July 13, 2024

Apple Gives Publishers a Sales Break

On Monday, in an unannounced change, Apple did an about-face on controversial rules that required publishers who sold content or subscriptions in iPhone and iPad apps to offer them through the iTunes App Store, with Apple taking a 30 percent cut. It revised the rules to give magazine, newspaper, music and video publishers more freedom to sell their content directly without going through iTunes.

Apple confirmed the changes, which came in updated guidelines issued for application developers. But the company did not comment further. The changes were first reported by the Web site MacRumors.

Apple’s rules, which had not yet been in effect, were attacked by some publishers, who complained that giving Apple such a large cut would put them out of business. Some publishers had threatened to remove their apps altogether from Apple devices. The rules also attracted scrutiny from federal antitrust regulators.

But other major media companies have recently reached agreements to sell subscriptions through Apple.

Publishers were still digesting news about Apple’s adjustments to the policies on Thursday, but there were early indications that they liked what they saw.

In February, Apple introduced a subscription mechanism for iPhone and iPad apps that required companies to offer customers the option of buying content like magazines or music through its payment system. The rules also barred companies from offering a better deal to customers if they paid for a subscription elsewhere, say on a company’s own Web site. Apps that did not comply were not authorized on Apple devices.

Under the new rules, companies can sell the subscriptions to their content on their own Web site at any price they choose, and make that content available in iPhone and iPad apps. Publishers are no longer required to offer users the option to purchase the content directly from within their app, but if they do, the transaction must go through the iTunes store, and Apple will still get a 30 percent cut. And publishers are still not allowed to put “buy” buttons in their apps that circumvent the iTunes stores, say by directing users to their Web sites.

Apple’s prior rules sparked concerns among many publishers. But relations between Apple and some major media companies warmed in recent weeks, after Apple showed flexibility on another sticking point: its willingness to give magazine publishers data about subscribers that signed up through iTunes.

Hearst and Condé Nast, the second and third largest American magazine publishers, recently reached agreements to sell subscriptions through Apple. The New York Times has also agreed to sell subscriptions through Apple’s App Store. Time Inc., the largest magazine publisher, is still negotiating with the technology giant but has cut a deal in which subscribers to Sports Illustrated, Time and Fortune can read the magazines free on the iPad as long as they verified their identities.

Others have sought ways to bypass Apple’s rules completely. For instance, The Financial Times, the British daily, on Tuesday introduced a mobile Web app that worked in a similar way as an iPad or iPhone app, but could be made accessible through a Web browser. The goal was to circumvent Apple’s store and the commission.

The music service Rhapsody, which had criticized Apple’s earlier rules as unworkable and had threatened to remove its app, said Thursday that it was still reviewing the new rules. A Condé Nast spokeswoman called the changes “great news” but said the magazine company, which sells GQ, Vanity Fair and The New Yorker on the iPad, still had “to look carefully at this development.”

Executives at Hearst, which will begin selling subscriptions for Esquire, Popular Mechanics and O, The Oprah Magazine soon, were still sorting through Apple’s changes and had no comment on Thursday. Time Inc. should not be affected much by the changes because it has not reached an agreement yet with Apple to begin selling subscriptions. Those talks continue.

Apple’s previous rules surprised some analysts because of their potential to alienate media companies. The company has long courted content makers and app developers, not so much because of the revenue it generates from selling their wares, but because having a large supply of content and apps helps the company sell the gadgets that account for the vast majority of its revenue and nearly all of its profits.

As the largest distributor of music, for example, Apple generates a hefty stream of revenue for major labels. But the iTunes store accounts for just a sliver of its own revenue, and the company has said in the past that it generates virtually no profit from the store. In the most recent quarter, Apple said the sale of apps, music and content combined brought in just $1.6 billion of the company’s $24.6 billion in revenue.

“The more content there is in their ecosystem, the better their devices sell,” said James McQuivey, an analyst with Forrester Research. “Why they had decided to tighten the rules on content publishers is hard to explain. I think they overreached.”

Jeremy W. Peters and Nick Bilton contributed reporting.

This article has been revised to reflect the following correction:

Correction: June 9, 2011

An earlier version of this story mischaracterized The Financial Times’s motivation for shifting to a Web-based app. It was to avoid Apple’s store, not to attract readers from the store.

Article source: http://feeds.nytimes.com/click.phdo?i=8afb579cd7213c5116ae20a0abc339af

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