Weekly Web Watch: Putting the Squeeze on Publishers
Apple and Google are eager to help big media sign up paying subscribers, for a cut off the top.
With panache worthy of Al Capone, Apple (AAPL) is offering a deal to publishers desperate for paying customers: Set up shop in Apple's online store, and we'll split the takings, 70-30. That is, Apple skims 30% off the top of the subscription price, and the publisher gets to keep the rest. Nice work if you can get it, but this time Apple may have gone too far.
Apple explains that this is its standard deal in the app store. It sees no difference between the one-time development costs of the usual "app" and the ongoing production costs of a "news app," which on any given day might include putting a reporting team on a plane to Cairo, or paying a paparazzo for a shot of Charlie Sheen falling off the wagon. Perhaps Apple would like to share the costs, too?
Adding insult to injury, Apple's subscription service prohibits publishers from offering a better subscription price outside the Apple store. That last prohibition has raised regulatory antennae in the US and Europe, since it sounds an awful lot like price-fixing. Plus, its system effectively encourages users to buy through its store rather than directly from the publisher, and to park their personal data with Apple rather than the publisher.
Enter Google (GOOG). A day after Apple announced its publishing deal, Google announced it will open its own digital Publishers Clearing House, charging 10%.
Google One Pass is not just cheaper, it's more flexible. Publishers can charge for a story, or a subscription, or metered access, or any other way they want. Subscribers click to pay through Google Checkout. Then they access all of their subscriptions with one password, and read them on any Web-enabled device. Not incidentally, the publishers keep their own subscriber data, a key element of advertising sales and marketing.
Google may not be looking for a real revenue stream with One Pass. Rather, it appears to be boosting the visibility of its checkout feature as an alternative to eBay's (EBAY) PayPal.
So, publishers have at least three choices of strategy for staying alive in the digital age. They can set up their own payment systems independent of any virtual "newsstand," in the dim hope readers will find them. They can sign up with Apple, and hope that they can survive despite a revenue model that seems unworkable. Or, they can sign up with Google and hope that its new and untested newsstand concept goes somewhere fast.
It's not as easy a choice as it sounds. Publishers who choose Apple get sprinkled with whatever kind of magic dust gives it an 82.7% share of the mobile "app" market. As other mobile device manufacturers gain market share, that may change fairly quickly. Maybe Google needs an audience-booster -- like a big, rich block of content from a consortium of publishers fed up with Apple's tough terms.
- "In the end, Apple envisions a world in which people don't consume any kind of digital media without its help." --Forrester Research analyst James McQuivey, to the BBC.
- In The Atlantic, a news industry executive calls the Apple pricing plan "a wakeup call for publishers seduced by the beauty of the iPad, the simplicity of iTunes and the brand of Apple."
- eWeek compares the Apple and Google plans.
Holes In The Web: A National Broadband Map just published by the federal government shows some serious holes in America's network. A vast stretch of the country, including much of the Southwest, has spotty or no high-speed coverage. Sure, there's room to roam out there, but it means that 5% to 10% of Americans can't get the quality of service required to use today's internet, never mind tomorrow's. Worse, two-thirds of our schools and nearly all of our public libraries lack adequate broadband service.
The map was created with federal stimulus program money, which also is being spent in grants to increase broadband coverage to underserved areas. The San Jose Mercury News points out that some of the information is already out of date. To be fair, the mapmakers are requesting updates and corrections.
Groupon Goes To China: Daily deals site Groupon has been spotted interviewing job candidates in China, The Wall Street Journal reports. It appears that the site may be planning a Chinese offshoot under the name Gaopeng.com, which apparently translates roughly as "cherished friend sitting around the table."
If true, Groupon is entering a crowded domestic market. The Chinese are known as tough customers who run their own group-bargaining services online or off. Founded in Chicago in 2008, privately-owned Groupon claims to be the fastest-growing company in history.
Alibaba And The 2,326 Thieves: Speaking of Chinese retail giants, Alibaba's top two executives just resigned after revelations that the site's sales force allowed 2,326 fraudulent vendors to establish virtual storefronts under its banner. Not good news for Yahoo (YHOO), which owns 40% of the Chinese site.
Crowd-Sourcing Fashion Design: Derek Lam is one of those hot young American designers whose name is known mostly to fashionistas, but he's found a clever way to get a wider audience. In the midst of New York Fashion Week, he announced that he will post 16 dress designs at dereklam.ebay.com. Ebay (EBAY) users can vote on their favorites, and top vote-getters will be available for purchase exclusively on eBay in May.
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