What Does Apple Want from Content Producers?

Today’s reminder of Steve Jobs’s mortality has overshadowed the rush of various news reports related to publishers using the iPad as a platform for growth. Apple chose a day that markets are closed and news outlets are running on reduced staffs or not publishing to drop this depth charge. The timing would suggest that tomorrow’s earnings report from Apple will be the usual blow-out-the-expectations success with the ever-controlling Apple hoping to jump-start the news cycle toward the company’s success rather than its vulnerability.

Truth be told, Jobs’s health is now more likely an issue for Jobs himself but not his company. During the last medical leave, Tim Cook and team showed they could execute as well without Jobs as with him. All companies eventually move on from their founders. Apple is in a better position than most to do that now. Jobs’s principles are firmly embedded in the company’s culture and his team carries on his values and vision whether Jobs is bullying people in the offices or off recuperating.

One important and open question remains whether Apple’s insistence on raking a substantial toll from content providers is driven by Jobs himself. The iPad has created a surge of interest from publishers to feature their content on the device. But as Apple Insider points out, the hardware company’s terms are onerous for software producers:

According to a report issued Friday by deVolkskrant (via Google Translate), Apple has employed “stricter rules” for publishers, informing them that they cannot offer free iPad access to paid print subscribers. By offering free access to print subscribers, newspapers could avoid charging for access through the iPad, and can avoid paying Apple a 30 percent cut of all transactions on the App Store.

In addition, nrc.nl reported Friday (via Google Translate) that Apple will no longer allow newspapers to offer free access to print subscribers after April 1. Content providers are upset with the change, characterizing the move as one that makes Apple “too dominant.”

As a distribution fee, 30% might not seem like much in the physical world with trucks and retailers all needing to take a cut. But in digital distribution, 30% is a huge tax on producers. Apple surely feels it deserves compensation for having built the platform and maintaining it. After all, how different is iTunes from something like a cable network?

Indeed, Apple’s insistence on controlling subscriber information also mimics the cable model. But, of course, Apple isn’t paying its content producers the way that cable networks pay for the channels they carry. Magazines might actually be happy with that. One reason single-copy prices remain high is Apple’s surcharge. Magazines simply can’t undercut their newsstand prices and give Apple such a big cut without losing out in the bargain. Under the cable model, where Apple would sell bundles of content for fixed prices, the magazines could defend their print subscriber bases and expand on the iPad without doing violence to either.

Apple, however, doesn’t want to be in the cable business. Nor are they content to benefit solely from the hardware sales that content availability will drive. That leaves publishers somewhat sitting on the sidelines hoping that Google’s Honeycomb will present enough of a challenge to break Apple’s logjam. Here’s David Carey from Jeremy Peters story in today’s New York Times:

“I do believe that in the next year,” Mr. Carey added, “with all the new developments and all the new Android devices, that the industry will have a subscription option.”

In other words, the biggest roadblock to realizing the ambitions for the iPad of both publishers and readers is Apple itself. With the company surging in value, the roadblock seems inexcusable and reminder than not every bit of Apple’s culture is positive or should be preserved.

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