Apple plans to create a 'Netflix of news and magazines'

Apple plans to integrate recently-acquired magazine app Texture into an upgraded Apple News service and debut its own premium subscription offering, according to people familiar with the matter.

Think of it as the Netflix of news, or maybe the iTunes of magazines.

The move is part of a broader push by the iPhone maker to generate more revenue from online content and services.

The company agreed last month to buy Texture, which lets users subscribe to more than 200 magazines for US$9.99 a month, and is now integrating Texture technology and employees into its Apple News team, which is building the premium service.

An upgraded Apple News app with the subscription offering is expected to launch within the next year, and a slice of the subscription revenue will go to magazine publishers that are part of the program, the people said. They asked not to be identified discussing private plans. Apple declined to comment.

Newstand 2.0

Apple used to have an app called Newsstand that combined several magazines and newspapers, but the publications were only provided on an individual subscription basis.

When Apple News started in 2015, it took a similar approach.

A new, simplified subscription service covering multiple publications could spur Apple News usage and generate new revenue in a similar manner to the US$9.99 per month Apple Music offering.

That streaming service was also built through an acquisition: Apple bought Beats Music and the Beats audio device business in 2014 for US$3 billion. At the time, Beats Music had fewer than a million subscribers, and Apple has turned that into more than 40 million paying users.

Playing the numbers game

Apple needs successes like that to meet a bold target for its services division. Sales from that segment grew 23 percent to US$30 billion in the company’s 2017 fiscal year. Executives have said they’re targeting services revenue of roughly $50 billion by 2021.

During a recent earnings conference call, Apple told analysts it had a total of 240 million paid subscriptions, with 58 percent year-over-year growth.

Services revenue includes Apple Music, iCloud, Apple Pay, App Store downloads and subscriptions, and iTunes purchases.

Repeating the success of the Beats deal with a Netflix for news will be difficult, according to Gene Munster, a longtime Apple analyst and co-founder of Loup Ventures.

"People pay for music, they pay for video, and most news services are ad-supported," he said. "If Apple launches this as a similar business to Texture, they likely won’t have many subscribers."

If Apple charges a few dollars per month versus the current US$9.99 cost for Apple Music or Texture as it exists today, the company could boost subscription numbers, he said. Still, the initiative probably "won’t move the needle for Apple’s subscription business," Munster added.

Currently, Apple sells subscriptions for iCloud storage and Apple Music. It also gets a cut of subscriptions sold by third-party apps on the App Store.

The company could also choose to turn its original video content efforts into its own Netflix-like video subscription service. Apple also gets services revenue from Apple Pay transactions, App Store downloads, iTunes music, movie, and TV show purchases, and digital book downloads.