Between the Lines

Larry Dignan, Andrew Nusca and Rachel King

Apple's iPad muscle flex: Setting the stage for a showdown with publishers?

By Sam Diaz | July 29, 2010, 3:00am PDT

Summary: Apple’s rejection of a subscription app by Time Inc. is an example of a possible showdown that could be brewing between publishers and Apple over control of valuable subscriber data.

A quick muscle flex by Apple over a subscription version of the Sports Illustrated iPad App is giving magazine publishers everywhere a glimpse of how things go when you play by Apple’s rules.

But it’s also setting the stage for a showdown - a game of chicken, if you will - between magazine publishers and Apple over the firm control that Apple maintains over the apps that go into App Store.

Peter Kafka, who writes the Media Memo blog for All Things Digital, tells the story of Time Inc., where execs “have been going nuts” over Apple’s rejection of its subscription app, a move that forced Time to sell the iPad version of the magazine as a $4.99 single copy sale sold via iTunes.

No one is exactly sure why Apple rejected the subscription app, though Kafka floats two theories: the first being that Apple is protecting the consumer data that the magazine publisher might collect and the second being that Apple wants to control the subscription, allowing it to essentially control the digital magazine market.

Now, if you’re a magazine publisher, you know the real value of the subscription is not the revenue but rather the data. And imagine the treasure trove of data, beyond just a subscription list, that could be generated by tracking in-app behavior or interaction with various forms of advertising. That’s valuable information when it comes to turning that content into ad revenue - which is the real bread-and-butter for the magazine.

So it makes sense that Apple would want to maintain some control over that. It also makes sense that Apple would have some muscle to flex, seeing how it makes both the platform and the device, a first-of-its kind and a smashing success with a huge market lead right out of the gate and no true contender in sight.

Now, there is an option for the publishers - and that’s where that game of chicken comes into play. Apple’s take on the situation is that there are two platforms supported for apps of all types, including magazine. Publishers can either abide by Apple’s rules and develop an approved app for the App store or take the HTML5 route and develop an iPad experience that’s based in its browser.

Essentially, it’s Steve Jobs saying, “My way or the highway.”

For now, Time Inc. is stuck with a tough decision - largely because it would be out on that limb alone if it revolted. Time’s media counterparts, Kafka reports, so far haven’t even submitted subscription apps and Hearst, which is trying to creative with sales of multiple copies, seems to be OK with giving Apple its 30 percent - and all of the data.

As Time Inc. considers its next move, it’s important to remember that, while there’s plenty of excitement around Apps today, that’s not to say that HTML 5 and browser-based won’t replace apps as the next “platform.”

Google, a big advocate of the cloud, has also been talking up browser-based computing for some time now and, given how young the market is, there’s plenty of opportunity for another player to come in and disrupt Apple’s app-based jump start.

Granted, Google is still trying to make a name for itself with Android and mobile phones. And when it comes to tablets, the biggest buzz around an iPad alternative has been the Dell Streak - but now, it looks like that won’t be a contender after all.

The question is how long it will take for a contender to come in or for HTML5 “apps” to take off and whether a publisher such as Time can afford to stay out of the App Store and out on that limb while the iPad app ecosystem continues to flourish.

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Apple iPad, Time Inc., Apple Inc., Magazine Publisher, Web Browsers, Internet, Sam Diaz

Sam has been a technology and business blogger for more than 18 years.

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If MS comes out with a decent Windows 7 ...

... slate interface by December, which is designed through and through for touch, I'm sure the company would be happy to give these guys a place to hang their hats. The slate form factor is still MS' game to lose. I just hope the Windows division has gotten real UI / UX religion, the same way the Windows Phone 7 organization has.
P. Douglas
29th Jul 2010
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RE: Apple's iPad muscle flex: Setting the stage for a showdown with publishers?

@P. Douglas
They (& HP) abandoned the Slate a couple of months ago. Time to let go the vaporware.
LTV10
2nd Aug 2010
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Apple cannot afford this attitude...

The heady days of Apple controlling everything are rapidly disappearing; Android saw to that.

Within six month there will be a large number of tablets out there; Androids, Win7, Palm, etc...and they will all be negoting with publishers.
trickytom2
29th Jul 2010
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RE: Apple's iPad muscle flex: Setting the stage for a showdown with publishers?

