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Magazine sales on the iPad get a cool reception

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By The Drum Team, Editorial

February 16, 2011 | 4 min read

Media companies will be able to sell subscriptions to their magazine, newspaper, music and video content on the iPad and other devices. That is the good news from Apple this week.

The less exciting news is the price: 30 percent of the cost of the subscription and ownership of subscriber data like names and e-mail addresses if the purchase is made through Apple’s App Store.

The arrangement left many in the media business cool, said the New York Times: “and few ran to embrace it.”

The Wall Street Journal and the Times raised another issue: the new subscription service could draw anti-trust scrutiny, according to law experts.

Shubha Ghosh, an antitrust professor at the University of Wisconsin Law School, said of the new service: "My inclination is to be suspect".

There were two key questions, Mr. Ghosh told the WSJ: Whether Apple owns enough of a dominant position in the market to keep competitors out, and whether it would be exerting "anticompetitive pressures on price.”

Brian Pitz, an analyst with UBS, told the Times that Apple’s tight control over subscriber data, its insistence on keeping 30 percent of the sale price and limiting consumers’ abilities to go outside an app to buy a subscription could raise antitrust concerns.

“It is possible that regulators will look into them,” he said, “and I think competition and pressure from others will push Apple to open up.”

Magazine companies have been seeking the option to offer both subscriptions and single issues on the iPad and iPhone, and to gain access to information about who is buying their content.

The coolness towards the idea, as set out by Apple, can be deduced from the fact that America’s three largest magazine publishers - Time Inc., Hearst Magazines and Condé Nast - declined to say whether they planned to sell subscriptions under Apple’s terms.

“This is an important step, but it really needs to go further,” Nina Link, chief executive of the Association of Magazine Media told the Times.

“There’s probably some sense of frustration because publishers would like it to be more flexible. I think everybody realises it’s early in the game and there will be other tablets that may have friendlier business terms and that this may evolve.”

However at least two magazines, Elle - owned by Hachette Filipacchi - and Popular Science - owned by the Bonnier Corporation - have said they will begin selling subscriptions through the App Store.

Companies like Amazon, Netflix and Rhapsody, the music subscription service, could also be forced to share income with Apple. They would be would be subject to the same 30 percent fee if the subscription - or in the case of Kindle books, a single title - is bought through the App Store.

Amazon and Netflix declined to comment. Rhapsody called Apple’s conditions “economically untenable.”

Only if consumers buy subscriptions outside the App Store - for example, through the Web site of a magazine or Netflix.com - would the companies keep 100 percent of the sale price.

Steve Jobs, Apple’s chief executive, said in a statement: “Our philosophy is simple - when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing.”

As part of the new arrangement, publishers can provide free access to existing subscribers. This was a major concern for Time Inc., which had an arrangement with Apple to allow print subscribers to People to download the People iPad app free.

A Time Inc. spokesman said that the company viewed Apple’s announcement as a positive step, but that it might not go far enough.

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