While there's no shortage of people criticizing Apple's new App Store subscription service, some executives at major media companies are still unsure what to think.
Some said Apple's plan to allow app publishers to sell subscriptions for the first time through the iTunes App Store was a step in the right direction. Others saw many of Apple's new requirements for app sales, which include a guarantee that publishers offer their best subscription price at the App Store, as the newest way for the company to grab more control of online media.
One possible reason for why reaction was so mixed was that Apple didn't prepare the media world for what it intended to offer. Apple was expected to roll out a subscription service, sure, but the company doesn't appear to have sought any early feedback from some of the nation's top media companies. An executive at a top newspaper said leaders there were huddling in the afternoon to try to understand the significance of Apple's announcement. A manager at a media conglomerate said most companies would have tested reaction by running the plan past top publishers before going public. Not Apple.
The magazine and newspaper sectors are among the most affected by today's announcement. Since the iPad went on sale last spring, Apple has mostly limited their app sales to individual issues. But they aren't the only industries that must figure out whether the iPad and the App Store are now a viable option.
Companies such as Netflix, the Web's top movie-rental service, and Spotify, a popular European streaming music trying to make the jump to the United States, could be forced to start paying Apple 30 percent of the subscription fees they see from the App store, although that sounds difficult to believe in Netflix's case. Netflix's distribution network now includes more than 200 devices and the company boasts more than 20 million paying subscribers.
The iPad and the tablet market, on the other hand, are still early in their development and soon a glut of iPad competitors will debut. Netflix could conceivably swat Apple's demands away by announcing that anyone signing up for Netflix via the App Store would be forced to pay 30 percent more--thanks to Apple.
So, which company needs the other more? Spokesmen for Netflix and Spotify didn't respond to interview requests.
Here's a couple of questions: if Apple execs didn't run the new requirements past big media companies, can Apple be sure how they will respond? What if Apple succeeds only in pushing them into the arms of Amazon or another competitor?
At first glance, Apple appears to have yielded ground to magazine and newspaper companies. The Cupertino, Calif.-based Apple said publishers now have the ability to sell subscriptions through the App Store, which they didn't have before. Where Apple once took 30 percent from every app sale, the company now says publishers can sell their iTunes apps on their own sites or elsewhere and Apple won't expect a cent.
But if Apple became more flexible in some areas, it didn't budge nearly enough on other important issues, such as the sharing of customer information, say observers. In prior talks, Apple refused to hand over customer data, such as names and e-mail addresses, to publishers. Now the company says it will share info with publishers only if a subscriber permits it. That is unlikely to go far enough to appease some publishing companies, experts said.
In other ways, Apple became even more restrictive. The company will no longer allow apps to include links to other app-selling sites and established a most-favored nation stipulation. Publishers that sell their iTunes apps from their own sites or third-party Web stores must offer the same price, or less, at iTunes.
Web pundits howled over this one. Some suggested Apple is trying to fix prices, and even The Wall Street Journal speculated that the company could be inviting antitrust scrutiny.
Some newspaper publishers suspect Apple is trying to lock them into the App Store and is "setting itself up as a toll taker," according to Joshua Benton, director of Harvard's Nieman Journalism Lab who formerly worked for the Dallas Morning News.
"It's disappointing to learn that in exchange for the convenience of a 'Buy' button in their iPad app," Benton wrote, "[publishers will] have to give up 30 percent of the revenue."
Benton also noted that Apple's offer to allow newspapers and magazines to keep the revenue generated from outside sales won't mean much. Newspapers already enjoy a relationship with older audiences so converting them isn't a necessity. The iPad is supposed to help draw younger audiences, and they are likely to discover a new digital publication, not from picking up a newspaper ad but from finding it on the iTunes store.
When they do, the newspapers must hand over 30 percent to Apple.
No doubt Apple and the iPad are the kings of the tablet market, but the company is also taking a big risk. Magazine and newspaper publishers won't like much of what Apple proposes, but it goes further than that. There's plenty of distrust of Apple in many media circles.
Nobody talks about Apple making a foray into a new area without bringing up the music industry. After Apple all but took ownership of the music sector's digital distribution, the company began dictating terms on pricing, promotion and practically anything else that mattered. The top record companies have been looking for an iTunes challenger to loosen Apple's grip for 10 years.
Back when iTunes first launched, Apple CEO Steve Jobs was dealing with music industry executives who didn't have a lot of tech savvy. He once called them "technologically innocent."
The question now is, as magazine and newspaper publishers try to navigate the new tablet world that Apple helped to forge, are they just as "innocent"?