Publishers Chafe at Apple’s Terms for Subscription News Service – The Wall Street Journal

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Publishers Chafe at Apple’s Terms for Subscription News Service - The Wall Street Journal

Apple News already gives news organizations an entree to millions of upscale news consumers. Apple’s new pitch is that it will allow publishers to expand their subscription base.

Apple News already gives news organizations an entree to millions of upscale news consumers. Apple’s new pitch is that it will allow publishers to expand their subscription base.


Photo:

Mark Lennihan/Associated Press

By

Apple
Inc.’s


AAPL 0.88%

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.

Apple said iPhone revenue dropped 15% in the fiscal first quarter, causing a drop in both revenue and earnings amid a matured smartphone market and a slowdown in its service business. WSJ’s Lee Hawkins reports. Photo by Justin Lane/EPA-EFE/Shutterstock

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

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