Apple said to be negotiating Digital Newsstand

By Adam Satariano, Peter Burrows and Sarah Rabil/Bloomberg News

Apple is developing a digital newsstand for publishers that would let them sell magazines and newspapers to consumers for use on Apple devices, said two sources familiar with the matter.

The newsstand, designed particularly for the iPad, would be similar to Apple’s iBook store for electronic books, said the sources, who declined to be identified because the negotiations are private. The newsstand would be separate from Apple’s App Store, where people can buy some publications now, they said.

Apple’s effort is aimed at luring more consumers to the iPad and helping publishers sell subscriptions, rather than single issues. The main hang-ups between Apple and publishers including Time Warner , Conde Nast, Hearst Corp. and News Corp. are who controls data about users and how to split subscription revenue, the sources said. Pricing for subscriptions also hasn’t been worked out.

The new storefront could be up and running within a couple of months, although the talks are ongoing and could fall apart. Apple may wait to unveil the initiative until they are ready to announce the next iPad, possibly in early 2011, one person said.

“These are serious discussions about subscriptions and advertising within newspaper and magazine applications,” said Roger Fidler, the program director for digital publishing at the Reynolds Journalism Institute at the University of Missouri. “Publishers want to know who their customers are and their usage patterns while reading.”

Fidler, who has been an adviser to publishers during the negotiations, said he has no inside information about the deliberations because the publishers he works with are under non-disclosure agreements.

Tom Neumayr, a spokesman for Apple; Julie Henderson, a spokeswoman for News Corp.; Dawn Bridges, a spokeswoman for Time Warner’s magazine unit; and Maurie Perl, a spokeswoman for Conde Nast, declined to comment. Paul Luthringer, a spokesman for Hearst, did not return a message for comment.

To support the online newsstand, Apple is developing software to make it easier and cheaper to create digital versions of magazines and newspapers, with extras such as high- resolution videos integrated with stories, one person said. By offering tools to simplify the process, the company aims to attract publishers to the storefront, the person said.

Apple, based in Cupertino, Calif., is also working on server technology to keep electronic publications frequently updated, so consumers wouldn’t have to click on a publication to get the most recent news, the person said.

One challenge is that publishers prefer to control subscriber data and revenue, said Ken Doctor, an analyst with Outsell Inc. Apple is trying to insert itself as a middleman that doesn’t exist in other industries, said Doctor, who is not directly involved in the talks. For example, Sony demand a cut of the revenue from television shows on its TV sets, Doctor said.

Time Warner’s Time Inc. magazine unit, which sells Sports Illustrated and People, doesn’t plan to sign on with Apple’s newsstand because of concerns the effort would sever ties between the publisher and its customers, a person familiar with the company’s discussions said.

Next Issue Media, a joint venture of publishers that includes Conde Nast, Hearst, Meredith Corp. and Time Inc., met this week and the discussions centered around the major magazine publishers not wanting to agree to the current terms from Apple, a person briefed on the conversation said.

Melissa Connerton, a spokeswoman for Next Issue Media, did not return a message seeking comment.

It’s unclear if any publishers have signed on yet, one person said.

A point of friction has been whether Apple will collect 30 percent of publishing sales, as it does for music, games and other applications, said Fidler of the University of Missouri. Another issue is that Apple may not share subscriber data with publishers, another person said. Without that data, it would be difficult for a publisher to bundle print and digital subscriptions.

Publishers are also talking with Google about tailoring content for tablets using its Android operating system, people familiar with the talks said. The competition created by Android, which is being used in devices from Samsung Electronics Dell, could help publishers in their negotiations with Apple, Doctor said.

Facing a drop in traditional readership, the publishers are looking to tablet devices as a new way to reach customers. U.S. consumer magazine circulation has fallen for two straight years, according to the Audit Bureau of Circulations. Newspapers’ average daily circulation fell 8.7 percent in the six months through March, after declining 11 percent in the prior six months, according to the trade group.

To take advantage of the new platforms, News Corp., owner of the Wall Street Journal, is setting up a subscription news product specifically for tablets such as the iPad, according to a person familiar with the plans.

One person familiar with Apple’s digital platform plans says it is being designed to help large media companies showcase different kinds of content — say, Fox News television interviews within stories from the Wall Street Journal.

In their negotiations with Apple, publishers are trying to avoid repeating the battle of digital editions sold on Inc.’s Kindle device.

Publishers criticized how much revenue Amazon was sharing and the retailer’s policy of owning the subscriber information. Amazon still doesn’t share information with publishers about their customers.

“The last thing these companies want is a new middleman,” Doctor said.

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