Industry Rorschach – An (unauthorized) View Into Digital Publishing Negotiations – Positioning and Coming To Terms

Publishers are eager to recapture the momentum they have lost since they began launching iPad editions last year. Since the introduction of the iPad, Conde Nast’s Wired Magazine has sold 100,00 digital copies, but has since seen sales drop dramatically, further cannibalizing publishing profits.

With consumers complaining about paying the cover price for an iPad version (even being paid print subscribers), publishers looking for ways to stop hemorrhaging money, and Apple’s content interests, a viable solution for all parties needed to be created.

“Our negotiations with Apple came down to reconciling Apple's need for a quick-and-easy purchasing process with their [Condé Nast's] desire to sell several different iPad packages and to receive data about who is buying the publisher's apps,” stated Eddy Cue, Apple's vice president of Internet services, as quoted in The New York Times.

From a leverage and power perspective, Apple had the advantage moving forward in these negotiations, its disruptive device has forever change how consumers and brands interact. And since tablet owners are increasingly consuming more digital than print content, publishers are playing catch up. However, Apple did not enter negotiations without knowing that its interests lie in the need for content for its then new subscription service. Apple’s restrictive app policies were a major contention point for Condé Nast heading into negotiations. Painstaking negotiations ensued, as Ashley S., counsel team member for Condé Nast report, but major tenets of the negotiation include:

• Apple makes 30% on all purchases made through an app- this was a position Apple will not budge on. (This was not necessarily a contention point for Condé Nast, since the majority of their money will be based on ads for the digital editions)
• Publishers receive names, email addresses and zip codes only (if customer opts to share information)
• Condé Nast to offer digital only, or print-plus-digital subscription options at a monthly or yearly price

In the end, the negotiations help modify Apple’s app buy-flow process and shaped a mutual agreement around the customer relationship and digital publishing. The deal also signified two powerhouses negotiating in what may now be considered a baseline or objective criteria for additional Apple-Publisher deals.