Apple's Powerful Position

It seems as though the blogosphere is only now waking up as to how extraordinarily powerful Apple's position with the iTunes/iOS/iPhone/iPad stack is. Apple's critic's (and in this case the most effective critics are significantly long-time supporters) are concerned that Apple is over-reaching: the objections are focusing not on the level of Apple's commission (though plenty of people think that 30% is too high) but on the way that Apple's rules appear to reach through to 'regulate' the way in which its partners can price services outside the iOS platform. Marco Ament,

A broad, vague, inconsistently applied, greedy, and unjustifiable rule doesn’t make developers want to embrace the platform. Subscriptions and the new in-app purchase requirement Marco Ament.

And another shrewd critic

If I am interpreting this correctly, I can’t bring myself to see it as reasonable. Not only do businesses have every right to price their products on the open market as they see fit, .........
I also don’t see how it’s even remotely enforceable. Are Apple staffers seriously going to check every vendor website for sale prices on a regular basis?

I think a great deal of this drama could go away if Apple dropped section 11.13 ....... (about pricing away from iTunes).... Your prices on your store are your business; just don’t be a jerk and advertise the difference all over ours. About This Whole Subscription Hubbub Matt Drance

John Gruber, usually very loyal and positive about Apple, notes at Daring Fireball that he agrees entirely with Drance.

It is unlikely that Apple will do much about this hullaballoo, except perhaps to clarify that the rules are not going to be enforced in an aggressive and over-reaching way. The trouble is that it is not obvious how they can be enforced in a clear and unarbitrary way and if there is too much fog and vagueness that could be a real bane for Apple developers. It is almost inconceivable that Apple will back off the 30% commission (the music publishers have been griping about it for years), so we had better get used to it.

There is another feature of the Apple infrastructure that needs to get some critical attention. The available prices. The App Store Pricing Matrix has 85 levels (99c to $999.99) and ranges across currency bands ($, Can$, Aus$, UK£, Yen etc). The matrix could be host to a few problems which someone in Apple needs to think about:

1. Will this pricing matrix become the default pricing regime for all cultural services and software? If the rules say that a publisher has to price stuff outside iTunes at a price equivalent to or higher than the Apple pricing matrix, is that not going to appear in a very poor light when the regulators come and investigate?
   
2. Are Apple sure that there is not scope for a price level beneath 99c or 115¥? Is it 'offside' for a developer to offer 49c or 99¥ specials? The 99¥ price 'looks' pretty good to me. No restraint of trade investigation will like the Apple rule which says that virtual stuff is either sold at 99c or given away. Apple may not want to sell apps at less than 99c, but if Disney want to do 49c apps off its own e-commerce system, why not?
   
3. Then there are prices at the high end, off the Apple scale. There are B2B magazines with extraordinarily high personal subscription rates. There are excellent, technical, specialist and very influential magazines (finance and law) sold on subscription that cost as much as a safari holiday, many of these will work well as iPad applications. At the moment the Apple matrix does not stretch to those subscription levels (for the annual sub). I suppose that the publisher can at least comply with the rules by offering a monthly sub at $299 (weekend in Paris), but should it not be feasible to offer an annual sub at $2,999 (7 days in Kruger National Park)? There may be few takers at the high end, but Apple is not averse to 'high ends' that will attract a 30% commission.
   
4. The really devilish problem is that currencies move. I don't think that the Apple app pricing matrix has yet been revised, but at some stage it will need to be. The Australian dollar will shoot through the roof, or the British pound will sink like a stone. When that happens and the prices in the Tesco downloads store start jumping as a direct result of a new Apple Matrix that will be a political hot potato.
   
5. Worse still, when currencies move (they do) and the matrix has to be rearranged, there will be enormous disruption to the 'self renewing' subscriptions in the iTunes ecology which Apple has now introduced. Prices will not self-renew if they change. This circuit-breaker is very correctly a rule in the Apple pricing system to protect consumers. At some point the matrix will become very misaligned with the real world of fluctuating currencies and Apple will push through some revisions. Revisions which may be mildly annoying to consumers but hugely damaging to developers who have come to rely on renewals.
   

