Apple vs App Publishers: Does Confrontation Loom?

James Martin

Newspaper and magazine publishers are mulling over the price that Apple requires to be part of The iPad and App Store
James Martin/CNET

While there's no shortage of people criticizing Apple's new App Store subscription service, some executives at major media companies are still unsure what to think.

Some said Apple's plan to allow app publishers to sell subscriptions for the first time through the iTunes App Store was a step in the right direction. Others saw many of Apple's new requirements for app sales, which include a guarantee that publishers offer their best subscription price at the App Store, as the newest way for the company to grab more control of online media.

One possible reason for why reaction was so mixed was that Apple didn't prepare the media world for what it intended to offer. Apple was expected to roll out a subscription service, sure, but the company doesn't appear to have sought any early feedback from some of the nation's top media companies. An executive at a top newspaper said leaders there were huddling in the afternoon to try to understand the significance of Apple's announcement. A manager at a media conglomerate said most companies would have tested reaction by running the plan past top publishers before going public. Not Apple.

The magazine and newspaper sectors are among the most affected by today's announcement. Since the iPad went on sale last spring, Apple has mostly limited their app sales to individual issues. But they aren't the only industries that must figure out whether the iPad and the App Store are now a viable option.

Companies such as Netflix, the Web's top movie-rental service, and Spotify, a popular European streaming music trying to make the jump to the United States, could be forced to start paying Apple 30 percent of the subscription fees they see from the App store, although that sounds difficult to believe in Netflix's case. Netflix's distribution network now includes more than 200 devices and the company boasts more than 20 million paying subscribers.

The iPad and the tablet market, on the other hand, are still early in their development and soon a glut of iPad competitors will debut. Netflix could conceivably swat Apple's demands away by announcing that anyone signing up for Netflix via the App Store would be forced to pay 30 percent more--thanks to Apple.

So, which company needs the other more? Spokesmen for Netflix and Spotify didn't respond to interview requests.

The Deal

Here's a couple of questions: if Apple execs didn't run the new requirements past big media companies, can Apple be sure how they will respond? What if Apple succeeds only in pushing them into the arms of Amazon or another competitor?

At first glance, Apple appears to have yielded ground to magazine and newspaper companies. The Cupertino, Calif.-based Apple said publishers now have the ability to sell subscriptions through the App Store, which they didn't have before. Where Apple once took 30 percent from every app sale, the company now says publishers can sell their iTunes apps on their own sites or elsewhere and Apple won't expect a cent.

But if Apple became more flexible in some areas, it didn't budge nearly enough on other important issues, such as the sharing of customer information, say observers. In prior talks, Apple refused to hand over customer data, such as names and e-mail addresses, to publishers. Now the company says it will share info with publishers only if a subscriber permits it. That is unlikely to go far enough to appease some publishing companies, experts said.

In other ways, Apple became even more restrictive. The company will no longer allow apps to include links to other app-selling sites and established a most-favored nation stipulation. Publishers that sell their iTunes apps from their own sites or third-party Web stores must offer the same price, or less, at iTunes.

Web pundits howled over this one. Some suggested Apple is trying to fix prices, and even The Wall Street Journal speculated that the company could be inviting antitrust scrutiny.

Newspaper and magazine publishers are mulling over the price that Apple requires to be part of The iPad and App Store.

While there's no shortage of people criticizing Apple's

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    Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.

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