Is Apple on the Verge of Another Big Revenue Stream?

As we’ve seen companies start to build out new revenue streams and enter new markets, it has become increasingly clear that the big 5 are turning into huge conglomerates. Amazon is a media company, Google is the dominant producer of mobile operating systems, and Facebook is now talking about blockchain and other expansion possibilities. So with this, Apple is now making the move to become “the Netflix of news” and expanding their Apple News product to include a subscription option.

Apple’s New Business

With slowing iPhone sales, Apple needs another big win in order to maintain their “most valuable company in the world” status. And moving into the news niche isn’t entirely surprising. They did popularize streaming music using iTunes, after all. Then Apple Music came along, which makes Apple News seem like it has a logical evolution to be a subscription service.

The interesting thing about the timing on Apple’s announcement is that Buzzfeed, Huffington Post, and numerous other outlets have laid off journalists recently, so the industry is clearly hurting.

Pushback on the Structure

Controversy has arisen regarding the financial cut Apple is proposing to take. The plan is for Apple to keep 50% of revenue and divide the rest up among the publishers based on the length of time spent consuming their content. Granted, Apple already has the Apple News app, which has proof-of-concept, but publishers are still going to be hurting if they are only entitled to half of the $10 per month fee that Apple is expecting to charge.

Unlimited content for a single monthly fee is a very appealing model for users, and with an estimated 90 million subscribers (potentially delivering more traffic than Facebook), that would give publishers a high number of potential viewers. However, the problems don’t end with the financial aspect. Because of the structure of the app, these publishers wouldn’t have access to the subscription information (e.g. emails or credit card information) which would hinder their back-end marketing abilities.

In business, the back end is usually where the most money is made, and publishers would effectively lose this capability, as well as the ability to retarget using programmatic ads. Apple is planning on designing the app to use an algorithmic selection which doesn’t favour any particular publication. This is good for allowing discovery, but hinders each publisher’s ability to build brand value with readers the way a single subscription would. The differentiation disappears.

Aggregating Customers and Publishers

For Apple, the end goal for all of this is to aggregate a ton of different news suppliers, and then benefit from the same network effects that companies like Netflix thrive upon. Even though Apple News won’t come with the same advertising capability or deliver any traffic to the actual website, it is likely to draw publishers in for one simple reason: they have users.

The fact is, publishers weren’t going to get pageviews from these readers anyways, just by nature of them already using Apple News. Even though there is an intense level of competition and no way to get a direct-to-consumer relationship, it is better than nothing. Aggregators work because users want them, since nobody wants to choose a few publications to subscribe to.

Apple’s success in this endeavor will depend on what publishers do, but it seems like the obvious prediction is many of them will join so as to not miss out on revenue. The publishers with a higher degree of brand value may stay independent, but those will be few and far between.

Where Facebook has had rougher times, and both Amazon and Netflix have been moving in a positive direction, Apple has been relatively stable. This move could represent a swing in the right direction.

Featured image courtesy of Shutterstock.