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Apple’s Digital Newsstand: Should Publishers Sign On?

By Helen Gregg

A potential deal between Apple and major periodical publishers has already been covered by The Wall Street Journal and Bloomberg News. Apple is moving forward with plans to sell magazines and newspapers on the iPad though its iTunes store, and recently the company has begun approaching publishers. A few days after Bloomberg’s story, the Journal cited reports that one major publisher, Hearst, indicated it was willing to sign on with Apple.

Yesterday, Bloomberg Business Week offered a warning to publishers allured by the opportunity to reach the 160 million Apple account holders. The shiny tablet seems bright in what has become a bleak industry — subscription rates for magazines and newspapers have fallen sharply over the past few years, and it’s no secret that even the largest publishers have been facing financial hardship. Apple and iTunes has created large revenues for major record labels, and it’s only natural for Hearst and other publishers to want to give it a try.

Yet the article warns that allowing Apple to sell digital editions of their publications may cost publishers one of their largest assets -– their subscriber database. If subscriptions are routed through Apple, publishers may well be kept in the dark about their audience. This is a major loss, as the Bloomberg Business Week points out, publishers’ “subscription database is about the only proprietary information they can show to prove their value to advertisers.” This loss is in addition to the 30% commission Apple typically takes on all sales.

Apple already sells single digital issues of magazines like Wired. But subscriptions, which still account for about 70% of magazines and newspapers sold, are incredibly important to publishers and their business. The Business Week article calls a deal with Apple a ‘Faustian bargain,’ but will publishers take it? Business Week’s answer: “That depends on how desperate they are.”

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