Apple goes for the jugular with subscription revenue deal

There have been rumors about a forthcoming Apple News subscription plan for some time now, with the first reports emerging in April last year, when Bloomberg said the company was working on a Netflix-style news service that would include dozens of publishers for one monthly fee. As talks continued, some media companies were said to be reluctant to sign up, and this week it became obvious why: According to a report in The Wall Street Journal, the tech giant wants to keep 50 percent of the revenue from its subscription program, and it also has no plans to share any of the user data it collects with publishers, including credit-card info and email addresses. The 50 percent of revenue publishers share will also be pooled and split up based on whose content gets the most engagement, according to the Journal report.

To say this proposal caused an outcry would be a massive understatement. For an industry that has seen mounting layoffs—more than 2,000 employees have been let go in recent weeks from BuzzFeed, Vice, HuffPost, and the Gannett and McClatchy chains—and even outright closures of newspapers and magazines, the Apple news came as a significant blow. Many were outraged that one of the world’s most valuable companies, a behemoth with a staggering $245 billion in cash on its books, would take such a significant chunk of the revenue from its proposed plan, while also saying how much it cares about journalism.

Verge writer Casey Newton called it “obscene,” and said the fact Apple could even think of taking a 50 percent share is “a worrying sign about the concentration of tech power in this country.” Another journalist said the move amounted to Apple wanting to “twist the knife.”

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The deal includes no access to user data. For publishers and media companies eager to build sustainable businesses of their own by appealing to subscribers, access to user names, credit-card numbers and email addresses might make the 50 percent revenue take more palatable. But keeping all of that data just reinforces how all the power is in Apple’s hands—and every user who signs up for the bundle just adds to that data hoard.

The unfortunate reality, however, is that some publishers may not have much choice when it comes to deciding whether or not to accept Apple’s deal. Giants like The New York Times or the Journal have the heft and the market power to run their own successful subscription businesses, so anything they might get from Apple’s plan is gravy. But smaller publishers don’t have the brand power and their subscription programs are in most cases significantly smaller, which means they need all the revenue help they can get.

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The biggest risk with a plan like Apple’s is the same as it was with Facebook’s Instant Articles and video projects, both of which came back to bite publishers badly: Namely, that publishers and media companies make a big bet on the platform, and come to rely on the revenue and/or reach that they get from their huge partner—and then that partner either changes the terms of their deal or doesn’t come up with the revenue they promised. Dozens of publishers made significant bets on video because of Facebook’s pitch about how much it wanted video, and then had to either unwind those investments or in some cases shut down because the promised benefits never emerged.

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Part of the reason fired its entire staff and sold itself for a fraction of its former value was that it made bets on video that never panned out, and a heavy reliance on Facebook was also part of the driving force behind BuzzFeed’s layoffs of more than 200 employees.

Just like Facebook’s proposals before it, the Apple deal is a classic Faustian bargain. Apple News has enormous reach (more than 90 million readers, according to recent estimates) and that makes it seem hugely appealing to struggling publishers, many of whom have watched their advertising revenue plummet as Google and Facebook have taken over the industry. But the price of this deal isn’t just 50 percent of the revenue; it’s also the incalculable cost of yoking your business and potentially your survival to a third party, one that—for all its heart-warming statements about a commitment to journalism—has its own commercial interests in mind. Never build your house on rented land, someone once said.

Here’s more on Apple’s plan and the reaction to it. There’s also an open discussion thread on CJR’s Galley forum:

  • It’s insane: It’s probably not surprising that the proposed Apple deal would get significant pushback from many journalists, but even veteran Apple blogger John Gruber criticized the proposal, saying taking 30 percent would be “a bit greedy,” but that taking half the revenue “is insane.”
  • The Hunger Games: The idea of a “Spotify for news” sounds good, says Alastair Coote, “until you realise the actual comparison is dozens of artists releasing cover versions of the same song every morning and desperately trying to get the algorithm to put their version ahead of everyone else’s.”
  • Start running: Apple’s proposal should “send publishers running in the other direction,” said The Verge’s Casey Newton. “Nothing the iPhone can do is worth 50 percent of revenue.” Newton also noted that even Facebook, which is not known for being friendly to third parties, let publishers keep 100 percent of their Instant Article revenue.
  • The Aggregator: Tech analyst Ben Thompson said in his Stratechery newsletter that Apple is doing what aggregators always do: It is using content from others to attract users, “which makes Apple News more attractive, making publishers ever more reticent to leave, even though they aren’t getting much out of the deal.”

Other notable stories:

  • Maria Ressa, founder of the Philippines-based news site Rappler, was arrested on Wednesday afternoon by federal agents on charges of breaching that country’s digital libel act — an act that Ressa and others have noted was passed months after the article she was arrested for was published. Ressa and her site have been repeated targets of harassment from the government of president Rodrigo Duterte.
  • After much debate, two controversial proposals for new copyright legislation in the EU are headed to a vote by the EU Parliament. Article 11 would require aggregators like Google News to pay for republishing even small snippets of articles, and Article 13 would require platforms to filter content for copyright violations before it is even uploaded to their networks. Freedom of information advocates argue that both proposals could have significant negative consequences.
  • Zainab Sultan writes for CJR about how student journalists working for newspapers and magazines published on campuses in many cases do the same kinds of critical investigative stories their peers at mainstream media outlets do, but are subject to far more pressure and even outright intimidation from school officials.
  • Members of the Newspaper Guild of Pittsburgh have asked that John Robinson Block, publisher of the Pittsburgh Post-Gazette, be banned from entering the newsroom after an incident in which staff said Block went “berserk,” ranting and screaming about firing people and “raving like a lunatic.” After a statement from the Block family that downplayed the incident, the Guild has released several eyewitness accounts.
  • A government review of the state of journalism in the UK has recommended tax breaks and other subsidies, but Guardian columnist Owen Jones says that’s not enough. He says every citizen should get a stipend of $200, funded by a tax on advertising, and they should be able to give those funds to any nonprofit site.
  • More than 300 journalists at the Los Angeles Times have signed an open letter to the newspaper’s management about its proposed policy on intellectual property. The letter from the LA Times Guild says the policy, which it describes as “draconian,” would give the company control over any books written by employees and any movie rights associated with them.
  • The Agence France-Presse wire service, which has partnered with Facebook to do fact-checking in 17 different countries, says that the relationship is evolving in a positive direction, but that the social network needs to open up more and share data with its partners about how the program is progressing.
  • Matt Thompson is leaving his current post as executive editor of The Atlantic to become editor-in-chief of the Center for Investigative Reporting and its investigative journalism site, as well as the organizations public radio show and podcast. Thompson said he will continue to be a contributor editor to The Atlantic.

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Mathew Ingram is CJR’s chief digital writer. Previously, he was a senior writer with Fortune magazine. He has written about the intersection between media and technology since the earliest days of the commercial internet. His writing has been published in the Washington Post and the Financial Times as well as by Reuters and Bloomberg.