Some of Apple's critics write as though the company had room to duck and dive. Such criticisms are misguided, Apple's project is so well integrated and so interdependent that it can not turn on a sixpence. Whilst many consumer magazine experts are complaining about Apple's rather meticulous oversight of app developers and some big companies are hanging back, reluctant to sell their magazines through a system that gives them little consumer data, there is every sign that iTunes and the next generation iPad will continue to excite the market. If the Apple critic wants to look for a silver lining in this situation, she can rely on the fact that an extraordinarily successful marketplace with huge momentum and profit margins approaching the 30% commission, will attract ferocious competition. Somebody is working, in a garage, on a scheme that pulls the rug from under the 30%. The inflexibilities and rigidities in the rather large pricing matrix may be one point of attack.

Aligning app with print with web

We learn a lot from support. Yesterday we had this message:

Really great job with the ipad edition!
I'm an old fan of the mag -since 1997- and is just marvelous to have it in this digital format. I have the XXXXXXX group at last.fm and a group at facebook with some people -if you like to have the admin pass to this communities please tell me, i think you'll do a better job to mantain it.

I'm a webdeveloper with 10 years in the field, i think the web presence could be more aligned with the print version -taking advantage of the digital interaction- and the overall image of the magazine. If you could be open to accept some suggestions i'll be happy to send you some of my ideas...

We certainly welcome David's ideas and appreciate his appreciation. The thought that really caught my attention is that the 'web presence could be more aligned with the print version -taking advantage of the digital interaction- and the overall image of the magazine.' Because this appears to be pointing to a deep strength of magazine publishing in a digital age. With clever design, good interfaces and solid platforms, it is possible for a magazine to be the same magazine (recognizably the same to its loyal readership) in the very different manifestations that it has in the app format on the iPad, in the rather different guise it may have as an iPhone app, or as an Android app (different again for phone or tablet), on the web, and of course in print. Through all these manifestations it seems that there is a key value to keeping the magazine aligned with the print edition/version. The magazine as an app is different from the print edition (so it is wrong to view it as a mere replica) but it is stronger if it is recognisably the same magazine, albeit an edition with greater interactivity, searchability and findability. Keeping the web presence aligned with the print edition and the app version(s) is a core value.

There is a natural temptation to look at digital technology as replacing analog modes. This is happening, but as the physicality of the print object is becoming obsolete it also seems as though we are finding ways in of reinventing and repositioning analog devices (books, magazines) as virtual objects in a digital framework. This is why books and magazines and newspapers are likely to survive as reading objects in a world of apps and digital reading systems.

Apple Launches its Subscriptions Service with the iTunes App Store

Apple two days ago announced its content subscriptions service with a Press Release.

Subscriptions purchased from within the App Store will be sold using the same App Store billing system that has been used to buy billions of apps and In-App Purchases. Publishers set the price and length of subscription (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly). Then with one-click, customers pick the length of subscription and are automatically charged based on their chosen length of commitment (weekly, monthly, etc.). Customers can review and manage all of their subscriptions from their personal account page, including canceling the automatic renewal of a subscription. Apple processes all payments, keeping the same 30 percent share that it does today for other In-App Purchases.

“Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing,” said Steve Jobs, Apple’s CEO. “All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app. We believe that this innovative subscription service will provide publishers with a brand new opportunity to expand digital access to their content onto the iPad, iPod touch and iPhone, delighting both new and existing subscribers.”

Publishers who use Apple’s subscription service in their app can also leverage other methods for acquiring digital subscribers outside of the app. For example, publishers can sell digital subscriptions on their web sites, or can choose to provide free access to existing subscribers. Since Apple is not involved in these transactions, there is no revenue sharing or exchange of customer information with Apple. Publishers must provide their own authentication process inside the app for subscribers that have signed up outside of the app. However, Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app. In addition, publishers may no longer provide links in their apps (to a web site, for example) which allow the customer to purchase content or subscriptions outside of the app.

