Why Apple's mooted ‘Netflix for News’ is bad for journalism

This article was originally published on The Drum, on 25th March 2019.

It wasn’t long ago that an announcement of Apple’s ‘events’ would trigger a flood of media commentary on what the next wave of devices would look like. This time it’s slightly different, with the focus almost entirely on what services it may or may not launch.

Most of the attention has been on TV, and whether we can expect Apple to mount a serious challenge to Netflix with a new streaming offer, in the way Apple Music has started to challenge Spotify. Having spent 20-plus years on the commercial side of the news business at News UK I’m more interested in the mooted publishing product, which has attracted a little less attention.

This wouldn’t be Apple’s first attempt. Having discontinued its 'Newstand' subscription product, its free Apple News service is peripheral at best, and Apple is expected to announce a revamped, subscription based, Apple News product today (25 March).

The reaction from the publishing community has been lukewarm. The leaks on the commercial terms suggest Apple intends to keep 50% of the subscription fee, sharing the rest with participating publishers. This has caused understandable controversy, and Apple may stand accused of being greedy.

But the bigger question is whether this business model can work.

As one source put it, unlike music, “no-one wants an all-you-can-eat magazine service” and that “magazines are passion points, whereas music, you do want a library”. But even if there were customer appetite for such a service, the model is still flawed because what’s good for Apple is not the same as what’s good for publishers.

Marketplaces work better when incentives are aligned. When what’s good for the distributor, say, is also good for the supplier and the consumer.

What Apple needs is more subscribers. Its share is guaranteed, so more subscribers means more cash for Apple. But not, necessarily, more cash for publishers.

Apple doesn’t need to care how much content a user consumes, as long as they keep subscribing. So Apple wants to make sure users get a lot of stuff for their money.

That stuff always costs Apple the same. Whether Apple divides the publishers’ share up into 10 chunks, a hundred or a thousand, the cost to Apple never goes up.

Publishers, of course, have to invest in content. When it comes to getting paid they’re at the mercy of an algorithm, uncertain and variable. Apple, having used the publishers’ products as the lure, can relax and see its profits increase. But for publishers to thrive, they need a reliable way to connect their popular success to their revenue.

Joining a blanket subscription service is not it. Publishers can’t set prices. Every product sits alongside all the others, in an all-you-can-eat media buffet. If the service is an aggregator, combining content from multiple publications into personalised feeds, publishers can’t control their product either.

It’s easy to understand why some publishers are keen to latch onto any new source of revenue, especially if they know a standalone subscription offer either won’t work for them, or can only appeal to the 2-5% ‘die hards’ in their readership at most.

But imagine if the popularity of their product directly drove their revenue again. If publishers could control their pricing as well as their product, selling twice as much would mean making twice as much money. Or sell a hundred times as much and make even more – scalability works for media too.

Such solutions are now being developed and made available because there has never been a better moment to challenge the internet orthodoxy – both publishers and consumers alike are discontented.

But what options are there? Subscriptions are a big commitment for consumers. Outside the media industry and ‘news junkie’ elite, how many people buy even one newspaper or magazine subscription, let alone two or more?

My firm belief is that there’s a ‘middle majority’ of casual readers out there who may not want to subscribe to every title they want to read, but who would pay something for the articles and products they really want to. Certainly a greater fee than that user could earn from advertising revenue – most of which, The Guardian’s David Pemsel has frequently pointed out, does not go to the publisher anyway.

In my view, publishers need to find a way to charge for content without demanding a subscription. That way, they do best when they make the best product they can. Attract attention to it, set a price which works, get consumers to form a habit which keeps them coming back. Then consumers spend more, and publishers can invest in making the product better and more appealing.

But can you ever find enough customers to make this work?

Well, yes. They’re everyone. Publishers used to find them in newsagents. You never put your own shop on every high street; you put your product where the customers were.

And the internet is the biggest newsagent ever built. Publishers don’t have to build their own shops.

Unlike Apple’s model, the same thing would drive everyone’s bottom line. The best product stands to make the most money, but not at the expense of someone else’s revenue.

Apple’s model, by contrast, limits the value of each user and, thus, of the total market.

If the rumours are true, most news publishers are yet to commit to Apple’s service. I hope that’s right, but I also hope they have not become fixated on Apple’s 50%. That’s not the problem; even if Apple reduces its percentage, the issues facing publishers today remain unanswered.

30 years on from the birth of the web, its inventor Sir Tim Berners-Lee has struck a glass-half-full, cautionary tone. There’s still much to do.

Paying for media online remains awkward and fragmented, which has created a vacuum that the mass-subscription model has tried to fill. Great for the tech giants but not so good for everyone else trying to build direct relationships with their customers and, in the case of publishers, the revenue that’s essential to fund high-quality journalism. They need to stay focused on making great products that a middle majority of casual users are willing to pay for, and building a direct relationship with them.

Resist the quick-fix overtures of the tech giants – it’ll be better in the long term.