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Publishers betray themselves by using the Subscriptions News Service's Apple Terms of Service



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Plan to set up a subscription service for news encounters opposition from major publishers about the proposed financial terms of the tech giant, according to those with whom The situation is familiar, an initiative that is part of the company's efforts to offset declining iPhone sales.

In its pitch to several news organizations, Cupertino, California, the company has stated that it will retain about half of the subscription revenue of the service people said. The service, called "Netflix for News" by industry executives, would allow users to read an unlimited number of content from participating publishers for a monthly fee. It is expected to start as a paid tier of the Apple News App later this year, people said.

The rest of the revenue would go into a pool, which is split up by publishers, depending on how much time users spend with their articles, people said. Apple representatives have told publishers that the subscription service could cost about $ 1

0 a month, similar to Apple's streaming music service, but the final price may change, some people said.

The New York Times and the Washington Post are among the key outlets that have not previously agreed to license their content for the service, in part because of concerns over the proposed terms that were previously unavailable, according to the individuals who are familiar with the matter.

The talks are still ongoing and agreements could still be reached with the publishers.

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

Another problem for some publishers is that they probably will not get access to subscribers' data, including credit card information and e-mail addresses, people said. Credit card information and e-mail addresses are critical to news organizations as they build their own customer databases and market their products to readers.

Apple suggested that at least some publishers offer access to their content for at least a year to people who are familiar with the matter. Some publishers want a longer commitment, while others want the flexibility to end the partnership sooner.

Apple declined to comment.

The news service is part of Apple's efforts to grow as an iPhone sales stand. The tech giant posted its first sales and earnings decline in a decade last month for the three months that ended in December after iPhone sales dropped 15% to $ 51.98 billion. Apple seeks to offset the downturn in its core smartphone business with a rapidly growing service business that includes app store sales, streaming music subscriptions, and mobile payments.

Apple said the iPhone sales fell 15% in the first quarter of the fiscal year. As a result of a mature smartphone market and a weakening of the service business, sales and earnings declined. Lee Hawkins of WSJ reports. Photo by Justin Lane / EPA-EFE / Shutterstock

This year, the company plans to launch several new services, including original TV programs and the news service. By 2020, the number of paid subscriptions on all devices is expected to increase to 500 million (now 360 million).

Apple has bundled the news offering with an upcoming package of original TV shows and iCloud, a storage service for, discussing photos, documents and more, said one of the persons who are familiar with the matter.

Apple seeks to promote a news industry that has been watching the impact of large technology companies on their business.

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For a long time an important traffic source for publishers, the news feed has changed in a way that has contributed to some media companies to strong viewer and revenue declines.

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Google underwent an in-depth review because readers could bypass the digital paywalls, a practice that the search giant has since softened.

Digital subscriptions drive growth for major publishers, including the Times, whose monthly base subscription costs $ 15. and the journal, which charges $ 39. Some of these companies are skeptical about giving up too much control over Apple or running their existing subscriptions to attract lower-cost Apple users, according to the people who are familiar with the matter.

But tech platforms also offer a great opportunity. Apple News, a free service installed on iPhones that allows users to select news by topic or publication, provides news organizations with access to millions of demanding, sophisticated news consumers. Apple's bad luck is that it will allow publishers to expand their subscription base.

The three outlets are already distributing some of their articles in Apple News, which readers can access for free. News organizations retain 100% of the revenue from ads they sell for these items, and 70% of the revenue from ads that appear alongside their items they do not sell. Apple's planned subscription service would dramatically expand access to these stores and add content that is currently behind Paywalls.

Users can also subscribe to news organizations via Apple News. News organizations hold 70% of subscription revenue for the first year and a larger share thereafter.

Last year, Apple purchased the Texture software, an app that allows users to read an unlimited amount of magazine content for a monthly subscription of $ 9.99.

Bloomberg previously reported that Texture would be integrated into Apple News as a premium product.

Write to Benjamin Mullin at Benjamin.Mullin@wsj.com, Lukas I. Alpert at lukas.alpert@wsj.com, and Tripp Mickle at Tripp.Mickle@wsj.com


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