At Exact Editions we think this is an important development which will help to grow the market for digital magazines. Especially on the iPad. It will also have effects on the market for other subscription and content services: newspapers, film, music, TV and perhaps books. Some publishers and distributors in those markets have been complaining. But magazines are different, they understand subscriptions and know how to sell them direct. There is one particularly simple and clear point in the memo that is crucial for magazine publishers. It bears repetition:

Publishers who use Apple’s subscription service in their app can also leverage other methods for acquiring digital subscribers outside of the app. For example, publishers can sell digital subscriptions on their web sites, or can choose to provide free access to existing subscribers. Since Apple is not involved in these transactions, there is no revenue sharing or exchange of customer information with Apple.

In Steve Jobs's exact words:

“Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing”

The invitation is very plain. Publishers are being encouraged to produce branded apps for individual magazine titles, to market them within iTunes and to provide free access to their existing print and digital subscribers. Publishers who do this must provided an "authentication process inside the app for subscribers that have signed up outside of the app." This is the precise service that Exact Editions has been providing for our partner publishers since August 2010. The fact is that publishers (through the fulfillment houses and distribution houses that work for them) already know their market. They know who their subscribers are, and magazine publishers have proved pretty competent over the years at recruiting new subscribers.

Should publishers be more concerned about the possibility that Apple may be taking too much through the 30% commission it will levy on purchases made through Apple's e-commerce system, or welcoming of the fact that Apple enjoins publishers to keep 100% of the revenues from services which are being partly executed and delivered on the Apple platform? Publishers may be worried by the gravitational pull of the iTunes system, but one should consider this: if the gravitational pull is so strong, perhaps the sales will be also?

Maglet Losowsky and iPads Reclaimed

Andrew Losowsky has peered into the glass of the iPad and decided that the world of magazine apps is half empty. So we feel it necessary to cheer him up a bit and fill the glass. Andrew pens his blog at The Hospital Club -- one of Covent Gardens best watering holes -- offering us a swig from the bottle in his first paragraph, a convenient summary of his position:

Twelve months ago, the magazine industry was shouting from the rooftops that the iPad was going to be their saviour - but it turns out that all those people lining up to buy one weren't doing it solely to pay for glass-coated editions of Marie Claire. Sales of maglets (magazines on tablets - geddit?) have been far below the costs of developing these apps, and public reaction has been underwhelmed at best. What went wrong? Six things, actually.The Truth Behind the Failure of iPad Magazines

But if you look at the six points he makes it would appear that the glass is really half full. There have been some mistakes - as is surely to be expected with an innovation as startling as the iPad - but there has also been some progress. Take a look at his problems

1. Publishers are Selling the Same Content Twice. This is clearly a big mistake. But there is no compulsion on publishers to adopt this posture (that they have done so, is largely the result of a separate battle that they have been fighting with Apple about the ownership of user-data). Some publishers, all those who work with Exact Editions, have opted to offer free iPad access to their existing subscribers. There is nothing in Apple's terms and conditions that says that publishers cannot do this, or that digital magazine access has to be sold exclusively through iTunes. Apple's mooted new system for in-app subscriptions will surely encourage more publishers to adopt this attractive way of selling subscriptions, though it may also require that digital/app subscriptions are sold through iTunes.
   
2. There are not enough iPads out there. Only 15 million in the nine months! Since Apple will sell perhaps another 40 million this year, and no market analyst predicted, prior to launch, that Apple would sell more than 7 million in the first year, this is a glass rapidly filling up before-we-can-get-organised, point. Come on Andrew this is surely a reason for publishers to get their skates on!
3. Maglets are competing with everything else on the iPad. Yes indeed, "....magazines no longer have the benefit of being at the centre of our cultural lives. They have to work harder than ever to grab our attention and force their way into our habits, a task that's all the harder when they reside on a fully connected device that contains the latest news from thirty seconds ago..." Which is also a reason for magazines to see if they can persuade consumers to use them on iPads just as they use them in their living rooms. Magazine publishers did not chuck in their hands when the TV invaded the living room, innovative publishers will see the iPad as a similar challenge. Glass half full.
   
