Apple's Terms of Trade Finally Win Acceptance with Magazines

Suddenly the dam seems to have broken and the major consumer magazine publishers are lining up for iPad editions sold on subscription through iTunes.

In the last ten days, Time Inc, Hearst and Conde Nast have all announced moves towards selling their leading consumer magazines as subscriptions on the iPad. They are also offering free iPad access to their existing print subscribers, a simple and very necessary step as we have been emphasizing for months.

In disclosing these new offerings the major consumer magazine companies have been stressing that Apple has been willing to make concessions and to grant flexibility (see reports of such by Peter Kafka at AllThingsDigital). I expect some modest concessions have been granted, but on matters of detail and to help with 'bedding in'. Apple has not had to modify its developer contract or bend on its commission terms. Apple has the whip hand and, more to the point, Apple will not make concessions on issues that put obstacles in the way of the successful operation of the iTunes service. Apple will not make concessions which force it to re-write its end-user license agreements. Apple will not make deals with magazine companies on its 30% commission when it has been completely impervious to the pleadings of the music publishers on royalty rates. The bald and uncomfortable truth for these giants of consumer publishing is that Apple is not going to do deals. Apple is not going to cramp the economy of iTunes for the sake of the magazine business. So what follows?

1. Magazines will sign up to the iPad service in a growing avalanche. Now that the big 3 of the US consumer magazine business have moved over to the Apple way of doing business, we expect that most major magazine companies will move over to producing iPad apps for their key magazines.
2. Within 12 months iTunes will contain many more iPad magazine titles than has ever been collected in one physical kiosk or emporium. Finding titles in such a rich product mix will become more of a problem. But magazines are better placed than most categories to thrive since magazine titles are (usually) so clearly branded and so distinctive.
   
3. The magazines in iTunes will be offered primarily on a subscription basis. Hitherto iPad apps were being offered on a single issue basis.
   
4. The major consumer magazines in all the major national markets will soon be offering iPad apps through iTunes and they will also be offering free digital access to their existing print subscribers. Magazines will do this because in that way they retain more control over their subscriber base and can avoid having all their subscription services handled by Apple. They retain, indeed enhance, the crucial relationship that they have with paying customers.
5. The prices for digital magazines within iTunes will be pitched at increasingly aggressive levels, Bloomberg Business Week costs $36 per annum. The Esquire iPad app will apparently cost $19.99 pa. Apple's pricing rules mean that international pricing will level-down to the best home market subscription offers (US subscription prices for consumer magazines are low in comparison to European prices).
6. These recent announcements have all been focussed on the iPad. Conde Nast and Time Inc are committed to producing iPad apps, it is not clear whether the iPhone market is being by-passed or merely temporarily left behind.
   
7. Android apps also appear to be taking a back seat. It will be interesting to see whether this week's Google I/O, now in its second day, has any mention of digital magazines. Not much sign of them in the opening sessions.
   
8. The apps that are being produced for the iPad bear a remarkable similarity to the print product. The idea that a magazine app needs to be something radically different from the page-oriented, highly designed and issue-based package that we all know, is losing ground. Most magazine publishers cannot afford to run two parallel design, production and editorial processes.
   

There is no question that the iPad is a very good device for reading digital versions of print magazines. The magazine publishers have, of course, realised this from the outset. They are now beginning to realise that Apple's terms for trade are not so bad. When Amazon brings out its Android tablet I suspect that these same magazine publishers may find that the Amazon terms of trade for digital magazines are just as unyielding, and perhaps in some ways worse than those that Apple have set before them. My first take on the Amazon app developer rules certainly caused me to blench.