Apple Continues to Vallidate 2011 as the Year of the App Subscription

Earlier this year, we predicted 2011 would be the Year of the App Subscription.

By that we meant that publishers are going to need to figure out the mechanics of charging for app-based subscriptions. Regardless of whether or not they actually develop an app specifically for the iPad or a competing tablet platform, and whether or not they actually roll out a subscription fee for app-based access, what's clear is that 2011 will a make-or-break year in terms of how publishers and readers approach app-based access to magazines.

Since then, we've seen Apple make a significant change in its subscription policies, as reported in the New York Times -- a breakthrough we had said would be necessary for magazine publishers and subscription platforms: "Apple Offers Subscriptions for All iPad Publications."

The latest validation of our prediction comes from the Wall St. Journal, which reported today that Kobo would not be allowed to sell digital books directly from its apps -- due to pressure from Apple. At the same time, the Journal announced that it will stop "circumventing Apple's payment system by providing links to its website from inside the iPad app, (and) will soon remove ll purchasing option in the app in response to Apple's new rules." Instead, people "will have to either call customer service or visit wsj.com."

While both announcements represent a step backwards for consumers, it shows that Apple is taking a strong stance in protecting app subscriptions.  Making things more complicated is not a win-win for content developers, consumers or, ultimately, Apple, I think, because consumers will be frustrated with both the content developers and Apple. In an interesting article about Hulu, the New York Times reported about consumer frustration with the lack of availability of some TV programs via Hulu -- for example, some programs are available on any platform, some limited to only your laptop.

For app subscriptions and video content to continue to be pervasive, they must make it easy for consumers to purchase. Setting obstacles is the wrong policy. I expect that ultimately consumers will get what they want, but that may turn 2012 into the Year of the App Subscription, Part II -- while things sort themselves out.

You can read more about the issue at Technologizer by Harry McCracken.

Time Magazine Validates the Year of the App Subscription

We predicted that 2011 would be the year of the app-based subscription -- and in just a few weeks, we're seeing evidence that validates our prediction published in "Birnbach Communications' Top Predictions for 2011, Part I."

The New York Times reported "Time Inc. has begun selling subscription bundles that include apps that run on the Android tablet software from Google." Time still wants to sell subscriptions through iTunes, too, but negotiations have been slow.

Meanwhile, the Times reported online today a breakthrough we've said is necessary for magazine publishers and subscription platforms: "Apple Offers Subscriptions for All iPad Publications."

Here are key points about the new service, according to the Times:

• Revenue from subscriptions sold through the App Store will be shared. Apple will keep 30 percent, and publishers will keep 70 percent. That is the same revenue-sharing split that applies when apps of single-copy publications are sold through the App Store.
• Apple said it would not restrict publishers to selling their apps solely through Apple. And when publishers do sell apps outside Apple’s store, they will keep 100 percent of the revenue.

Also check out Forbes' coverage, "Apple Introduces Subscriptions — But There’s a Catch."

Clarifying What We Mean That 2011 is the Year of App-based Subscriptions

We've gotten some interesting and positive responses to our predictions. One theme, however, is about whether app-based subscriptions will work because people are used to accessing news content without having to pay for it.

On that basis, a VC friend of ours specifically questioned whether we were right to call 2011 the year of the app-based magazine subscription.

So let me clarify.

When we say it will be the year of app-based magazine subscriptions, we mean that this year, publishers are going to need to figure out the mechanics of charging for app-based subscriptions. Regardless of whether or not they actually develop an app specifically for the iPad or a competing tablet platform, and whether or not they actually roll out a subscription fee for app-based access, what's clear is that 2011 will a make-or-break year in terms of how publishers and readers approach app-based access to magazines.

There's a cost involved in developing an app that provides a consistent look-and-feel that's similar to the print edition while providing additional value with content that takes advantage of the tablet's multimedia platform. But that all costs money, and somehow publishers have got to have this effort payoff.

That's the real challenge facing publishers as they roll-out and embrace tablet access. They've got to find a way to convince people to pay for app access. They're pretty much doomed if they don't.

As a journalism fan, I think I'm a bit more optimistic that users will be willing to pay for content customized for their tablets -- even as they're used to accessing free content off the web. The key will be how publishers package content on a tablet that's more impressive than what you can get online.

