Apple's "New" Policy: Looking Beyond Digital Circ Dollars to Ads & Data
Today, Apple posted its policy on the new digital walls we’re getting accustomed to reading. Like similar proclamations, posted on real walls, over the centuries, the citizenry, some more literate than others, are madly deciphering it. This is what it seems to say, but is this what it means, they ask?
Overall, there’s little surprising in the Apple announcement. After all, what it said publicly is what it has said privately to news and magazine companies for months. Your old business is still your business, but the new business — when we help you get it — is our business, too. For Apple, that’s a logical position, and the logic is backed up by a big number: 160 million. That’s the approximate number of iTunes account holders, a number 40 times bigger than the largest newspapers in the U.S. and Europe. You want access to our customers, Apple says, pay us.
Digital circulation money, though it may the highest profile part of this story, isn’t the most curious issue involved here. There are at least three big issues for media companies — and you can put Netflix, Hulu and Rhapsody in the mix here — surfacing here:
- Selling a customer across all media types, including print, with the new all-access media consumer promise — a cornerstone of many next-generation business models. (“The Newsonomics of News Anywhere“)
- Unifying the customer experience as we digidextrous readers (and listeners and watchers) move from desktop to smartphone to tablet and back and forth over the course of our days.
- Sophisticated ad targeting. Yes, new digital circulation money — has it finally arrived? — seems like a godsend, but it’s a small godsend compared to the amount of digital advertising spending to be available to media over the next five years.
First, though, let’s take a quick look at what the policy does tell us about circulation pricing. Essentially, it sets a new circulation cost structure for publishers. They’ve got all the old metrics from the print side, and have been raising print subscription and single-copy prices a lot over the last four years, even as the print volume ebbs away. Now, they can say, okay, we can look at digital circulation pricing three ways:
- We can use Apple to get new, standalone, digital subscribers for iPads and iPhones, and we’ll just give Apple 30% to be our digital delivery boy. It’s more than we’d like to spend, but at least it’s a known expense, and we can factor that into our pricing.
- We can use Journalism Online’s Press+ to get new digital subscribers, and work with that company to connect our print subscribers and digital ones. That will cost us 20-25% of the digital income, a little lower than Apple’s take, but we’ve got a chance to offer a print/digital bundle.
- We can build out our own authentication/e-commerce systems (what Press+ does) at a larger cost — a quarter million dollars and up for a metro title — and devote operational money to running it. That’s a bet that they’ll be lots of money in digital circulation and the investment/ongoing staffing is worth it. That’s a classic build/buy decision, one with lots of unproven revenue assumptions.
From a pure financial point of view, Apple’s announced deal gives structure to news and media strategy. For newspaper companies, it also offers the outline of a two-market strategy. Yes, they can — through their own systems or Press+ — transition their readers to All-Access, as they increasingly use tablets to replace print. The core of print newspaper readers — largely older — is hugely valuable in this tablet transition, and that remains intact. The second market — largely younger — is made up of heavy news users who aren’t print subscribers. Now, through Apple, newspaper companies have access to many non-print customers, who, at the touch of a click can buy. That buying could include subscriptions certainly, but also an endless potential of special products (Egypt special sections, personal finance for new couples, baseball season previews+++; “The Newsonomics of Kindle Singles“). Apple just says: we brought you that customer and we’ll take 30% of the price you set.
So far, not bad.
Back to the rubs, all of which can be massaged out, but haven’t yet, as publishers and Apple both get their heads around how to play the new ecosystem.
The rubs all start with data, the real new currency in digital business. Apple has chosen an opt-in policy. When we consumers sign up for a subscription, we can choose to offer our names, e-mail addresses and zip codes. Given a choice, lots of consumers will say “no” or “what’s in it for me”? So, lots of basic information will never be captured. That basic info, to the extent it is captured (or publishers figure out how to incentivize us to give it to them), could be used to match up the Apple customer with the print or online (desktop, laptop) customer, though the match is easier said than done.
But, wait, that’s not the data that matters most. The most vital data is what tablet news readers are reading, how long they are reading what and their ad-clicking behavior — basically all the tracking breadcrumbs allowing marketers to better target and customize their messages and offers. Targeted ad selling will produce lots more money over time than the digital subscription revenue, and it appears that news and media publishers won’t have much (any?) access to it. What is a customer doing on the tablet — with one news or media brand, and overall, in aggregated usage form — is a big question. For Apple, building out its iAds business, the data can be a goldmine, allowing it to hypertarget advertising, and taking its additional 30% there, as it offers publishers iAd advertising on their tablet products. If that’s true, the whole digital circulation policy may be just a Trojan Horse to get to the real iAds riches.
Beyond the ad revenue, publishers need to be able to see their customers — and what they are doing — across all possible platforms (as much as print allows, of course) if they can best serve them. For instance, if I can start reading a story on the iPad and want to pick it up on the home desktop, can I do that, another way of asking whether the systems will know I’m the same reader. If you are the Journal, the Times or the FT, further, and Apple sells a digital bundle to your content (part of the policy is that Apple must be able to offer a similar product at a similar price), then how do I know that customer may also be my own print customer. The mixing and matching questions here go on and on.
Yet, they can be worked out. They can be massaged, as Apple learns both the ad business and sees a greater potential in partnering with publishers on these knotty issues. If the IPad operates too much like an island — disconnected from other non-Apple digital reading and media consumption — that could hurt Apple is a world of increasing connected expectation.
Overall, today’s news will push publishers strongly in the All-Access direction, a route some has charted and most have surveyed. Well-executed, it offers the chance, a new one by the pre-tablet standards of two years ago, to move print customers to paid digital reading experience — and get into play for a new audience (How they make that play — the product — of course is the big question.) Expect a lot of harrumphing around the announcement, but then more behind-the-scenes tackling of the tougher ad and data integration issues.