4. Separate App Syndrome. I think Andrew misses a key point here. Magazine publishers have made a big mistake in designing magazine apps as though each issue was a separate app. This is a valid complaint, but not the point that Losowsky makes, and it is one reason for the disappointing showing of several magazine apps. It is also one reason why magazine publishers have felt that they should market and sell magazines on the iPad one issue at a time, failing to see that selling subscriptions through, or without, iTunes is clearly the way to go. Magazines as apps work very well as branded apps in iTunes partly because magazine titles often confer superb branding and findability on the product (Marie Claire, Elle, Vogue and also niche titles Literary Review, Opera, Index on Censorship). But the branding should cover magazines in their entirety: past issue, current issue and future issues are ideal to function as branded apps in the customer's iPad. This is a glass that needs to be very full -- including the archive.
   
5. Magazines are outside the digital conversation. This is indeed a valid objection, but in mitigation the magazine publishers (and app developers such as Exact Editions) can point out that this is a complex and rapidly developing field; better engagement and social interaction with digital magazines is certainly coming. The Exact Editions apps are already stuffed full of links to web pages and email addresses (and on the iPhone, phone numbers that the customer can call). Magazine apps can be highly interactive and they are increasingly becoming more so. Losowsky appears not to have noticed that the iPad itself makes it incredibly easy for a single 'page' or a JPEG to be emailed from any magazine app, it is not a matter of some publishers enabling this. There is nothing that the magazine publishers or the copyright owners can do to stop such informal sharing (which does not mean that magazine apps can be easily copied wholesale; that is a different matter). This is a glass to be shared.
6. The medium is nine months old. By which I am sure that Andrew Losowsky means that its really too early to be sure: "The truth is that we just don't know yet what varieties of format, design and interactivity will best serve each kind of content, and though some of the experiments in the field are fascinating, most of them are just irritating applications of over-design by people giddy at the possibilities of new formats." This is indeed a matter of the glass being half-full, and a point on which we can agree

Losowsky's excessively gloomy, more than half-empty, headline 'The Truth Behind the Failure of iPad Magazines' is perhaps belied by this concluding (half-full) optimism:

That said, this is still a genuinely exciting time to be working in media. Nothing at all can be taken for granted - except for the simple fact that there will always be a hunger for unique stories, told in a manner in which the text, design, images. and when necessary audio and video, combine to enhance our enjoyment and understanding of the story itself. This ability to make design part of content is the reason why magazines lasted in the first place.

I first noticed Losowsky's piece via an approving tweet, from Erik Spiekermann, perhaps the Lionel Messi of typographic design. This design discontent with magazine apps is not an odd-ball view, most/many good magazine designers are disappointed by the way that magazine iPad apps have been designed so far. My hunch is that the user experience and pleasure in magazine apps will improve as designers and publishers realise that magazine design and book design has to move to a more holistic and a more abstract level, perhaps when designers are less 'giddy' with the possibilities and more relaxed about the opportunities and the 'flow' that comes with touch interfaces. Technology is moving very fast and good digital magazines have to be conceived and conceptualised for systems and services that don't yet exist. From now on all pages are virtual, all stories have addresses, and all interfaces have to be intuitive. This is not a trivial set of challenges for a designer who aims at quality and effect.

On Making Digital Subscriptions Work

All Things Digital has an interesting essay by John Squires: Apple, Google and the Publishers: Here's How to Make Subscriptions Work. Squires used to be a senior executive at Time Inc and is founder of Next Issue Media a company that is stealthily developing a new approach to marketing and selling digital magazines on tablet platforms.

Squires echoes cries of anguish that have been coming from his peers in the consumer magazine industry:

In recent weeks, we’ve heard growing concern from magazine and newspaper publishers regarding the challenge of providing content for mobile media while preserving their print franchises. The concern is nothing new, but it’s apparent that content providers are at risk of losing track of their customers like toddlers in a shopping mall. Squires All Things D

Its news to me that magazine publishers care for their subscribers the way parents look after toddlers in a shopping mall. Squires goes on to say:

Devices like the iPad offer consumers a rich reading experience and offer publishers even more targeted advertising, but the revenue tradeoff as publishers navigate the path from print to this new world is lopsided–and not in a good way.

