Apple Still Doesn’t Get the News-Subscription Business

(Bloomberg Opinion) -- Apple’s News+ service, unveiled Monday, makes a a grab for the news junkie’s Holy Grail: a universal subscription to get behind all paywalls, the Spotify (OK, OK, the Apple Music) of journalism. So far, Apple doesn’t have it right. That would take a much more creative effort than the company may be capable of achieving.

Compared with creating a universal subscription for news, Spotify was a walk in the park. Music publishers and independent artists weren’t in the business of selling subscriptions to start with: They understood getting paid per album or per song. Consumers, for their part, were only too happy to have one app serve all their listening needs. Neither is true for the news industry.

Successful publications sell a lot of subscriptions and see no need to share revenue, and especially subscriber data, with an intermediary platform. And consumers find the journalistic content they need with the help of search engines or stumble upon it on social networks. Direct traffic is less than a quarter of the total. To be helpful to those who use social media or search to get their news, the stories would need to open in the app on every device a reader uses, including the desktop computer at work.

Apple hasn’t been able to overcome these obstacles with its new service, which inherits the unlucky history of Newsstand, launched by Steve Jobs, and its 2015 iteration, News. In 2011, Newsstand promised to reshape publishing, but Apple’s demand for high returns — as usual, it wanted 30 percent of revenue — and many publishers’ reluctance to cannibalize their own sales by giving Apple control of data turned the apps into duds, no matter what the company might say about its 90 million regular readers.

The latest iteration, News+, provides access to hundreds of magazines, thanks to Apple’s purchase of the major publishers’ joint project, Texture, last year.  It also offers access to the Los Angeles Times and some Wall Street Journal stories — but not to The New York Times or The Washington Post, and of course not to publications from other parts of the world. All of this (unlike, say, Apple Music) will only be available to people with Apple devices.

I’m a news junkie, but this kind of bundle is useless to me. For $9.99 a month, I would get access to a lot of content sources that aren’t my first picks on any important story (with all due respect to the magazines and the LA Times) — and I can’t even read them on a non-Apple desktop machine. And of course if I see a link on my Twitter feed to a paywalled publication that hasn’t agreed to pay Apple’s cut of the revenue, the subscription will be of no help to me. It’s like Spotify without many of my favorite bands and that doesn’t even work on all my devices.

Apple went about creating the universal subscription in a boring, unimaginative way: It offered publishers access to its large installed base, offered to pay per view (like the Dutch start-up Blendle, which, however, also charges readers this way) and claimed a huge revenue cut: 50 percent. Then it went ahead without those who didn’t want to play by these rules.

The New York Times, meanwhile, has nothing against bundles: It has one with Scribd, which also offers access to magazines and books. But bundling cuts into profit margins, and adding Apple’s cut makes playing along financially unattractive to a publisher confident of being able to sell its content without Apple’s help. Without such publishers, of course, the bundle won’t be a must-have for readers, either — it’s a vicious circle.

In 2017, Tony Haile, the founder of Chartbeat, the traffic analytics company, wrote that a universal subscription bundle would never work because fewer than 3 percent of monthly visitors run into a paywall as most people read fewer stories than their free monthly allotment. The heavier readers will buy a subscription to their favorite news source, and that’s what publishers want them to do, with the smallest discounts possible. So Haile himself isn’t messing with the old Holy Grail: With former Chartbeat, Spotify and Foursquare executives, he has set up Scroll, a service that, for an upfront fee, removes ads from news sites for a reader. It promises to generate a higher income for publishers than advertising. 

And yet I’m not sure giving up on the universal subscription bundle is the answer. Those of us junkies who run into paywalls all the time don’t subscribe to everything we’d like to read; we just close a tab when we hit that wall. 

Apple and others that have tried a subscription bundle simply haven’t searched hard enough for the right approach. If the Spotify of news, which puts it all in one place for a fixed fee, doesn’t work for publishers, perhaps something else will — for example, some kind of digital key that lets a reader unlock the paywalls of all participating publishers until a monthly limit of articles is reached. The subscription price would depend on the limit, say, 200, 500 or 1,000 articles per month, and a publisher’s share of subscription revenue would depend on the share of a subscriber’s traffic that the publisher captures.

To make this work for publishers, the subscriber database should be transparent to all of them, so they can pitch their own offers to heavy readers and communicate with them directly for feedback.

The service wouldn’t depend on a single platform — it would simply eliminate paywalls everywhere. And it wouldn’t cost 50 percent of revenue to maintain with a reasonable profit.

I’m sure someone will eventually make this happen, just out of sheer unhappiness with inadequate, self-serving, inconvenient solutions like those Apple has tried so far.

To contact the editor responsible for this story: Max Berley at mberley@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.

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