Apple’s News app running on an iPad.
Photo: Patrick Semansky (AP)

Tech giant Apple, which is trying to pivot to services as sales of some of its electronics slow, is reportedly working to launch a subscription-based news service that would get readers past paywalls at a discounted rate and share the revenue with publishers. But according to a Tuesday report in the Wall Street Journal, many of those publishers aren’t thrilled with those terms—especially because Apple wants half.

The subscription service has been called a “Netflix for news,” with sources telling the Journal that Apple’s negotiators have a planned price point of $10 a month to access an unlimited slew of content from participating publishers. Apple would keep around half of that, according to the Journal’s sources, and the rest of the earnings “would go into a pool that would be divided among publishers according to the amount of time users spend engaged with their articles.”

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So Apple wants half. Then it wants everyone else to squabble over what’s left.

The paper wrote that some major outlets including the New York Times and Washington Post are balking at those proposed terms, including concerns about both the revenue-sharing arrangement and a possible loss of control over valuable subscriber data:

The New York Times and the Washington Post are among the major outlets that so far haven’t agreed to license their content to the service, in part because of concerns over the proposed terms, which haven’t been previously disclosed, according to the people familiar with the matter.

Talks are ongoing, and deals with the publishers could still be reached.

The Wall Street Journal also has concerns, but its recent conversations with Apple have been productive, one of the people familiar with the matter said.

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Additional concerns include that Apple wants publishers to sign on for at least a year, and publishers are variously seeking shorter or longer deals, the Journal’s sources said.

It’s clear why publishers would be wary, and for a number of reasons. One is that many news organizations already got burned hard by Facebook, which has a powerful gatekeeper role in directing audiences to content, dominates online advertising alongside Google, and has launched several failed partnerships (such as Instant Articles) with them. Despite publishing an absolutely jaw-dropping amount of content for Facebook users, the publishers saw the resulting ad revenue get gobbled up by Facebook.

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Another is that, as the Journal noted, many newspapers charge well over $10 a month for subscriptions—and selling them for pennies on the dollar, then also splitting such a huge portion of the revenue with Apple and other publishers, may be a really bad financial decision.

For example, it could undercut their subscriber base and give Apple more power to push them around. It’s also possible that the audience willing to pay for news is not going to go much higher from an Apple News partnership, in which case the publishers run a serious risk of cutting Apple in on revenue with nothing to show for it in return. Such a partnership may also, as with Facebook, promote a race to the bottom on competing for views in Apple’s walled garden.

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As the Journal wrote, the three outlets mentioned in their report already have deals with Apple that include some free content, but seem much more generous at face value:

The three outlets already distribute a subset of their articles on Apple News, which readers can access free. News organizations keep 100% of the revenue from ads they sell for these articles, and they keep 70% of revenue from ads that appear alongside their articles that they don’t sell. Apple’s planned subscription service would dramatically expand access to those outlets, adding content that is currently behind paywalls.

Users can also subscribe to news organizations through Apple News; news organizations keep 70% of the subscription revenue for the first year and a larger portion after that.

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As the Verge noted, Apple’s demands for gluttonous revenue-sharing arrangements have previously undermined its efforts to branch into TV, which the company has finally just decided to have a go at itself. But the pressure is on for Apple to reach some kind of deal, with BuzzFeed News reporting that sources say it plans a launch date on March 25.

[Wall Street Journal]

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