Publishers and the Apple App Store

Everyone knows Apple’s App Store for iOS devices is as closed as they come. Many developers that want a piece of the pie have been able to overcome their fears of rejection. Every one that submits a non-free app to the store agrees to leaving 30% of each sale on the table to Apple for curating the store.

Then there’s the Publishers of this world. They have seen their magazine and newspaper sales decline over the years. It’s their hope that the attractiveness and interactivity of tablets, like the iPad, will turn things around. It seems however that the initial customer-interest in magazine and newspaper apps has since declined. A recent article in the NYTimes suggests the lack of a subscription option lies at the basis of customers’ disappointment in these apps: “They want to subscribe, and they don’t like the idea of paying $4.99 a month.”

Bad digital magazine sales is bad news for the iPad, you would assume. Ironically, it’s Apple that has been rejecting these apps when they added their own implementation of a subscription service. Currently, there are only two ways to sell magazines and newspapers through the App Store and that’s either a new App per issue, or by using the in-app sales model. However, the problem remains the same: consumers have to buy each issue individually. And every time they need to overcome that psychological barrier to pay up, again. With a subscription plan you only have to make that decision once.

In September of last year, the first rumors appeared that Apple was working on its own subscription model. Two months later, these rumors were linked to Rupert Murdoch’s plans to create a newspaper that will be delivered exclusively to tablets —starting with the iPad— through some kind of subscription plan.

In preparation of the release of this subscription model, Apple has been telling a number of Dutch and Belgian publishers to cease giving their paper-and-ink subscribers free access to content on the iPad through their newspaper App —by the 1st of April at the latest. They were also told to prepare for an Apple-controlled subscription service through the iTunes store. The consensus was that they weren’t happy with losing control of their subscription data nor with paying Apple 30% of the subscription fees.

It’s completely understandable that these publishers would hate to give up control and to start paying for getting their content delivered to the user. Especially when they already have the infrastructure in place to deliver that content over the internet.

On the other side, Apple has been slowly reinventing itself into the content-delivery business since the launch of the iTunes Music Store in 2003. Since then it has grown considerably, both in registered customers as in content: movies, series, and apps. Now, Apple is preparing to roll out the next step: newspaper and magazine content. And it won’t allow publishers to undercut their position with external subscription deals. The iPad App Store is only a free delivery platform for content (incl. apps) that is effectively free of charge.

Some perspective. When reading Lawrence Lessig’s review of The Social Network, I stumbled onto this comparison between delivery on the web and delivery in the real world.

[..] consider another pair of Massachusetts entrepreneurs, Tom First and Tom Scott. After graduating from Brown in 1989, they started a delivery service to boats on Nantucket Sound. During their first winter, they invented a juice drink. People liked their juice. Slowly, it dawned on First and Scott that maybe there was a business here. Nantucket Nectars was born. The two Toms started the long slog of getting distribution. Ocean Spray bought the company. It later sold the business to Cadbury Schweppes.

At each step after the first, along the way to giving their customers what they wanted, the two Toms had to ask permission from someone. They needed permission from a manufacturer to get into his plant. Permission from a distributor to get into her network. And permission from stores to get before the customer. Each step between the idea and the customer was a slog. They made the slog, and succeeded. But many try to make that slog and fail. Sometimes for good reasons. Sometimes not.

It describes the model that Apple aspires to —albeit now in a more modern package. Apple sees the iPad as a window for developers and publishers into a pond of millions and millions of credit-card bearing customers that have proven they are not afraid to use it. The difference with the story of the two Toms is that Apple is manufacturer, distributor and store-owner. Compared to the story above, this makes the publishers’ lives a little easier: they only need permission once, but they still get to pay up.

update: Apple responds to the growing concerns about exclusive iTunes store sales: External sales are only allowed if the app supports in-app sales as well.