@trickytom2 Apple cannot afford this attitude... For once I agree with you.
Pete "athynz" Athens
29th Jul 2010
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Re: Apple's iPad muscle flex: Setting the stage for a showdown with publish

@trickytom2 Rather than simply disagree with the bold, heroically overoptimistic and ill-judged statements you've made here, I'll instead issue a challenge. I bet that even though there may indeed be many tablet devices about [somewhat diluting the market] in 6-12 months time, none will gain a significant enough foothold in the market to seriously challenge Apple in real terms. And by that I mean market share and genuine earnings. I doubt most will even recover their development costs - a model that Microsoft thinks it can afford to sustain, but can the likes of Dell?

There are a number of seriously flawed assumptions made about so-called "potential iPad beaters". One is amply demonstrated by Sam's comment above: "... the biggest buzz around an iPad alternative has been the Dell Streak - but now, it looks like that won?t be a contender after all." Now? Wasn't it obvious from the beginning? Buzz??

Anyway, who created that alleged buzz? Was there even a real buzz at all? Was any sort of positive buzz ever even justified? I contend the answers are: NO, NO and NO.

Dell did, in their traditional, retarded, clumsy manner, attempt to create a buzz by leaking some pictures. But what users want is actual hands-on experience-based comment. Is it too much to ask for an actual release, followed by some hands-on reviews maybe? You can't get any of that from pictures and hinted spec lists. And how many comments did that story actually attract? Not that many. Comments on forums directly reflect the level of interest there is on the net for a particular product, as do Google searches. Check it out. That picture isn't pretty.

The MS/Dell/Android Axis fans on some tech blogs also tried to create a buzz, by getting far far too over-excited about those uninspiring leaked pictures. Save that energy for [insert own prefs for young starlet]'s first topless beach shots guys! But in the absence of a real device [even a prototype] and some actual hands-on experience, they were just more comment on vaporware.

But what was Dell actually offering? [My use of the past tense here is I believe more than justified]. A small, low-res screen, yesterday's Android OS, on a device with a personality disorder [too small to be a real tablet, too big to be a phone], that can't do Flash [the MS/Dell/Android Axis's argument why Apple's iPad sucks, right?], available on AT&T, all in yet another leak - from the company that millions of frustrated and disappointed desk-bound computer users have already long ago grown to distrust, in the only area where they're dominant - the only area where they've ever been successful!

Are you getting the picture? Horrible isn't it? Now tell me again why, if Dell is leading the MS/Dell/Android tablet vanguard: "The heady days of Apple controlling everything are rapidly disappearing".

It's obvious, the MS/Dell/Android Axis are stuck in 1999 in their understanding of marketing and the psychology of buyer/user choice. We all know, if you tease a child once with the promise of a new toy, you get excitement. Repeat the same tease so may times and eventually, even the arrival of that toy cannot save it from being tarnished by the disappointment inevitably caused by the over-use of this dumb, cruel-minded tactic.

In this respect, buyers/users are just like kids. We all respond to our environment in positive and negative ways. Tease us once and we're like: 'Oh, okay'. Tease us twice and it's: 'W.T..F?!'. Try the same trick again and it's 'Hasta la vista, baby'. Yet these massive corporations, with drawers crammed with their next batch of retrenchment packages, just waiting to be mailed, all blindly keep playing the same game!

Now, when the stolen iPhone 4 stories appeared, some people, obviously accustomed to the cynicism of the MS/Dell/Android Axis method, incredibly actually believed Apple were playing the same retarded game. And this is at the heart of the problem for Apple's competitors.

As anyone who's spent the shortest time studying Apple's internal security policy, M.O. and business model would know, Apple would no more leak a product as they would stick Go-Faster Stripes in original Apple logo colours, on a Cold War era East German Trabant, and use it as a promo vehicle. But for as long as the competition refuse to understand this to be true, and fail to work out why, they have no chance of making any headway in any markets dominated by Apple.

Selling tech products, any products [or services] depends upon beginning with an understanding of the end user. So the first rule of marketing [and no, I don't mean sales] is still: Who buys?

Think I'm wrong? Take my bet. $1000 says I'm right.
Graham Ellison
29th Jul 2010
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I've heard this all before...

@Graham Ellison

I know, nobody was ever going to beat the iPhone, either; and now we have Android devices galore that easily challenge the iPhone...in fact, many outspec the iPhone4.

It's a matter of common-sense. iOS4 and Android aren't vastly different in performance. When $300 Android tablets start hitting the market, what do you think will happen to iPad sales?

Android phones have already taken a large percentage of market away from the iPhone. Now, factor in the fact that there will likely also be Win7 and Palm players, and you quickly see that the iPad isn't going to stay on top for very long.

