won't be able to move forward with sub plans?
Posted by PKafka at July 28th, 2010 at 3:37 pmJames, that's precisely what Time was trying to do. It's also something that's explicitly forbidden by the iOS Developer agreement, unless you have Apple's prior written permission – which obviously Amazon (and the FT) have got.
Posted by Ian Betteridge at July 28th, 2010 at 3:39 pmYes, nicely put.
Posted by PKafka at July 28th, 2010 at 3:40 pmTo the contrary, avoiding Apple's in-app purchasing would save Time the 30 percent of the sale they have to kick to Apple. The question is whether Apple would approve such a system (the answer appears to be no), and how many potential subscribers you lose by forcing them to re-enter payment information on a web page as opposed the one-click buy of an in-app purchase.
Posted by jsmith1234 at July 28th, 2010 at 3:40 pmIt's not about selling it – it's about understanding the demographics of your readership in order to increase the page rates of your ads. If you know who your readers are, you can charge a premium for advertising to reach those readers. If you don't, you can't, and you have low-yield ads.
This is especially important to magazines like (say) Vanity Fair, which sell ads on the basis of reaching a high-value, high-spend audience.
Posted by Ian Betteridge at July 28th, 2010 at 3:41 pm@PKafka – I imagine the problem is with systems built for the specific and only purpose of bypassing iTunes in-app purchasing.
Posted by mturro at July 28th, 2010 at 3:42 pmThere may be a pro consumer way of reading this: what WSJ, FT, etc. have in common is a paywall that affects everyone equally.
What Apple is trying to avoid is charging iPad users for data that non-iPad users are getting for free?
Posted by Ted_T at July 28th, 2010 at 4:07 pm@Pkafka – longer term, Apple wants to be the gatekeeper. It can't yet overturn the FT or the Journal's subscription mechanisms (two of the only digital subscriptions to have any success), but it can say that new entrants must play by Apple's new rules.
Posted by rbradbury at July 28th, 2010 at 4:08 pmMagazine subscriptions already exist in the App Store. Take a look at Zinio.
Posted by BertC at July 28th, 2010 at 4:17 pmNope. People have an infinity of web-based content to access on their iPads. Apple could care less which publishers survive the current industry meltdown and which die out. For now Apple holds all the cards, and even after cheaper Android tablets start appearing, it will still be a long time before the Android Marketplace [tablet] revenue opportunity comes close to that the App Store [iPad].
Posted by rbradbury at July 28th, 2010 at 4:20 pmBut will these take off in time, before most traditional media outlets go out of business? Most consumers seem to have no interest in paying for reading material. I think we'll have to wait a couple of years: 80% of old-school pubs will be dead, and among quality outlets it will be “last men standing”. Only when the supply side contracts drastically will widespread paywalls be viable. Today, with so much content for free, it is almost impossible to upsell consumers on paid apps on a consistent basis.
Posted by rbradbury at July 28th, 2010 at 4:36 pmPeter,
Zinio has been on the iPad with 2400 titles since day 1, happily selling subs and single issues. Apple has been very aware. In fact, we are seeing 80% of our sales are for subscirptions. Seems like there is a whole new area of opportunity here.
Posted by Jeanniey Mullen at July 28th, 2010 at 4:36 pmIt's just the digital gods' way of punishing them for pulling their content off of Nexis and Factiva.
Posted by Stan Friedman at July 28th, 2010 at 4:45 pmI'm curious, Jeanniey: does Zinio disclose revenues/subscriber numbers? I hope you succeed but fear the iPad is not the silver bullet publishers were hoping for.
Posted by rbradbury at July 28th, 2010 at 4:57 pmNonsense. Zinio sells digital magazine subs, bypassing iTunes Store.
Posted by eur at July 28th, 2010 at 5:13 pmMy sense is Steve is waiting for the big September iTunes event to finally bring electronic “subscriptions” to the masses. Apple has been slow to mechanize magazines into the iTunes datastream. I blame Steve for most of that, but it's more of a tactical move than technical. Sadly, we are going to lose most pulp based magazine over the next 10 years no matter how this turns out… But on the bright side, the iPad is wonderful, so let's hold on as the transition to digital continues.
