Apple Newsstand Gets Much-Needed Boost From Time Inc. Magazines Deal

Analysis

  @redletterdave on June 14 2012 11:34 AM

Time Inc., the largest magazine publisher in the U.S., has decided to embrace digital distribution. On Thursday, Time Inc. announced that it will make all of its magazines available over the Newsstand application built by Apple, which exists on its iPhone, iPad, and iPod Touch devices.

The agreement was confirmed by Time Inc. CEO Laura Lang and Apple's senior VP of Internet software development Eddy Cue. The two company executives told the New York Times that they had agreed to allow Apple Newsstand users to subscribe to more than 20 magazines owned by Time Inc., including Sports Illustrated, Entertainment Weekly, People, and InStyle.

The move is somewhat unexpected, given that Time Inc. had resisted the need to go digital, and especially on Apple's platform. The company was wary about Apple's restrictions and requirements. When Steve Jobs was alive, Apple requested that in return for using the Newsstand platform, Apple would receive a 30 percent cut if the reader bought the subscription over the App Store. Many news companies didn't see it that way, especially Time Inc. and its parent company, Time Warner.

The only deal we have not done is with Apple, and to cede to their demands to sell digital subscriptions, said Jeffrey Bewkes, Time Warner's CEO, in an interview he gave on Nov. 30 interview, shortly after appointing Lang CEO of Time Inc. They want you to be subscribing to them, and the last time we looked they weren't making the magazines, Bewkes said of Apple.

Even though Apple requested a 30 percent commission from subscription sales, it offered little to publishers in return. In fact, many news companies lambasted Apple for refusing to release subscriber data, which is extremely valuable for publishers so they can figure out how to optimize advertisements.

Since then, however, the icy relationship between Apple and news companies and publishers has thawed. Apple now offers readers the ability to opt in to share data with the publishers, and according to a survey from the Association of Magazine Media, a whopping two-thirds of all tablet users say they would share personal information in return for advertising that fit their needs.

There was some controversy early on because it was something new and hadn't been done before, Apple's Eddy Cue said.

With Apple backing off some of its more lame restrictions, and given the monumental success of the new iPad, Time Warner and Time Inc. felt it was ready to join forces with Apple. Now that Apple has finally endowed a Retina Display on all its major devices, including the iPhone, iPad, and now the new MacBook Pro, Time Inc. was ready to make the switch to a more efficient and beautiful medium.

The deal is the first major initiative led by Lang, who was appointed Time Inc.'s CEO in January after serving as CEO for Digitas, a digital ad agency based in Boston.

It's hard for me to talk about what happened before, Lang said, but when I joined this was a top priority because this is where our consumers are. For a magazine or brand like People or Time, a tablet will become an increasingly important part of the experience. Our goal is to offer content where our consumers want to read it.

 A Win For Journalism, A Bigger Win For Apple

Newsstand, which was introduced in last year's iOS 5, was a great idea: Put all of our favorite news sources all in one place, and let readers buy magazines from the app just like they'd buy a magazine off a newsstand. There was hope that this new purchasing and subscription service would be journalism's savior. Finally, a way for journalism to be profitable.

Problem was, by the time Newsstand was released, it was a dud app. The app worked fine, but it was a dud because none of the magazines you actually want to read were on there.

Perceptions about Newsstand ought to change now that Time Inc.'s magazines are now available. The largest U.S. magazine publisher in the world has a great deal of clout, so one could presume that other, smaller news publications are soon to follow now that the top dog has taken the first big step towards Apple's digital platform.

Apple must be thrilled for several reasons: First, Sports Illustrated, Time, and People were three of the top five magazines in circulation revenue in 2011, so bringing those subscriptions to the iPad is going to help Newsstand immensely. But at a more core level, Apple must be extremely satisfied to have persuaded such a stubborn company like Time Warner and Time Inc. to buy into its product. It was something Steve Jobs hoped to do in his lifetime, but could not.

One of Jobs' great hopes was that Apple could help the world of journalism. He believed that editorial was needed now more than ever. He said on several occasions that he would do whatever he could to help news companies, especially since he didn't want to see us descend into a nation of bloggers.

Now that Time Inc. is finally transitioning from print to digital publishing, it can work with Apple to boost its advertising revenue, which has declined by roughly 30 percent in the last five years, and about 5 percent -- or $19 million -- just in the first quarter of this year.

Apple Newsstand currently sells more than 5,000 magazines and newspapers, and the majority of those customers buy subscriptions instead of just single issues. With this deal with Time Inc., Apple yet again separates its platform from those created by Google (Android) and Amazon (Kindle), even though those companies will likely get deals of their own in the not-too-distant future. Hopefully, with more news options on its platform, Apple can make the Newsstand deals cheaper and better for the news companies, which will only help both Apple and journalism stay competitive in the long-run.

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