The problem for Squires is that he can't see the old business model working for publishers with the new digital magazines. Publishers are not going to be 'allowed' to track their toddlers in the ways in which they have been accustomed to do. Furthermore Squires doesn't think that subscriptions are going to work for digital publishers:

Isn’t selling your magazine through an app store and receiving 70 percent of the revenues a great deal? After all, magazine subscription agents and newsstands don’t return anywhere near that amount to publishers. But this is argument misses an important point. In iTunes and the Android Marketplace, there’s virtually no merchandising of magazine products. A magazine app must swim to the top of several hundred thousand other applications. And even in the context of a dedicated magazine store, the publisher won’t control featuring.The value of the brand must pull the consumer through to the purchase. And brands are expensive to build and nurture....Squires All Things D

So the litany of complaints continues. Despite the potential for a 'rich reading experience' life is going to be very hard for digital magazine publishers, they will have to (1) create the rich reading experience (2) support devices on various platforms (3) market their wares (4) do some 'feature control' of their own so that their magazines come to the top of the heap (5) build their brands and (6) figure out how this fiercely competitive and rapidly evolving world is going to work. Perhaps Mr Squires should look to the example of Rupert Murdoch and go and build a publication which will meet those challenges head on.

Squires's proposed solution for this difficult quandary in which the magazine finds itself is to propose some industry wide standard solutions (perhaps it will appeal to the likes of Google, Apple, and Microsoft because) "there’s a significant long-term advantage for the software industry to make friends with 150 million magazine consumers." As though these technology titans are going to reach agreement on standard procedures so that the magazine publishers existing business model can be replicated in the digital framework?

Make what you can of John Squires' specific proposals. The second one astonished me: (the software industry should) "Create simple APIs that connect the handful of major print fulfillment houses to application storefronts so existing print accounts can be harmonized with digital access." Exact Editions has been doing almost exactly this for many of the publishers with whom we work. But note, such a solution has to work potentially for hundreds of print fulfillment houses (surely it is a sign of some Time-induced complacency to suppose that only the 'handful' of 'major' fulfillment houses count). It has to be general and generalisable. Furthermore the trick is to work with the APIs of the print fulfillment houses (not of the e-commerce store fronts), so the discussions have to take place between the publishers and the fulfillment houses and their IT houses and app developers. This sort of business has to be under the control and to the account of publishers for it to work the way they want it to. You do not attach conventional print subscriptions to digital subs -- which is what Squires on a strict interpretation is suggesting as the desired solution. You attach digital or app solutions to print subscriptions. That way the publishers (via their fulfillment houses) stay in control of the crucial customer relationship. There is no point asking Google or Apple to build your digital back-end. They are not going to do that, and furthermore the magazine industry really does not want them to do so. Which is where we started, with Mr Squires bleating that Apple controls too much data and will not provide access to the iTunes accounts of Apple's customers who subscribe to digital magazines. Why on earth should they? An iTunes customer who buys a magazine app from iTunes is an iTunes customer before she is a customer of the magazine app. The position is rather different with a subscriber who is already a customer of the magazine and the publishers can insist that their customers are treated with the respect and reciprocity that they deserve. They are already a subscriber to the (print) magazine and so should be offered free access via the app. The Economist got this right by providing free app access to all its existing print subscribers. Time Inc and the other big American consumer publishers is getting it so wrong by refusing to do this

Work around it, and start publishing digital solutions that customers want.....

The Daily is a Convincing App. But is it a Periodical?