Another thing to factor in is performace. The current iPad only has 256Mb of RAM, and that may not be enough for ios4, which means that all of those folks who bought v.1 are **** out of luck.
trickytom2
29th Jul 2010
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Re: Apple's iPad muscle flex: Setting the stage for a showdown with publish

@trickytom2 According to: ComScore, U.S. smartphone market share numbers for March through May 2010, Android phone saw the most significant growth in market share in May, up 4.0 percentage points to capture 13.0 percent of smartphone subscribers.

Despite Android?s gain, RIM and Apple still dominate, with RIM taking 41.7 percent share of U.S. smartphone subscribers, followed by Apple with 24.4 percent share.

Microsoft saw a 13.2 percent share and Palm rounded the top five out with a 4.8 percent share.

Now, the world picture is somewhat different, but as has been the trend for a long time now, the U.S. leads the world in most important tech advances. I discount the faster broadband speeds and other trends in some cities in some far eastern countries, because they are actually anomalies and not relevant to this discussion.

So we can look to the U.S. for guidance on future trends in the industrialised world.

You say: "It's a matter of common-sense. iOS4 and Android aren't vastly different in performance. When $300 Android tablets start hitting the market, what do you think will happen to iPad sales?"

I don't know what your business is or how familiar you are with the actual prevalence of common sense, but where I live and work, it's nowhere near as common as its name suggests. Besides, your evoking of common sense here is flawed.

Android's gain in market share during the period for March through May 2010 represents [IN TRUTH] a 1.9% gain over Microsoft and only a 1% gain over Apple - at a time when Apple was nearing the end of the iPhone 3Gs product cycle and before the launch of the iPhone 4 - which as we now know sold 1.7 million on the first day, and more than 3 million in the first 21 days.

What do you think that's going to do to the numbers next time around?

Then you give us: "Another thing to factor in is performace. [sic] The current iPad only has 256Mb of RAM, and that may not be enough for ios4, which means that all of those folks who bought v.1 are **** out of luck."

You aren't paying attention are you? Apple's business model is, in part, based on releasing products that are just powerful enough to satisfy early adapters, and drive significant sales. Therefore, come April 2011 there will be a new iPad model with more power.

So what do you think THIS will do to Apple's iPad sales? Yep, it all starts over again. The new numbers are anyone's guess.

And what do you think THIS will do to all the other potential tablet maker's sales?

You also say: "Android phones have already taken a large percentage of market away from the iPhone. Now, factor in the fact that there will likely also be Win7 and Palm players, and you quickly see that the iPad isn't going to stay on top for very long."

Again you're misusing a common term. This time: 'fact'. Nothing is certain about those releases. They haven't gained significant ground from Apple. They've gained some, at a time as described above. They've gained most from the other players.

Win 7 is already in trouble. Microsoft's schizoid behaviour, and their disaster with Project Pink/Kin [including that criminally dangerous ad campaign] shows they're not thinking right yet - if they ever will. Again, their making public that development phone is clear proof of this.

Anyway, when do you really expect these products to appear? And what impact do you really expect products that have been leaked and announced and shelved, leaked and announced again to actually have? I see nothing but muddle in this game.

The desire users have for Apple products may, on the face of it, transcend reason. It doesn't, it's a simple thing to track if you know how. And that doesn't mean it can be dismissed in the casual manner you have here.

The total lack of any coherent marketing either from Android, and the confusing array of choices from all the different manufacturers IS a major issue for the Android collective. I see it peaking in the not too distant future and not gaining much more ground. Most of all, it won't gain much if any more ground from Apple. The big losers from now on will be those players that haven't got their act together yet and those that have already had their day. Expect RIM to decline steadily, partially because they're employing backward thinking and never have gained scale globally.

I used to be a huge fan of Palm, but as part of the HP stable I have little or no hopes for their future offerings.

Before the full reality of the disparate ambitions that make up the Android experiment, I was also a fan of Android, but as we've seen, in practice, it simply doesn't work.

Even when Google kicked things off with a host of other device manufacturers [instead of backing, and concentrating all their resources on one], I was still fairly optimistic. Then they announced they were releasing a phone of their own - in competition with their partners!! I was actually quite worried for Apple at this point, because even though the move was commercially very bad practice and likely to upset all the other manufacturers, the prospect of a Google branded Phone [the GPhone?] was a potential marketing godsend. But then they chose to let a techie with a huge ego name it the Nexus fu ** ing One, and instantly killed the thing dead from an average buyer's point of view. And you do realise that it's average buyers that drive the market, right? And a vast proportion of them are women.

