Apple Can’t Win Over Media With Its Old Approach

(Bloomberg Opinion) -- Apple Inc. wants to become a subscription powerhouse for music, apps, online video, news and more. The company’s negotiations with news and magazine publishers offer a glimpse at the challenges this strategy will face.

Bloomberg News detailed on Wednesday why some news and magazine publishers are wary of Apple’s effort to refashion Texture, a company Apple acquired this year that offers a collection of digital magazines for $10 a month. One concern is that Apple could lure publications’ current subscribers, who might save money by reading the same articles on a revamped Texture instead.

It struck me that Apple is repeating many of the same missteps from its earlier digital news and magazine hub called Newsstand and from its multiple attempts at subscriptions for online television. And I’m equally surprised that Apple’s vision for Newsstand 2.0 — or at least what journalists have unearthed so far — seems unoriginal and potentially misguided. 

Reading about Apple’s negotiations, I had flashbacks to 2010, when I spent a chunk of time writing about Apple’s first significant stab at an iPad storefront for newspapers and magazines. What Apple called Newsstand wasn’t a single fee for an array of publications like what Apple is developing now, but fears about Apple cannibalizing existing sales and controlling data on publications’ subscribers were sticking points with many partners then, too. Newsstand flopped, and participating publishers wasted time and resources on Steve Jobs’s ill-conceived plan. 

It was utterly predictable that many of those same publishers would have similar misgivings about Newsstand 2.0, but Apple’s reported pitch hasn’t changed in eight years: We’re Apple, and this will draw masses who wouldn’t have otherwise subscribed to your newspapers or magazines. Apple may be right, but the publishers that Apple really wants believe they’re better off luring readers on their own without Apple serving as a middleman.

Partners also aren’t enthusiastic about taking a tiny slice of perhaps a $10 monthly fee for Apple’s “Netflix of news.” A similar set of objections were raised by the television network owners that Apple approached in multiple efforts to create a collection of online TV channels. At least one of those attempts was similar to current services such as DirecTV Now. Apple suffered from poor timing, but also from arrogance.

With both Newsstand and its TV efforts, Apple didn’t concentrate enough on what would motivate potential partners to take the risk of jumping into business together. Apple seems to believe that its approaches to media and entertainment will prevail over those of misguided media and entertainment companies. Yes, too many of those companies are living in the past, but Apple must understand what makes them tick if it wants to strike partnerships. Bullying is not always enough. 

Bloomberg News reported that Apple is stressing its track record with Apple Music to potential participants in Newsstand 2.0. The digital music service, which Apple says has more than 50 million free and paying listeners, is a sign of the company’s ability to draw fairly large numbers to a digital media offering. But the economics aren’t the same between music and news. Apple is paying guaranteed piles of cash to the record labels. That’s not the approach for Newsstand 2.0, which weakens the financial incentives for news publishers. They bear the risk of eroding their subscriber numbers without an adequate financial reward.

Apple has the power to transform people’s habits, and it may overcome the early hurdles of its news subscription bundle. But the company needs both a better pitch to potential participants and a different approach.  

A bundle of digital media and entertainment is a compelling force, as media analyst Rich Greenfield has articulated. But a transformed Texture is not quite a bundle like Netflix or Apple Music, for which people pay a single fee and obtain access to a collection of songs, movies or TV series. 

Texture is more like YouTube TV or DirecTV Now — a bundle that existed for years and is just being ported to the web. It’s not yet proved that people want this kind of bundle. The most popular of those quasi-TV bundles is Sling TV, which has about 2.4 million subscribers, according to data compiled by Bloomberg Intelligence. Netflix has more than 130 million paying subscribers, and Spotify counts 87 million people as subscribers to its music service. Like Sling and similar options, Apple’s refashioned news and information service risks the same awkward graft of analog and digital.

Apple’s years of tussling with media and entertainment companies are a helpful reminder that it won’t be a cinch for the iPhone company to become a hotbed of digital services. The problem is that transformation is the basis of the bullish investment narrative about Apple. If news subscriptions are a tough road, it undermines the idea that digital subscription services are the ticket to Apple’s future.

Both Netflix and Spotify have been around for much longer than Sling.

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

Shira Ovide is a Bloomberg Opinion columnist covering technology. She previously was a reporter for the Wall Street Journal.

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