Posted by Mile L. at July 28th, 2010 at 5:14 pmIt sounds like time inc wants to use apples built in system to have user purchase subscriptions with out the 30% apple fee. If Time, like zinio, amazon, wsj made the user buy their subscript from the times web site, and then have them log into the app, I'm sure apple would not stop them
Posted by peteo at July 28th, 2010 at 5:57 pmWhy do they use apps vs. iBooks, Kindle or something similar for magazines? I don't like the magazine app magazine. Would rather it have pages to flip and such. Would the epub format not be easier to port existing content too. Or an HTML5 site that requires subscription. Bypass the over blown/crowded app store.
Posted by Karl Sandin at July 28th, 2010 at 6:43 pmWhat decade will it be when print people stop inventing new ways to stab themselves in the eyes? These people have college degrees, right?
I have a Netflix app I got from App Store and I have a Netflix subscription. What is so hard?
Or they could sell a year of TIME in one app. If you want $30 per year you do this:
TIME 2010 – $30
And inside the app you have a list with all 56 issues in it that lets you choose which issue you want to read, just like an email app has a list of message to read. The issues that are in the future are grayed out. When each new issue is available, the app downloads it automatically and puts a badge on the app showing there is a new issue to be read, same as an email app shows unread messages. If you want user data, offer to send them a free gift and take their information within the app. Just like you have a subscription card in the print edition. Or put an iAd in the app and get their information that way.
If you can't make money in App Store then you truly deserve to go out of business. These are desktop class native C apps with extremely sophisticated user interfaces and connectivity. You can show a Web browser view at any time. The sky is the limit. There are more users with an iOS device than all of the newspaper subscribers in the United States. Man up and get it done! Sheesh.
Posted by JohnDoey at July 28th, 2010 at 7:13 pmThe answer is simple, charge a premium above the print magazine price to account for Apple's cut and give reduced prices for any electronic versions on platforms that do not charge Time for the pleasure. Other magazines would follow suit if they had any sense and Apple would have to relent, Apple are just bluffing because they aspire to megalomania.
Posted by Ro Atkinson at July 28th, 2010 at 7:16 pm@rbradbury I guess that is my point about Apple holding all the cards FOR NOW. I remember a time that if you wanted a computer with a decent web browser and operating system you had 1 option too. I am not advocating that Apple give the store away, but it is clear that they are creating a market opportunity that a competitor will surely grab. The growth of the Android Marketplace will be something to watch. Every week I see a new Android device appearing.
Posted by Tony D at July 28th, 2010 at 8:22 pmUsers don't have to enter their payment info everytime. A user creates an account with an email, cc info, address etc only once. Next, I launch the app, and just enter my email address only and once into the app.
Then app connects to the server to verify if I have new issue and download as data packet. Next month, system automatically bills me and when I launch the app, it verifies and download the app and it goes on… The issue is that they are too rigid and have depended so much on apple's platform. Time to change.
Posted by Luminence at July 28th, 2010 at 10:01 pmThis is missing most of the important points. Apple has built a market place that works and magazine publishers are whingeing because they wish that they could control the sales process (each inventing their own subs plan? like 43 different rules for subscribing to magazines?) and harvest all the private consumer data. Does ANYBODY think that is going to work? Full rebuttal at http://exacteditions.blogspot.com/2010/07/why-i...
Posted by adamhodgkin at July 29th, 2010 at 4:36 amblah blah blah
Wall Street Journal has a subscription for an iPad app that Apple doesn't get a penny for, you just have to leave the app to pay. Just like the Kindle. Time and everyone is bitching because Apple is supposed to make it easy for them to make money off of Apple's hardware and software without paying Apple. There are workarounds and they are widely used and simple to implement.
Poor multi-billion dollar media moguls are getting beat up by a company that actually has a solution for their industry not completely collapsing, what a shame. Apple is surely evil.
Posted by Grant at July 29th, 2010 at 4:24 pmSeems to me Apple has said it: “HTML5 provides an open platform for developers to create and distribute whatever they want”.
