Apple Could Rake In Billions From The Soon-To-Be-Launched Premium News Subscription Service

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Apple Inc. (NASDAQ:AAPL) is all set to launch its long-rumoured and much awaited paid Apple News subscription service at an event on March 25, as per BuzzFeed News.

The Tim Cook led company has a history of scheduling its product launches and events in late March. So if the company actually goes on to host an event at the Steve Jobs Theater on its Apple Park Campus this year too, it should come as no surprise. But for the fact that this time around, the company is said to be keen at showcasing service(s), unlike the focus on products at similar events in the past.

Apple’s Much Talked About March Event

The March events organized by the company in the past have usually been about iPad launches. This time, however, no hardware like AirPods, an updated version of the entry-level $329 iPad or the eagerly awaited AirPower charger are likely to be showcased.

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With the company registering a decline in the sales of iPhones, it is said to be shifting its focus towards increasing and improving upon its services base.

Despite declining iPhone sales, the company continues to be hugely successful at the services front which includes, among others, the App store and its very popular Apple Music subscriptions. The revenue generated by this segment during the recently ended fiscal Q1 2019 was $10.9 billion, a 19% YoY growth.

The tech giant can, therefore, be seen pushing towards generating more revenue from online content and services.

Convinced by the potential of its services business, Apple has plans to start a news subscription service. The company is apparently gearing up to offer premium magazine and news subscriptions by integrating the recently acquired magazine app Texture into the framework of hitherto free Apple News. Though the final subscription cost has not yet been disclosed, initial reports go on to suggest that it could be priced (tentatively) at $10 a month, the same as users pay for Apple Music.

This could perhaps mean Apple rolling out a single bundle package similar to Netflix and Hulu packages for TV and movies.

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Apple proposes to pocket half of this revenue while doling out the other half to participating publishers, based on their readership.

On the flip side, the plans to create this paid news subscription service, ‘Netflix for News’ service, seem to be running into rough weather already. Some of the major new publishers expressing displeasure over the financial terms proposed by Apple.

The company’s proposal to pocket half of the subscription fees is considerably higher than the 30% cut which Apple usually takes from service providers across its platform for the first one year, followed by 15% subsequently.

Apple wants to have at least a few committed outlets for supplying premium news related content before it announces its plans to the world.

At present, it is difficult to say if news readers who get access to premium content by paying $4 to New York Times or less than $8 to Washington Post would want to pay a much higher $10 to Apple, especially when they have the chance to access all such news from other online sources like Twitter, Reddit, etc, even if the layout isn’t too appealing.

But then Apple has 1.4 billion active devices around the world at present. If ONLY 1% of those users subscribe (i.e. only 14 million), Apple would rake in an additional $1.68 billion a year in revenue. Bundled together with music and video, the market could be many times the size.

Even after splitting the revenue with its publishers, Apple would save a neat amount every year, which is not a bad way of offsetting at least some of the losses coming its way because of weakened demand of their flagship devices all over the world. Till Apple makes a formal announcement, we can only go on to guess. They still have a long way to go (by way of placating their publishers) before their paid news platform becomes available.

Remains to be seen what Tim Cook will pull out of his magic hat this time!

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