Apple seeking to create news service revenue source
Apple (AAPL) is gearing up to launch a news subscription service as early as next month, according to a report from BuzzFeed. The service is expected to offer news and premium magazine subscriptions through a single app, thereby simplifying access for readers. Apple is recruiting news publishers to join its news service, promising to help expand their subscriber bases, the Wall Street Journal reported. There are 1.4 billion Apple devices in use globally including 900 million iPhones.
Hit by declining advertising sales, a growing number of news organizations are turning to selling subscriptions to their digital content. For Apple, this has created an opening to generate more service revenue. Apple is expected to take a cut of revenue generated through its news subscription service. Apple generated $37.2 billion in revenue from its service operations in fiscal 2018. It is aiming to generate around $50 billion in service revenue by 2020.
Race to win over news organizations
For Facebook (FB) and Google (GOOGL), Apple’s growing interest in the news business is likely to give them a tough challenge, as they too have been trying to court news publishers. Facebook and Google have in recent months launched separate initiatives where they pledge to spend $300 million each over three years to support news organizations.
Even so, Facebook and Google have been blamed for causing news publishers’ loss of advertising revenue. Apple may want to exploit the complicated relationship these rivals have with news organizations to woo more publishers to its platform and grow its news subscription business faster. But some publishers are even resisting Apple’s proposal. The Wall Street Journal report stated that the New York Times (NYT) and the Washington Post are some of the prominent news organizations yet to accept Apple’s news subscription proposal. The Post is owned by Amazon (AMZN) CEO Jeff Bezos.