By Benjamin Mullin, Lukas I. Alpert and Tripp Mickle
Apple Inc.'s plan to create a subscription service for news is
running into resistance from major publishers over the tech giant's
proposed financial terms, according to people familiar with the
situation, complicating an initiative that is part of the company's
efforts to offset slowing iPhone sales.
In its pitch to some news organizations, the Cupertino, Calif.,
company has said it would keep about half of the subscription
revenue from the service, the people said. The service, described
by industry executives as a "Netflix for news," would allow users
to read an unlimited amount of content from participating
publishers for a monthly fee. It is expected to launch later this
year as a paid tier of the Apple News app, the people said.
The rest of the revenue would go into a pool that would be
divided among publishers according to the amount of time users
spend engaged with their articles, the people said. Representatives
from Apple have told publishers that the subscription service could
be priced at about $10 a month, similar to Apple's streaming music
service, but the final price could change, some of the people
said.
The New York Times and the Washington Post are among the major
outlets that so far haven't agreed to license their content to the
service, in part because of concerns over the proposed terms, which
haven't been previously disclosed, according to the people familiar
with the matter.
Talks are ongoing, and deals with the publishers could still be
reached.
The Wall Street Journal also has concerns, but its recent
conversations with Apple have been productive, one of the people
familiar with the matter said.
Another concern for some publishers is that they likely wouldn't
get access to subscriber data, including credit-card information
and email addresses, the people said. Credit-card information and
email addresses are crucial for news organizations that seek to
build their own customer databases and market their products to
readers.
Apple proposed that at least some publishers supply access to
their content for a minimum of a year, the people familiar with the
matter said. Some publishers want a longer commitment, while others
want flexibility to exit from the partnership earlier.
Apple declined to comment.
The news service is part of Apple's effort to find growth as
iPhone sales stall. The tech giant last month reported its first
decline in revenue and profit in a decade for the three months
ended in December, after iPhone sales fell 15% to $51.98 billion.
Apple is trying to offset the downturn in its core smartphone
business with a fast-growing services business that includes
app-store sales, streaming-music subscriptions and mobile
payments.
This year, the company plans to launch several new services,
including original TV programming and the news service. It is
seeking to increase the number of paid subscriptions across its
devices to 500 million by 2020, up from 360 million now.
Apple has discussed bundling the news offering with a
forthcoming package of original TV shows and iCloud, a storage
service for photos, documents and more, one of the people familiar
with the matter said.
Apple is attempting to woo a news industry that has grown wary
of the influence of big technology companies on their businesses.
Facebook Inc., long a major source of traffic for publishers, has
altered its News Feed in ways that contributed to steep audience
and revenue declines for some media companies. Alphabet Inc.'s
Google has faced scrutiny for allowing readers to circumvent
digital paywalls, a practice the search giant has since
mitigated.
Digital subscriptions are powering growth at big publishers
including the Times, whose basic monthly subscription costs $15,
the Post, which charges $10, and the Journal, which charges $39.
Some of those companies are skeptical about giving up too much
control to Apple or cannibalizing their existing subscriptions to
sign up lower-revenue Apple users, according to people familiar
with the matter.
But tech platforms also present a huge opportunity. Apple News,
a free service that comes installed on iPhones and lets users pick
news by topic or publication, gives news organizations an entree to
millions of upscale, sophisticated news consumers. Apple's pitch is
that it will allow publishers to expand their subscription
base.
The three outlets already distribute a subset of their articles
on Apple News, which readers can access free. News organizations
keep 100% of the revenue from ads they sell for these articles, and
they keep 70% of revenue from ads that appear alongside their
articles that they don't sell. Apple's planned subscription service
would dramatically expand access to those outlets, adding content
that is currently behind paywalls.
Users can also subscribe to news organizations through Apple
News; news organizations keep 70% of the subscription revenue for
the first year and a larger portion after that.
Last year, Apple purchased Texture, an app that allows its users
to read an unlimited amount of magazine content for a $9.99 monthly
subscription.
Bloomberg earlier reported that Texture would be integrated with
Apple News as a premium product.
Write to Benjamin Mullin at Benjamin.Mullin@wsj.com, Lukas I.
Alpert at lukas.alpert@wsj.com and Tripp Mickle at
Tripp.Mickle@wsj.com
(END) Dow Jones Newswires
February 12, 2019 15:35 ET (20:35 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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