The effort is aimed largely at spurring more subscription sales of digital content for Apple's hit iPad, which the company hopes to accelerate with the aid of a coming new delivery and billing system that it discussed at an event Wednesday. At the same time, Apple is tightening enforcement of a rule governing how some apps for the iPad must handle sales, a shift that affects online books as well as other electronic publications.
Apple's moves are a hot topic, in part because they could require publishers to share revenue from some content with the Silicon Valley company for the first time. The hardware maker also could require that publishers forgo collecting valuable subscriber data they rely on to market their products, an issue that has emerged as a sticking point in discussions with publishers, people familiar with the matter say.
So far, Apple has announced only one customer for the forthcoming content delivery and billing system: News Corp., which is using it for The Daily, a long-anticipated digital publication for tablets that made its debut Wednesday.
But Eddy Cue, Apple's vice president of Internet services, expressed confidence other companies would take advantage of the system. "We think subscriptions are only going to help [publishers] get more customers," he said.
The activity is the latest sign of the swelling influence of Apple's iTunes, which transformed sales of digital music and has more recently become a focal point for distributing software applications, or apps, for the iPhone and iPad. Apple's App Store generated $1.1 billion in revenue in 2010, just a year and a half after it was launched, estimates Gleacher & Co., an investment bank.
Publishers rushed to develop their own applications to view newspapers and magazines, with the iPad a particularly attractive target. In most, cases, however, Apple allows such apps to offer only single-copy sales, not subscriptions.
A small number of publishers that had their own billing systems—such as The Wall Street Journal and the Economist—have been able to offer subscriptions by taking users to their websites, but most don't have the ability to do so. Such sales through websites don't require sharing revenue with Apple.
Apple is now requiring publishers that conduct sales of content—which includes books as well subscriptions—to offer a way to do so within apps, which will be handled by the iTunes billing system. The policy, which the company says isn't new, was cited in Apple's rejection of a Sony Corp. app for reading digital books earlier this week.
Yudu, a U.K. developer of digital editions for publishers, said it recently was informed by Apple that newspaper and magazine apps that don't take payments through the iTunes store will be rejected, beginning March 31. The company was alerted to the impending change when it applied for a new app and received an email outlining Apple's plans, Yudu Chief Executive Richard Stephenson said.
His company already processes all transactions through iTunes so there would be no change to the way it operates, Mr. Stephenson said, but said others could be affected. "The implications are fairly serious," he said. Adding that there are a number of companies whose "whole business model is on the basis of taking people away from the store."
Apple has indicated the sales outside of iTunes can continue, as long as sales through its store are provided as an option. "Rest assured that we want our customers to be able to get their publications easily both from our App Store and obviously from websites or other ways they get them," Mr. Cue said.
Apple hasn't disclosed details of terms it is offering publishers, but generally takes a 30% cut on such iTunes transactions. News Corp, which also publishes The Wall Street Journal, appears to be getting a similar deal for The Daily, which Apple helped develop. Rupert Murdoch, its chairman, said in an interview Wednesday on the Fox Business Network that his company is getting 70 cents of every dollar for the first year, with Apple getting 30 cents. He said the terms after that were subject to negotiation.
While developers may not be eager to share revenue with Apple, requiring that subscriptions sales be available on apps in one central place—the iTunes app store—might make the shopping process easier for consumers. "Apple obviously wants to control the experience," said Brian Marshall, a Gleacher analyst.
But the way Apple controls development of publishing apps may be closely scrutinized.
The Federal Trade Commission launched an inquiry last year to determine whether Apple had violated antitrust laws with restrictions on the programming technology it allowed to create apps for its iPhones and iPads, according to people familiar with the matter. The FTC also investigated whether Apple's conditions unfairly disadvantaged Google's mobile advertising network, AdMob, on Apple devices. Apple changed those policies in September.
The Wall Street Journal and the Economist currently sell iPad subscriptions through their own systems. The Journal sells access to its iPad app, WSJ.com and other mobile apps for $3.99 a week. The Economist charges $29 quarterly or $110 annually for access to its iPad, iPhone and online editions.
Newspaper and magazine executives have long lobbied Apple to implement a subscription feature, since revenue from single-copy sales can be erratic. But they are worried about what they might be giving up by using it. Some publishers have said they are unwilling to go along with an Apple subscription offering if it doesn't allow them to access data about who is buying their apps.
Apple's new subscription system is expected to address that issue to some degree, people familiar with the matter have said, by including a feature that prompts subscribers to opt-in to share some data with publishers. But publishers are concerned few consumers will do so, hampering companies' ability to offer iPad buyers discounts on print subscriptions or other products, according to these people.
It is not clear how the company's new policies may affect other companies that sell devices for reading digital content like Amazon.com Inc., maker of the Kindle device. The company didn't respond to requests for comment on the matter.
The iPad was introduced last April, and has subsequently sold 14.8 million units, according to Apple.
A new version of the iPad is widely expected to be available in coming months.
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