Friday, September 02, 2011

Financial Times Tablets

As a regular FT reader I watch their digital development with real interest. Paid Content has been following their strategy and has a note about the reasons why the FT has now withdrawn its app from iTunes.

Two months after the deadline for compliance hit, it’s now clear The Financial Times and Apple (NSDQ: AAPL) can’t come to a compromise over the new requirement that in-app subscription payments must go through iTunes Store. The paper’s iPad and iPhone apps have disappeared from iTunes Store. Apple says the FT took them down to comply with its new terms. Financial Times Apps Finally Pulled from iOS Paid Content

The FT has a really excellent HTML5 app designed for the iPad (and other tablets?) and subscriptions for this app can be purchased directly from the FT web site. Note that the headline is misleading, the FT has not pulled its app from iOS, the app actually works fine with an excellent touch-interface on the iPad. What has happened is that the app cannot be bought or distributed via iTunes. The reason for pulling out of iTunes? Well, it apparently isn't primarily about the 30% commission that the FT would have to pay for all subscriptions sold through iTunes:

“(Giving away) thirty percent of subscription revenue isn’t something we celebrate, but that was secondary actually - we already pay other distributors and agents; newsagents take a cut. Central to our whole strategy and all our aspirations is to have that direct relationship with the reader.” John Ridding CEO FT, interviewed by Paid Content, August 8, 2011.
But this is still hard to understand, because the newsagents and other distributors who sell the physical product not only take a cut, in aggregate much more than 30%, they deliver readers who have no direct relationship with the publisher. Refusing to sell subscriptions through iTunes and refusing to participate in the shortly to be launched Newsstand within iTunes is de facto hiding the publication from the 200 million people who have an iTunes account. The FT has lots of costs to get on to physical news stands but good product placement within iTunes is pretty much free for the publisher, so why turn that away? Sure some loyal readers who have purchased an iPad will be willing to go to the FT's web site and sign up directly there, through the Safari web browser, but everyone who has an iPad has an iTunes account and knows how much easier it is to use it to buy a subscription within iTunes than to transact with a web site using a credit card. The FT's move away from iTunes makes no sense in the context of customer acquisition, especially since Apple now allows publishers to provide free for subscribers access through an app. Apple has also stepped back from requiring that publishers who sell subscriptions should offer the best price in their iTunes sub. If the FT wished to promote digital subscriptions which include free access to the app, and at a lower price to direct subscribers who have given their demographics to the publisher, there is nothing now in the Apple rules to prevent this. They could have in-app purchasing within iTunes, but no reader demographics, and off-iTunes direct selling with complementary iPad access to those subscribers who complete the demographic form. Anonymous readers via Apple, and 'engaged' subscribers via their own transactional system.

The FT's stance in this matter is so puzzling that I wonder if there is some hidden explanation. One that occurs to me is this: the FT will have spent some time developing its HTML5 app and the service that delivers it. It surely will have done this because the FT expects there soon to be a range of media consumption tablets of which the iPad is merely the foretaste. So the publisher would like to manage the way in which subscriptions are handled across all platforms, collecting similar information from Android, Windows and iOS platforms on similar terms. That this may be the main concern is shown by this remark:
“You have to think about the customer - life is going to get pretty confusing if you have to have a different sign-on with all the different device manufacturers. John Ridding CEO FT, interviewed by Paid Content, August 8, 2011.

Sure there is a certain logic to this approach: the FT is going to do everything the FT way. This is a 'consistent' way of looking at distribution channels from the publisher's point of view, but it is an extraordinarily un-customercentric way of looking at the market. Suppose every publisher develops apps in a similar fashion. There is no likelihood at all that different publishers will offer their subscriptions on similar terms or have matching demographic requirements. So life is going to get very confusing for periodical subscribers who have to learn about the very different sign-on steps required from different publications. An approach that may appear to be simplifying matters for the publisher is vastly complicating the lives of consumers. One of the great advantages of iTunes for the customer and the publisher is that the terms and conditions for purchasing apps and subscriptions are pretty much standard. You know what to expect and its all very simple.

It will be interesting to see how the FT app plays alongside the terms and conditions that will be attached to the heavily rumoured Amazon Android tablet. Its hard to see how Amazon could keep an HTML5 app off the hardware, but it will be surprising if the publication is sold through the Amazon app store, because there is no likelihood of Amazon letting publishers collect all that demographic data that they would like to have from subscribers. So, rather than being a rebuff to Apple, perhaps the FT's stance in this matter is a statement of principle and a shot across the bows of the soon to be revealed Amazon periodical platform.

How much will it hurt the FT if they persist in their policy of not offering the app through iTunes? My hunch would be that iTunes availability with very modest promotional efforts could easily double the level of sales that they can achieve from a stance without iTunes. We are currently seeing a big step up in iTunes subscription purchases (mostly for the iPad). iPad sales are ramping up. There is a good chance that the FT app will go back into iTunes with 12 months. Apple will not have changed its stance, but the FT will have seen that it can work with iTunes and 'upsell' to customers who may have initially been reluctant to provide personal details to the publisher.

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