Apple’s Subscription Bundle and the Secret of Subscriptions

It seems there is quite a lot of smoke around a hard date for Apple’s launch of at least it’s subscription news and magazine service. Whether or not the rumored video service is released at the same time is an open question, but with several different reports being published it seems something is near.

One report mentioned that Apple was negotiating in the 50% split range with publishers. That seems high, even in an area where Apple must rely on services growth to satisfy investors in the short term. I do wonder if this is more the publishers leaking information to attempt to get even more favorable rates from Apple in these negotiations. One other worry is that if the revenue split is quite high, the publishers could raise the price they want which then increases the overall price of the subscription service. What is a major question still is whether or not the price for such a service is set or not.

On the question of price, I still struggle with a one price subscription for all content. Essentially a Netflix for News and magazines if you will. Given the high cost of a subscription to something like the NYTimes or Wall Street Journal it seems unlikely we would see a price bundle for all major newspapers that is $20 or even $30 a month. Magazines seem to have standardized around $9.99 a month for a vast catalog of magazines, but I don’t think newspapers subscriptions will follow the same model. Perhaps the price of an Apple subscription will offer different tiers starting with just magazines at $9.99 and scaling up from there as you add other news publishers to your subscription. Apple may even be able to offer discount pricing if you lump together several publishers. But, my overall concern is the price of this bundle in total can be quite high which could be a turn off for new customers.

The Subscription Secret
The point publishers need to wrestle with is anything they do with Apple will be an attempt to acquire new customers. This is unlikely to be a solution for existing customers who are already comfortable using their subscription digitally either right at the publisher’s website, app or through Apple News as an aggregate. This move with Apple is all about getting to new customers they have struggled to acquire thus far.

With that in mind, going through Apple News is the most likely way for them to get new customers. Perhaps in this model, they only offer lighter versions or just access to specific content as a part of a basic subscription. The challenge will be to keep this pricing and packages simple as my fear is it becomes too complicated and hard for consumers to decide what to subscribe to.

This is the secret of subscriptions which our research has revealed after doing many studies on the subscription business model. When consumers are faced with a monthly subscription, the level of scrutiny in the decision-making process goes up. They enter into a new mental model where the process whether it is worth it or not with a finer tooth comb. There is both a positive and negative to this reality.

The negative is, it becomes a larger hurdle to get over for the consumer as they investigate the subscriptions true worth more deeply. The positive is, that once they choose to subscribe, they become a much more engaged customer. Meaning they spend more time on the service, sometimes invest even more money if they find additional value, etc. Basically they become an even more valuable customer.

Perhaps it is this more engaged and valuable customer where Apple can provide some deeper incentives for news publishers. I have no idea what that could be, but it seems there is room to add more value where the publishers get more out of deeper engagement, and Apple gets more out of the initial sign-up revenue. It will be fun to analyze this once the details are clear.

While I understand the publisher’s hesitancy, and again I’m focusing on news, not magazine publishers, they hopefully realize Apple is their best hope to streamline a service and bring them new business. The point I made about consumer putting subscriptions through a more scrutinizing mental model is eased somewhat when it comes from a brand they trust. Meaning Apple as the aggregator of these outlets subscriptions makes it easier for Apple customers to process and trust. Interestingly, this could also help smaller, less known publishers, emerge and start to compete with the bigger publishers. This point about trust is likely less an issue with something like the New York Times or Wall Street Journal since those are well-known brands, but smaller less known publishers will have a better chance signing up a subscriber through Apple than by themselves.

As I pointed out yesterday, there is still a great deal of room for innovation in the publishing industry. I do hope that a subscription model grows in success because I worry greatly about the ad-based business of news and information. An Apple service could open up competition in new ways that could spur this innovation and enter in another golden era of publishing. And while Apple may be first out of the gate with this type of service, I would fully expect Google and Amazon to follow suit and again create more interesting competition in the marketplace.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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