Apple, Amazon, and the Great Media Wars to Come
Can we trust our tech overlords to bundle the publishing industry?
For a company that looked like it had frankly given up on selling to the commoners, Apple’s keynote this week was a refreshingly egalitarian product launch. The company announced a low-interest credit card, a TV streaming service, and the long-awaited Apple News+.
Even with the ludicrous 50 percent tax Apple levies on publishers, the potential ubiquity (read: 1 billion iPhones) of Apple News+ makes it about as close to a potential savior of journalism as the free market has the ability to create. No other company can offer the same scaled combination of distribution and bundled incentives to entice people to pay for news. No other company except the sleepless giant in Seattle.
Before diving into that, let’s take a quick look at the publisher side of the Apple News+ equation. There’s a tendency to treat the business dynamics of publishers as a homogeneous plight, but the economics of the New York Times and the New Yorker are vastly different, to the point that a single model cannot well serve the interests of each. Furthermore, even as the industry transitions from advertising to subscriptions, media economics is largely a zero-sum game where a user subscribing to the Wall Street Journal often does so at the cost of canceling their membership to the Akron Beacon Journal. All of this is to say that Apple News+ is not an industrywide panacea, but a fit for a particular type of publication.
For the premium magazines in the Apple News collection, paying half the revenue as a tribute to Apple for distribution is a no-brainer. Texture (the company Apple acquired to serve as the backbone for Apple News+) was originally established as a joint venture between Condé Nast, Hearst, Meredith, and Time Inc. to overcome the basic impossible unit economics of trying to sell magazines as a standalone entity. Even in the glory days, magazines were largely distributed through a multichannel marketing company called Synapse (founded by the son of famous Time editor Marshall Loeb), which bundled magazines with credit card offers and frequent flyer programs.
Conversely, for the New York Times, which now boasts more than 4 million standalone digital subscribers, staying off the platform and continuing to own its distribution was an obvious call. The decision to join Apple News is a bit of a head-scratcher for the Wall Street Journal, which charges hundreds of dollars per year for standalone subscriptions. While the publisher will offer only a curated selection of general interest news, it’s a brand-dilution risk for a company that has spent a century cultivating a premium image.
The companies that faced a truly fascinating decision here were the Los Angeles Times and the Washington Post. Both are elite regional newspapers whose grand strategy for the past decade had been trying to establish a stronger beachhead as national publications. Buoyed by a hyperambitious plan to hit five million paid subscribers, the Los Angeles Times has taken the gambit. The Washington Post has not.
There are plenty of sound business reasons why the Washington Post may choose to steer clear of Apple News. But as always, it’s hard to ignore the $146.1 billion elephant in the room, especially when that elephant owns both the Post and a company that will come head-to-head with what Apple is trying to build.
As long posited by the tech intelligentsia, Apple’s endgame here is pretty clear. The company can now offer the news as part of a power bundle designed to make you helplessly dependent on its ecosystem. Standalone access to the Los Angeles Times, Wall Street Journal, and New Yorker for the price of a Hale and Hearty soup is a pretty decent deal for consumers. If the price is knocked down to $5 per month if you subscribe to Apple Care, add Apple Pay to your phone, buy an Apple Watch, etc., it’s a steal. The broader ramification here is that Apple could use bundling to own a frightening share of a wallet that includes your banking, telecommunications, entertainment, professional equipment, fitness, and, potentially, health insurance data. How we feel about that as a society is a subject for another post.
If Apple succeeds, only one other company can build a bundle that is so deeply intertwined in our daily lives. Not coincidentally, it’s the company whose subscription product has a 90 percent renewal rate and counts 100 million members. While Apple owns the most ubiquitous content-consumption device in human history, this company actually makes one that is far better for reading.
Amazon is not a company to be dwarfed in scale of ambition and, like Apple, appears to have its eyes on the health care sector in the long term. For now, Amazon could package pretty tight bundles around adding premium publisher content to Amazon Prime and Prime Video. It could experiment with using the news as a lever to sell more Kindles and Alexas. If we’re really barreling toward a voice-dominant future, a morning where Alexa reads you personalized headlines may not be far off.
In the months ahead, Amazon is going to make a far bigger play for media, partially out of patriotism and partially to provide another lever to make the Amazon Prime ecosystem even more frighteningly sticky. For Bezos, reviving the Washington Post is part civic mission, part petri dish for understanding how to build a successful media business.
Amazon has nipped at the margins by selling subscriptions through its platform, but it’s finally starting to get a bit more serious. The company is already making its first foray at directly hosting content on-site by republishing articles from top commerce publishers. While this looks like a tactic primarily designed to increase conversion rates from search, it’s a potential Trojan horse for building relationships with large publishers. Aesthetically, this has a long way to go before one could imagine reading a 3,000-word political think piece in this format. But it signifies that Amazon places a certain premium on the ability of content to boost its core business.
And, like Apple, Amazon has enough cash on hand to essentially acquire any media entity at any time. Access to content, publishing interfaces, design chops, and anything else you’d want for building a media business is just a swipe of the pen away.
In the 2010s, publishers found themselves as commodities in a grand battle between Facebook and Google to sell ads. In the 2020s, publishers will find themselves as a commodity in a grand battle between Apple and Amazon to sell superbundles.
Of course, this isn’t necessarily a bad deal for publishers, but more than anything else, this will once again intertwine media’s fate with the ethos of big tech leadership. For Facebook and, to a lesser extent, Google, the plight of journalism was acceptable collateral damage for the growth of their ad businesses. We must hope Apple and Amazon view publishers differently.
The best argument for Apple as media’s tech guardian is the fact that the company has consistently placed a premium on using highly qualified editors over algorithms to curate news. Of course, this looks radical only in the context of the dystopian approach of its peers.
Many have speculated whether Facebook’s legacy would be different if Mark Zuckerberg had hung around Harvard long enough to take a few of those pesky ethics classes. Tim Cook attended Duke, which means he learned that he has carte blanche to charge through opponents without ramification. Kidding (and tears for Tacko) aside, Cook hasn’t quite waxed poetic about the Fourth Estate à la Bezos, but he has gone to the Twitter bully pulpit several times to opine about the importance of a free press.
As for Amazon, its overall sentiment on the press is quite hazy. On the one hand, Bezos has shown no hint of interfering in critical coverage of Amazon in the Washington Post, going so far as to hire a reporter explicitly to dig deep into Amazon’s skeletons. In 2016, New York went as far as to name Bezos “the Valley’s lone defender of journalism.” At the same time, Amazon is one of the greatest corporate manipulators of media in business history, using everything from leadership lessons to flying drone patents to control the narrative around Bezos’ company. If Amazon pushes deeper into publishing, which tenor would win?
Amid an unknown future for media, one thing is for sure: When it comes to the dissemination of information, it is big tech’s world. We’re all just reading in it.