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Publishers Chafe on Apple's Terms of Service



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plan to create subscription service for news to go against major publishers over the tech giant's proposed economic terms, according to people familiar with the situation, complicating an initiative that is a part of the company's efforts to compensate for reducing sales of the iPhone.

In its pitch to some news organizations, Cupertino, California, said it would retain about half of the service's subscription revenue, people said. The service, described by business executives as a "Netflix for news", allows users to read an unlimited amount of content from participating publishers for a monthly fee. It is expected to launch later this year as a paid tier of the Apple News app, the people said.

The rest of the proceeds would go into a pool that would be shared between publishers according to how long the users are using the engagement with their articles, the people said. Apple representatives have told publishers that the subscription service can be priced at about $ 1

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

The New York Times and the Washington Post are among the major outlets that so far have not agreed to license the content of the service, partly because of concerns over the proposed terms, which have not previously been disclosed, according to those familiar with the case.

Lectures are ongoing, and agreements with publishers can still be reached.

The Wall Street Journal also has concerns, but recent talks with Apple have been productive, one of those familiar with the case.

Another concern for some publishers is that they probably would not access subscriber data, including credit card information and email addresses, the people said. Credit card information and email addresses are crucial for news organizations seeking to build their own customer databases and market their products to readers.

Apple suggested that at least some publishers access the content for at least one year, people who are familiar with the matter, said. Some publishers will have a longer engagement, while others will have the flexibility to leave the partnership earlier.

Apple refused to comment.

The news service is part of Apple's effort to find growth as an iPhone sales stall. The tech giant's last month reported its first decline in revenue and profits for a decade for the three months ended December, after iPhone sales fell 15% to $ 51.98 billion. Apple is attempting to offset the decline in its core smartphone business with a rapidly growing services business that includes app store sales, streaming music subscriptions and mobile payments.

Apple said the iPhone revenue fell 15% in fiscal first quarter, causing a decline in both revenue and revenue among a matured smartphone market and a decline in services. WSJ's Lee Hawkins reports. Picture of Justin Lane / EPA-EFE / Shutterstock

This year, the company plans to launch several new services, including original TV programming and news services. It seeks to increase the number of paid subscriptions across the units to 500 million by 2020, up from 360 million now.

Apple has discussed bundling the news offering with an upcoming package of original TV shows and iCloud, a storage service for photos, documents and more, said one of those familiar with the case.

Apple is trying to challenge a news industry that has grown cautiously for the influence of major technology companies on their businesses.

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For a long time, a great source of traffic for publishers has changed its news stream in ways that contributed to the steep public and revenue fall of some media companies.

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Google has met with the readers' ability to bypass digital payment methods, a practice that the search giant has reduced.

Digital subscriptions are growing at major publishers, including the Times, whose basic monthly subscription costs $ 15, the Post, which charges $ 10, and Journal, which charges $ 39. Some of these companies are skeptical about giving up too much control to Apple or cannibalizing its existing subscriptions to register lower-income Apple users, according to people familiar with the case.

But technology platforms also provide a great opportunity. Apple News, a free service that comes installed on the iPhone and lets users choose news by topic or publishing, brings news organizations a headline to millions of exclusive, sophisticated news users. Apple's pitch is that it will allow publishers to expand their subscription base.

The three stores already distribute a subset of their articles on Apple News, which readers can access for free. News organizations keep 100% of the revenue from the ads they sell for those articles, and they retain 70% of the revenue from ads displayed along with the articles they do not sell. Apple's scheduled subscription service will dramatically expand access to these outlets, adding content behind paywalls.

Users can also subscribe to news organizations through Apple News; News organizations retain 70% of the subscription revenue for the first year and a larger portion after that.

Last year, Apple bought Texture, an app that lets users read an unlimited number of magazine contents for a $ 9.99 subscription.

Earlier, Bloomberg reported that Texture would be integrated with 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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