I predicted [on here and other places] it would be a disaster and it was. Just a few days ago, Google had to drop their attempts to sell the horribly named Nexus one on line. And this is hugely significant from a business analyst's point of view. If you can't sell your own phone to a dedicated audience that uses your Globally ubiquitous search facility billions of times a day, online - where you've got dirt low overhead [you even own the servers!] and 100% control of the message... you've got something [or several things], horribly horribly wrong, and much more than just the name. And this is what you're pinning your hopes on?

Good luck. $1000 says you're wrong.
Graham Ellison
29th Jul 2010
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RE: Apple's iPad muscle flex: Setting the stage for a showdown with publishers?

@Graham Ellison
"the U.S. leads the world in most important tech advances."

ummm ... and by this you mean what? I grant that the U.S. may lead in >>inventing new tech (which may be arguably construed as "tech advances") however the facts are incontrovertible that as a nation we do not lead in the implementation or use of those advances (possibly barring our military weapon systems). We sell those 'advances' lock stock and barrel. There's not a tech advance worth speaking of that we haven't farmed out to other countries. There are fools who think that just because a supposedly U.S. company invents something, and perhaps owns the IP, that we as a nation somehow own the the actual technology and are therefore "leading". Sorry, pal. India, Brazil, China ALL possess the highest and most advanced tech in the world because OUR supposedly American companies (as well as our Government) gives it to them! Practically ALL of our 'non-weaponized' tech is BUILT OUTSIDE THE U.S. Guess what? If the plans describing and defining a particular tech are in the hands of a someone, they have it! If an electronics factory in China has the plans to build an iPhone, then CHINA HAS THE TECHNOLOGY. Most people think Apple is an American computer manufacturer, and that is so falacious as to be mind-boggling. They are an American DESIGN FIRM. Apple produces virtually NOTHING in the United States, virtually ALL of their product is built entirely outside the borders of the U.S. Americans invent stuff, then ship it off to the lowest bidder to be built and sold world wide. The U.S. as a nation is NOT a leader, except perhaps in self-destructive behavior.
Tivolier
29th Jul 2010
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RE: Apple's iPad muscle flex: Setting the stage for a showdown with publishers?

When you say "Publishers can either abide by Apple?s rules and develop an approved app for the App store or take the HTML5 route and develop an iPad experience that?s based in its browser." I have to ask why on earth you would want to go the "app" route. If you go the "HTML5/browser" route you instantly open your subscriber base to all platforms rather than the limit yourself to the iPad/iPhone market. There are other tablets/media consumption devices out there and using the browser route makes your subscription available to all platforms without having to pay the "30% Apple tax."
Scubajrr
29th Jul 2010
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Re: Apple's iPad muscle flex....

@Scubajrr What you said. I don't understand this willingness of print media to jump on the iPad bandwagon, when it's obvious that it both limits your market AND puts Apple in a position to bend you over a barrel.

These people CAN'T be this stupid.

Then again, looking at how print media has tanked over the past several years, maybe they are.
huntm856
29th Jul 2010
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RE: Apple's iPad muscle flex: Setting the stage for a showdown with publishers?

@huntm856 Yeah, they must be pretty stupid to consider create an app for a market that hit 3 million potential customers in it's first 3 months. Maybe if you let go of the apparent hatred you can see the business potential there.
non-biased
3rd Aug 2010
- Flag
nobody pays for web

@Scubajrr Simple people won't pay for browser based content, but they will pay for app based content. Listen to the hubub when Times of London went to a paywall. But people are willing to pay for the app version of the NYtimes.

It's not an apple tax, but a finder's fee.
Komplex
29th Jul 2010
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WSJ app has in app subscriptions...

Time must be wanting to do some funny business.. lots of other apps have in app purchase etc Sport Illustrated, Wired, Pop Mechanics, DC Comics etc.. Time is not being forthright.. they're likely wanting to do some funny business under the hood with user data..
doctorSpoc
29th Jul 2010
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RE: Apple's iPad muscle flex: Setting the stage for a showdown with publishers?

@doctorSpoc More likely there is an utter lack of consistency on what has been approved and what will not be.
rtk
29th Jul 2010
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Re: WSJ app has in app subscriptions...

@rtk Yeah. Given that Apple's process for approving apps is by all indications opaque and/or arbitrary, why suppose Time's trying to do something funny here, rather than Apple just bending Time over?
huntm856
29th Jul 2010
- Flag