The magazine sector may see significant value loss as a result of Apple News+.
Apple News+ may cause the magazine sector to lose a significant amount of value.
For the journalism industry, the Apple digital kiosk is a poor bargain. Why wouldn’t most newspaper publishers join?
1. The arithmetic, seen from the viewpoint of the sector
The standard argument used to support AppleNews+ is that the platform will bring in more money for the newspapers it hosts because there are a billion iPhones in use worldwide. After all, Steve Jobs repeated that in 2010:
We’ll see later that publishers have chosen the “aggressive stance” that Jobs championed during the past ten years. It wasn’t really helpful.
I made the following computation to determine the effect of an AppleNews+ deployment in its entirety.
The $27 billion in yearly revenue generated by the magazine business in the US represents a decline of more than 40% over the previous ten years.
According to the trade group, there are 225 million magazine readers, thus the Average Revenue per User (ARPU), including all sources, is $120 per reader and per year.
Apple News+ promises to make $9.9 per month, or $119 per year. Taking Apple’s 50% cut out results in a net income per reader of $59 The US magazine business will lose 50% of its subscriber revenue by signing up for Apple News+.
We are, of course, discussing transfer: magazine subscribers who sign up for Apple News+ will surely terminate their membership to the service’s chosen publication. Despite the fact that my most costly subscriptions – digital newspapers — won’t be in Apple News+ for a good reason, I will carefully assess my own subscription portfolio, which costs $1500/year.
2. The viewpoint of the publisher
Let’s use the example of a serious magazine subscriber who has a number of titles and pays the publisher’s official fee for a digital subscription without receiving any discounts or free trials. How Apple News+ plans to split the subscription income is unknown. Let’s thus suppose that the platform will choose a revenue allocation depending on the amount of time each reader spends reading a certain article. (Distributing income on the basis of the number of articles read wouldn’t make much sense given the disparity in article length between the New Yorker and People Magazine, for instance).
Instead of a rate card of $227, these publications will have to divide Apple’s pitiful net ARPU of $59. They will each lose $168 altogether, a 74% decline in value for being on Apple news+.
The pro-rata kiss of doom then begins to manifest. Even if the reader of this hypothetical bundle spends 20% of their time on it, the New Yorker ($100 a year) will lose 88 percent of its income if Apple decides to share the cash based on reading time. Comparatively, Wired will lose just 12% of its earnings assuming a reader spends 15% of their time on it. Wired can afford to be extremely affordable since it bears a considerably greater advertising load. The loss increases with rate card price.
Whatever the distribution, it is a sad zero-sum game for the publishers, or rather, a $59 per year awful game.
The frequently used argument that “It is just another channel, publishers should take advantage of it” is one reason to subscribe to Apple News+. If the publisher could maintain the connection with the client, that may make sense. That won’t be the case in the Apple News+ environment for obvious reasons. Apple will control the connection. Publishers that sign up for Apple News+ and lose three-quarters of their revenue won’t be able to create or upsell anything to their consumers directly based on their profile, propensity to spend, etc. When it comes to “the other channel,” news brands are in the dark because they won’t even be able to generate extra money for their present operations.
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