Crazy. It’s one of the most common qualifiers that emerged after the Wall Street Journal reported that Apple plans to keep half of the revenue generated by the paid version of Apple News . This proposal is too high for media such as the Washington Post, Wall Street Journal and New York Times, which already have their own subscriber base.
But, what about the rest of the smaller caliber media? That is the question whose answer we started to see throughout yesterday thanks to Recode.
Not everyone is the New York Times
This is an excerpt from Recode’s article, where Peter Kafka gives us one of the keys to Apple News . The Washington Post, Wall Street Journal and New York Times already have a significant subscriber base paying between $10 and $35 a month. This has allowed them to resist the crisis that the online media has been suffering in recent years. But not all publications enjoy this good health.
There are tens, perhaps hundreds of online media in the US and around the world that do not have the same number of readers nor have they been able to mount a viable subscription model, as Angel Jimenez states in his tweet . It may be clear to large media outlets like the three mentioned above that this type of arrangement does not benefit them, but there are many others who can see it as an interesting source of income.
Not the Netflix model but the Apple Music or Spotify model
Ben Thompson gave us another key piece of this puzzle. This is not a Netflix of the news , since that would imply that Apple would have its own team of journalists generating the news, at the same time that it buys the “catalog” of media like the New York Times and all the others. Apple has a team of journalists, but they are dedicated to manually selecting which ones deserve to be on the front page of Apple News, while the rest of the news are placed using algorithms.
In AppleApple News and monetization: the dilemma between traffic, ads and paid subscriptions
Another fundamental difference between Netflix and Apple News is that the former has a catalog that does not lose much value over time. News, by its very nature, melts away like a sugar cube in a coffee cup as the hours go by. What happened three days or three years ago is of little value. Unless it’s timeless content or the so-called evergreen , few people will want to pay for a back catalog of news.
Therefore, the model of Apple News is more similar to that of Spotify or Apple Music than that of Netflix. Perhaps the best way to get rid of doubts about its appeal is by doing a few simple calculations.
Doing the calculations for a paid Apple News
The New York Times claims to have about 3 million paid digital subscribers (news and other services). Let’s say that the average subscription is $10 per month, that means it will generate $360 million in revenue per year in total. Let’s now move on to the paid version of Apple News in various scenarios:
- 50 million subscriptions to Apple News would generate $250 million to be distributed among publications per month. In total it is 3 billion a year. If the NYT captured 5% of that total, it’s $150 million a year.
- 100 million subscriptions to Apple News would generate $500 million to be distributed among publications per month. In total it is 6 billion a year. If the NYT captured 5% of that total, it’s $300 million a year.
- 150 million subscriptions to Apple News would generate $750 million to be distributed among publications per month. In total, that’s $9 billion a year. If the NYT captured 5% of that total, it’s $450 million a year.
Looking at these calculations, it is easy to see that the appeal to large media like the NYT occurs only if the service has a significant number of subscribers. Paying Apple News would need to have a large number of them for this type of publication to consider embracing it, more so if we consider that cannibalization would be inevitable: why pay $10 to the Times when for that same amount I can read the content of the NYT and lots of other sites.
At AppleOnline media are reluctant to the paid version of Apple News, according to WSJ
However, for more modest means the business case is much more attractive. A regional gazette but with a very loyal user base could be made with 0.5% of that total income. This could mean a peak for your accounts . Of course, the Apple News proposal would be much more convincing if it were to have the approval of the large publications.
Apple News will require time to exploit its full potential, just as Apple Pay or Apple Music have done before this service yet to be unveiled
But this is a long-distance race and Cupertino’s people have a habit of thinking about the long term. It may be enough at first to have one of the big ones and eventually the others will join in, just like Apple Pay has done.
Just look at Apple Music. Everyone wondered what the company was working so hard for if Spotify was the clear market leader . And now its streaming music service has 56 million subscribers worldwide, making it Spotify’s main competitor. All in less than four years.
We don’t know if Apple News will follow the same fate. Of course is a risky bet for everyone, especially the online media. We still don’t know the exact details of this service yet to be revealed, but everything indicates that we will see it on March 25th.
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