Lure of iPad subscriptions may outweigh pain for publishers

There may not be a ton of enthusiasm in the publishing world for Apple’s new policy for subscription services—particularly when it comes to giving Cupertino a 30 percent slice of the pie. But the iPad juggernaut may be too big for many publishers to risk pushing back.

Elle's publishers say they'll concentrate on content and let Apple handle the business arrangements.

The publishers of Popular Science and Elle magazines said they’d make their publications available for for subscription through Apple, but acknowledged Wednesday there will some tradeoffs. The iPad-using audience is too big and too lucrative—and the demand for subscription options is too great—to ignore.

“Of course we would always like to see a lower commission, but we are able to work with this commission rate at this time,” said Philippe Guelton, chief operating officer of Hachette Filipacchi Media U.S., publisher of Elle. “The cost of developing our own e-commerce platform is not economically viable. Apple is offering a great turnkey tool that allows us to test with little to no financial risk.”

“In today’s consumer marketing environment, we feel a 70 percent remit directly to the publisher is a sustainable and reasonable model we can work with,” added Gregg Hano, Bonnier Corporation’s group publisher for Popular Science. “The audience is, we think, extremely valuable.”

Elsewhere in the publishing industry, reactions ranged from cautious optimism to pushback to silence on Apple’s new policy, which lets customers sign up for subscriptions via in-app purchases. Those subscriptions will get automatically billed and renewed on users’ iTunes accounts. With this method, Apple takes 30 percent of subscription fees. Customers can sign up outside the app, at company Websites, but publishers are not allowed to provide in-app links for such a signup, and Apple stipulates that in-app subscription prices remain either the same or less than their counterpart offers.

Time, Hearst, Conde Nast, and Atlantic Media Companies were among major magazine publishers who remained silent or declined comment Wednesday about their iOS plans. Barnes & Noble, which makes some periodicals available on the iPad through its Nook app, offered a curt statement: “Nook apps are available on the App Store for iPhone and iPad,” said Mary Ellen Keating, a spokeswoman for the book-selling giant. “Nothing further to offer at this time.”

But Rhapsody, the cloud-based subscription music service, reacted with outright anger.

“Our philosophy is simple too—an Apple-imposed arrangement that requires us to pay 30 percent of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable,” John Irwin, Rhapsody’s president, said in a statement. He said his company “will be collaborating with our market peers in determining an appropriate legal and business response to this latest development.”

Other publishers reacted more positively to Apple’s new rules. Richard Stephenson, CEO of London-based Yudu Media—which has built more than 60 apps for periodicals ranging from Reader’s Digest UK to American Handgunner —said he would advise publishers to put aside their reservations and plant their flag in the iOS platform. Apple’s commission may be a steep price, he suggested, but the user-friendliness of the iTunes subscription method may bring a higher number of subscriptions.

“We’re a great believer in slick consumer journeys,” Stephenson said. “When you take people off the App Store, you lose a lot of people along the way, the dropout rate is pretty high.”

There are so many iPads in circulation, Stephenson said, “whatever Apple charges, you have to be there. Don’t fight it, run with it.”

Popular Science’s Hano said his magazine was already selling upwards of 10,000 digital issues a month, at $5 a pop. Customers’ “biggest complaint” was the lack of a subscription option, and he expects the magazine’s new $15-a-year offering to be popular.

And some money lost in commissions to Apple could be made up with information about those subscribers. Customers will have the option to share their name, e-mail address, and zip code with publishers. Even a partial gathering of subscriber data will be useful in luring advertisers, both Stephenson and Hano suggested.

“We’re interested in being able to share with advertisers more information about who is buying our brand on tablets, and on the iPad in particular,” Hano said. “If we can help them learn more about who our readers … we think that’s good for everybody.”

Ted Nadeau, general manager of the Elle Digital Group, said the arrangement will allow his magazine to concentrate on content while Apple handles the money matters.

“This is good for the consumer,” Nadeau said. “We are not in the payment processing business. We’re happy to concentrate on our core strength of producing great content.”

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