Please ensure Javascript is enabled for purposes of website accessibility

Why The New York Times Won't Be Joining Apple's News Service Anytime Soon

By Evan Niu, CFA - Updated Apr 14, 2019 at 8:16PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The prominent paper isn't willing to risk giving up $15 per month per subscriber in exchange for a cut of $5 per month.

In just a matter of days, Apple (AAPL -0.29%) is widely expected to show off the premium news subscription service it's been working on for at least the past year after acquiring Texture. The news service is expected to cost somewhere around $10 per month, with Apple keeping half of subscription revenue and the remaining half being split up among other publishers aggregated within the service based on the engagement their content generates. The tech titan has reportedly gotten The Wall Street Journal on board, along with Vox.

One prominent publication that isn't interested is The New York Times.

Texture interface shown on iPad and iPhone

Image source: Apple.

Lessons from Netflix

In an exclusive interview with Reuters yesterday, The New York Times (NYT -0.07%) CEO Mark Thompson explained why his company isn't interested in joining the forthcoming third-party distribution service. Thompson drew several comparisons to how Netflix (NFLX 2.96%) used a similar model to reshape Hollywood.

"We tend to be quite leery about the idea of almost habituating people to find our journalism somewhere else," Thompson told Reuters. "We're also generically worried about our journalism being scrambled in a kind of [food processor] with everyone else's journalism."

Many studios and content owners licensed their shows and movies to Netflix, helping the streaming service amass an enormous subscriber base (nearly 140 million globally at last count). "If I was an American broadcast network, I would have thought twice about giving all of my library to Netflix," the chief executive added.

Thompson expressed concern around ceding all control over the customer relationship to Apple, which has long been a worry among publishers. Expectedly, the other big challenge is whether or not the underlying economics are viable. The Times charges about $15 per month for a digital subscription, and added 265,000 net new digital subscriptions in the fourth quarter. Total paid digital-only subscriptions are now approaching 3.4 million.

"We ended 2018 with $709 million in total digital revenue. This means that after just three years, we are already three quarters of the way to achieving our five-year goal of doubling digital revenue to $800 million by 2020," Thompson had said in a statement in the company's earnings release last month. "As a result we are setting ourselves a new goal -- to grow our subscription business to more than 10 million subscriptions by 2025."

Check out the latest earnings call transcript for Apple.

Signing on with Apple's news service could undermine that progress. In a worst-case scenario, partnering with Apple could even cannibalize The New York Times' digital subscriptions. Some subscribers would inevitably cancel direct subscriptions and sign up through Apple, forcing The New York Times to give up $15 per month in exchange for a cut of $5 per month. That's not a sacrifice that Thompson is willing to make, according to the report.

Apple is hoping that it can offset lower per-subscriber revenue with volume, attempting to leverage its massive worldwide installed base. The tech giant recently confirmed it has 1.4 billion active Apple devices, of which 900 million are iPhones.

Evan Niu, CFA owns shares of Apple and Netflix. The Motley Fool owns shares of and recommends Apple and Netflix. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends The New York Times. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$164.87 (-0.29%) $0.48
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$233.49 (2.96%) $6.71
The New York Times Company Stock Quote
The New York Times Company
NYT
$30.97 (-0.07%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/09/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.