Meanwhile, although we listed a dozen story angles we think the business media will cover, we have missed two topics that unexpectedly are generating a lot of attention:

1. The medical leave from Apple by Steve Jobs. Since that news hit after our predictions were posted, I think it's okay to let us off the hook on that one. We wish him well, and a quick recovery, but in the meantime, expect that to be a theme, and that reporters, analysts and bloggers alike will question the role of celebrity CEO, the nature of a senior management team, the role of the board, etc., in managing and running companies. Also expect that questions about disclosure and succession planning will be important topics.
2. Tiger Mother. Amy Chua is a Yale law professor who wrote a book, “Battle Hymn of the Tiger Mother,”which the New York Times described as "a memoir about strict Chinese parenting (that) reads as criticism of Western practices. Since a Wall St. Journal excerpt from her book was published Jan. 14 (after our list of trends was first posted on Jan. 10), it's been difficult to avoid the controversy about Tiger Mothers, which even reached People Magazine. I'm not sure of Tiger Mothers (a very different species from Mama Grizzlies) will be a hot topic once the initial furor has passed over the next few weeks. However, I do think the role of parents, particularly women, could continue to be a top topic for two reasons that are changing family dynamics: the lingering impact of the jobless recovery, in which women may be working while their husbands may still be unemployed; the new way of working, in which people don't have one full-time job but have a number of part-time jobs, which might make traditional family dinners a thing of the past as parents no longer work nine-to-five jobs.

Let us know if you have other comments to our predictions or to our clarification of our predictions.

Birnbach Communications' Top Predictions for 2011, Part I

We've been issuing annual predictions going back a decade now. Our goal is to help our clients more effectively understand and engage on topics of interest for social media.

We will be rolling out our 2011 list of trends this week. Here are the first few:

• The battle between the iPad and the iPad Killers, the race for apps and the impact of tablet computing will be a main theme. In 2011, there will be lots of choices among tablets from other manufacturers, but the (soon-to-be-announced) iPad2 will give Apple the momentum to continue to dominate the market – even as other tablets offer videoconferencing and other features not available in the current iPad. Expect to see a lot of coverage about an “iPad killer,” but also expect the iPad to remain king of the hill at year's end. In our app-enabled culture, part of the iPad's success in 2011 will be the availability and variety of its apps. Also expect to see much discussion about the battle of operating systems: iOS vs. Android because the Apple vs. Google makes a compelling story angle. The media will also look at the impact of tablet computing on how students learn while using tablets and how people spend time online – already there are indications that users spend more time on social media sites and less time on email. There will also be lots of stories about the impact of tablets on the PC market. (Anyone remember netbooks?)

• 2011 will be the year of app-based media subscriptions. Last year lots of publishers either rolled out or announced online subscription access fees. This year, publishers are rolling out apps for iPad and other tablets as well as e-readers to help them generate subscription revenue. One challenge for publishers and consumer alike: Justifying app subscriptions when current single-edition app access (at $3.99 per single-issue for Wired or $4,99 for each issue of Time) can cost significantly more than annual print subscriptions (e.g., $20 for Wired, $30 for Time). A second challenge: the lack of a standard subscription process -- each magazine seems to take a different approach. Early adapters seem to be willing to pay; the real question is the price point that the rest of the population will be willing to pay. This will succeed with the establishment of an app store for subscriptions (currently you can easily purchase single-issue subscriptions but that's not the case for annual subscriptions) that provide a common approach, the way iTunes does.
  

• The converging media phenomenon will gain momentum in 2011. With early generation gadgets on the market that combine TV and Internet, it's time to get rid of the old way of thinking about media. For example, we need a new term for video content that we're already accessing on devices that are not traditional TVs. Meanwhile, the same convergence will continue to impact how news is reported: Newspaper reporters, who once only filed print stories that appeared nearly 24 hours after the news hit, are not only going to continue to be filing stories in near-real time, but also they will be producing accompanying video. Meanwhile, broadcast reporters will post text versions of their segments on their websites. Radio stations will provide video on their websites to accompany the audio-only pieces already accompanied by text-based articles. This already started taking place in 2010, but expect more cross-channel news operations in 2011 and beyond.
  

Let us know if you agree or disagree. And check back tomorrow for additional predictions.