I wonder if any other publishers are considering that the future of digital magazines is actually HTML5? Apps are great – they've allowed us a very quick entry into the iPad market and they allow for simple, spontaneous purchases. They are found money for those of us who've gotten on the train. But Apple controls and is entitled to control that channel. We accept their rules when we get on board and play by them as long as we travel with them. There are profound limitations but many things in life are tradeoffs.
But we seem mired in a conversation about what could be a very short term solution, given the rapidly changing landscape in a market that is really just a few months old.
Can someone speak to the longer term? Is it possible that a browser-based magazine is the better solution given that it would be cross-platform and better allow for us to have that direct publisher to consumer relationship that many of us have built our business models on?
Posted by bdawson_AGI at July 29th, 2010 at 5:38 pmGood one.
It's getting harder to find a company I don't hate.
Posted by macbeach at July 30th, 2010 at 4:14 amHow is Apple the bad guy in this? Like any successful business, Apple wants what's best for Apple and Time wants what's best for Time. Nobody forced Time into this deal. Time Inc isn't an inexperienced child, naive about how business works. It's each party's responsibility to negotiate and agree to pivotal elements like this and memorialze them in a signed contract before they begin their business partnership, not after it's up and running. Reading Time's complaints, frankly they sound like a bunch of rinky dinks who are now trying to use their media contacts to manipulate a deal they failed to nail down at a more appropriate time and in a more forthright way.
Posted by zaladonis at July 30th, 2010 at 10:03 amwell friend i look every time and i think it is good site!
Posted by modular homes at July 31st, 2010 at 6:16 amI disagree because there are two types of payments – cash and ads. So it might end up like this. If a mag is pushing content to me, it would earn only from the ads (yes not even the apps) but if I want to ask someone a question or for technical help, I'll have to pay cash. I'll do that because I couldn't find that question already answered elsewhere or that my searching skills are poor or that I am in a hurry or that I need a reassurance from someone I trust and respect. Basically the app game is only the start game because there is a limit to how many apps we can manage. Later it would be all about interactivity and influence and targetted ads. So some generic app would feed me stuff from people of varying influence and I would watch ads on the side then if I need to interact the micro cash payments would happen. The more influential the person, the more I might need to shell out.
Posted by amolpatil2k at July 31st, 2010 at 11:31 pmI agree, the very concept of magazines is in danger. IMO, first there would be a transition from mags to personalities (along with all their ghosts for sure). Next there would be a transition from personalities to life goals because there would be bandwidth crunch. In the first transition, we would fall in love with 500 personalities but soon realize that we are spending all our time on them and have forgotten what we look like in the mirror. That's when we would realize that what matters are the goals we have for ourselves so we would listen only to those who can serve these the best. That's when bandwidth optimization would start forcing long overdue customizations.
Posted by amolpatil2k at July 31st, 2010 at 11:44 pmQuality in regard to edit, I agree. However Time Inc wants/needs volume to garner higher levels of ad revenue. An advertiser buys ad space based on the relevancy of edit in regard to product/service, loyalty of target reading title, efficiency of reaching target through title. Of course Time wants to increase audience and they want to execute at the lowest cost possible. Tablets are a new form of distribution for magazines. If you can’t afford creating your technology then you find a complementary partner. And that may come at a higher price initially. If Time is not able to afford that extra cost with Apple then wait for competitive channels to open.
Posted by Anonymous at August 1st, 2010 at 4:52 amWe can rest assured that browsers and tablets would co-exist and find their respective niches. What we are trying to figure out is how will it all pan out and will that be fair to all concerned or will the way things pan out be more favorable to only some of the parties involved. I suspect and it is already happenning that the Net would split into two. A more accessible but more censored version and a wilder less censored version. Also tablets would keep getting cheaper (for instance Kindle is down to 139) because their revenue models would become increasingly dependent on services. So the hierarchy would be something like Tablet or Phone / New Net / Old Net. The fact that television can flourish in the age of YouTube is enough proof that entire platforms can be “managed”. Also such discussions are too complex for mere mortals like ourselves but one thing we can rely on – the majority are sheeple and their handholding would never go away.
Posted by amolpatil2k at August 1st, 2010 at 12:06 am