I like The Daily rather more than I was expecting. I also think that it has a commercial chance; it is a gamble, but it is potentially a very significant money-spinner. A lot will depend on the execution. Murdoch is prepared to take a big punt on the newspaper's success, and like a good gambler he can do this because he is playing with a limited stake ($30 million in startup costs and $500k a week in running costs). He is not playing for break-even but for a significant win, which happens when he has 1 million or 2 million subscribers. That will take 18 months or two years to pan out, so at most $100 million is at risk. For News Corporation with its huge investment in print newspapers this is peanuts. The upside is that The Daily gets 2 million subscribers from which the subscription income is $80 million ($40 annual sub x 2 million subscribers), Apple's commission and sales tax may bring this net take down to $50 million but the running costs are $25 million. Also there is some advertising revenue which should help.

Murdoch's off the cuff comments at the launch were fascinating and engaged, and I heard them the same way as Peter Kirwan, blogging at the UK Wire, who also fancies the commercial prospects of the new title:

If this makes The Daily sound like a bolt-on addition to the media ecosystem, Murdoch is also dreaming of something much bigger. Away from his script, during an interview on Fox Business News yesterday, his words suggested a bid to promote cannibalisation of print audiences.

"I really believe that everybody in America who can afford one is going to buy a tablet," said Murdoch. Ultimately, he added, he would like The Daily to overtake the 26m audience attracted by American Idol on News Corporation's Fox network.

News Corporation executives may smile at the old man's hyperbole. But the intent is clear. What's more, Murdoch claims that he isn't phased by the prospect of cannibalising print audiences. "Oh, there may be some expensive changeover," he said yesterday. "Net-net I think we will get." Peter Kirwan: What's New about The Daily?

Murdoch is aiming a newspaper proposition at a market which can probably commit to the prices he is putting on it (99c a week or $40 a year). Because he has a clean slate Murdoch has been able to take a realistic view of what an annual iPad newspaper should cost. Net-net, I think he will get.

The Daily has a mid-market feel, a bit like USA Today (2010 circulation 1.8 million, and if I were in Gannett's boots I would move very fast to cut Mr Murdoch off at the pass with a snazzier app in the same class) and it will have a mid-market appeal. It is not very serious, it is gossipy, and the sports coverage impressed me; the illustrations are good and some of the diagrams and 360° photographs are excellent. There is much that one could question or criticize (see some very insightful analysis of the typography and design by Stephen Coles), the social interactivity is ham-fisted at launch, but I will be watching the progress of The Daily with interest.

Murdoch in answer to questions, left open the possibility that The Daily will in due course migrate to other tablet platforms, but it is for this year and next aimed fair and square at the iPad. Nevertheless it is in many respects designed and conceived in a rather conservative magazine fashion: as if it were a newspaper designed for a small format with lots of colour and a fair amount of interaction, snippets of video and short, punchy stories. Which is what it is, mostly produced with traditional print tools. The maganewspaper is, we may suppose, produced with InDesign and could almost be laid out as though it were a print object -- almost, but not quite, since as with other apps generated from inDesign the imposition would not work. The framework and the metaphor is still largely a print metaphor, but one re-scaled for the iPad's dimensions and interface. Like any app it can interact with the web and it condescends to save pages and bookmarks and links in suitably undistinguished web pages, but it is most definitely an app and a tolerably enjoyable one to navigate and browse.

So The Daily is a newspaper and an app, but is it a periodical? I only raise the question, because there is no way, at present, to move back to a previous issue (except through the rather drab web pages which are used for reference, bookmarking etc). The Daily is a daily event and not a newspaper of record which would have an archive of issues that can be opened and re-opened to review and re-read earlier content, so that one could again look at the 360° photograph of Tahrir square that they carried on February 4th (one can see the video carried on that day here). It may be said that a proper archive could be 'retro-fitted' once they get going; but I wonder whether this will happen or whether we will move to the idea of a digital newspaper being a more ephemeral publication (like a news web site) with no full archive? Shall we borrow a word from the French and call such not-for-the-record newspapers 'quotidians' rather than 'periodicals'?

I think that digital magazines certainly will retain their archives, and the apps which map them will have to figure out how the archive is presented and integrated alongside the current number. There is strength in that model and anchoring readers in the quality of your back issues has some commercial advantages.