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Did publishers miss the “real” Apple story? (Not the 50% split controversy)

Here’s what we know about the Apple story that has taken the publishing world by storm.

1. Apple is planning a special event on March 25 to launch a paid Apple News subscription service, reports BuzzFeed. Sources said there is a small chance the final date could shift.

2. Apple would keep about half of the subscription revenue from the service, according to people familiar with the matter, says The Wall Street Journal.

Apple hasn’t said anything.

Yet, the verdict is already in.

Unreasonably unfair.

Official Apple response? Nada.

Nevertheless, copious amounts of digital ink has already been splurged on complaints, criticisms, and counterarguments:

Apple is asking for too much, publishers are pissed, and threatening to revolt, major outlets are balking at the proposed terms, the idea of a staggering 50 percent cut on revenue feels like a punch in the nose, and Apple apparently wants everyone else to squabble over what’s left.

Apple’s comment? Still nada.

Yes, Apple’s track-record with news has been spotty at best. And yes, they have been known to buck industry trends and do 50% deals, quite successfully too.

Nevertheless, it’s interesting how the publishing world has become judge, jury and executioner based only on comments by anonymous “sources” and “people familiar with the matter.”

Again, what do we really know?
(or can make a reasonable, educated guess about…)

1. Apple has the audience

Given Apple’s active installed base of 1.3 billion devices, an Apple News subscription service will allow publishers to expand their subscription base.

With 85 million monthly active users, Apple News has the largest audience of any news app.

2. Apple’s actual revenue share model is time-tested

Apple’s standard, time-tested model is a 30% transaction fee from developers who sell apps through iTunes and its App Store.

In Apple News, publishers keep 70% of the subscription revenue for the first year and 85% every year after.

3. Apple is serious about its services business

Following a slump in iPhone sales, Apple is more focused on its services business. In the quarter ended December, services gross margin hit 63%, up from 58.3% a year ago.

Apple’s services business reached an all-time high of $10 billion during the holiday quarter, and its services revenue is projected to grow to $100 billion by 2023.

What’s next?

Given all of the above, it appears highly unlikely that Apple would take any foolhardy step that would alienate publishers, whose partnership would be critical as the company moves deeper into services.

Apple is aware of publishers’ concerns, and notwithstanding all the epithets shared at the beginning of this piece, the world’s first trillion-dollar company is arguably anything but stupid.

Having said that, it’s understandable that publishers, who have been burnt by Apple before – especially Newsstand – are wary of the Cupertino collossus.

So, what’s the “real” Apple story?

Apple generally hosts a product launch event in March, but this time—if BuzzFeed News has got it right—the highlight will be the unveiling of a new subscription news service.

This is unprecedented for Apple.

Launching new, potentially lucrative, subscription services with all the grandeur of a hardware event.”

For the first time ever, Apple is putting a major spotlight on services, rather than hardware.

And when the star of the show is a News subscription service—where strong partnerships are critical—Apple is essentially putting publishers front and center of its growth strategy going forward.

If news is the centerpiece of this event, publishers are the hero of the story, not the enemy.

We have no official word yet on what the business model will be, but whatever it is, the company has put a year’s worth of development into it since its purchase of Texture.

There’s been enough of conjecture. Let’s wait for the actual facts before tearing Apple to shreds.