UPDATE 3-In media win, Apple relaxes rules for content

Thu Jun 9, 2011 5:51pm EDT

Related Interactive

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By Jennifer Saba and Poornima Gupta

NEW YORK/SAN FRANCISCO, June 9 (Reuters) - Apple Inc (AAPL.O) handed a big victory to publishers by dropping demands they sell subscriptions through its App Store, a rare reversal for the iPad maker.

Apple now allows publishers to set pricing for subscriptions while no longer requiring them to sell subscriptions within the App Store.

IPad and iPhone users can now read magazines and books, or play music and videos bought outside of Apple's App Store as long as there is no button or external link to purchase the content, the company said on Thursday.

Apple will not receive any of the revenues for approved content purchased outside the app.

The move is a huge win for media conglomerates at odds with the world's biggest consumer tech company over what they considered rigid terms, which allow Apple to seize control of their customer data through the billing system and forced publishers to share a significant portion of revenue.

While media executives are enamored with the iPad, they have also cast a gimlet eye on Apple, afraid they will loose control of their business model as the music industry did with launch of the iPod and iTunes store in the early 2000s. The iTunes store is now the No.1 music retailer.

"I am a little surprised they took this long," Gartner media analyst Mike McGuire said about Apple's change of heart. "I think it makes sense."

Apple started its subscription service for magazines, newspapers, videos and music in February with little support from major publishers such as Time Warner Inc's (TWX.N) Time Inc, Conde Nast and Hearst.

Publishers initially blanched at Apple's terms to take about 30 percent of revenue for apps purchased in its store and its control of subscriber data, the lifeline of newspapers and magazines used to entice advertisers to their pages.

Publishers were allowed to set the price and length of subscriptions. They could also offer subscriptions through their own websites, but had to offer the same terms to anyone signing up through Apple. Publishers had until June 30 to comply with the guidelines.

The App Store is an online site where iPad and iPhone customers can download software, including newspaper applications such as the Wall Street Journal and games such as Angry Birds.

"They could see that, if they continued in their old policy, they could lose a central advantage, which was the iPad becoming a central reading device of our time," said Ken Doctor an analyst with Outsell Research.

In recent months, some publishers, including Conde Nast, which owns titles such as the New Yorker and Vanity Fair, made a deal with Apple to sell subscriptions in the App Store. [ID:nN09226646].

Earlier this week, the Financial Times put up a Web-based version of its mobile application for smartphones and tablet computers, essentially freeing itself from the App Store. [ID:nLDE7552D3].

"We will be giving consideration to Apple's terms within this context," said FT.com Managing Director Rob Grimshaw. "While it's certainly positive that they have made concessions, the FT still wouldn't be able sell subscriptions within a native app using our own payment system."

The news about the Apple change was first reported by MacRumors.

Apple shares closed down 75 cents at $331.49 on Nasdaq. (Reporting by Jennifer Saba in New York and Poornima Gupta in San Francisco; editing by Maureen Bavdek, Lisa Von Ahn and Andre Grenon)