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News Publishers Want the Same Sweetheart Deal From Apple That Amazon Got

By Evan Niu, CFA – Aug 22, 2020 at 1:00PM

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CEO Tim Cook said any company meeting "the conditions" can pay lower fees.

It was a pretty big deal when (AMZN 4.50%) brought its Prime Video app to Apple (AAPL 2.56%) platforms back in 2017. Up to that point, the two tech behemoths had been locked in a standoff, as Amazon had refused to sell the Apple TV set-top box because Apple has strict rules surrounding its 30% cut of digital sales and subscriptions.

Lawmakers released documents last month as part of a broad antitrust investigation, and they showed that Apple gave Amazon a sweetheart deal: The Mac maker would only take a 15% cut of any subscriptions sold through the Prime Video app.

An email between Apple services chief Eddy Cue and Amazon CEO Jeff Bezos outlined the agreement, which represented a concession compared to the standard 30% cut of subscriptions that Apple takes for the first year before that share drops to 15%. Amazon even added in-app purchases earlier this year, allowing certain users to use Amazon's payment system instead of Apple's; such a move by just about any other developer would run afoul of Apple's guidelines and provoke swift retribution.

A still from "The Marvelous Mrs. Maisel" displayed on a TV with an Apple TV and remote next to it

Image source: Apple.

News publishers now want similarly favorable treatment.

"We treat every developer the same"

When Apple CEO Tim Cook testified virtually in front of Congress last month, Cook stated (emphasis added):

We treat every developer the same. We have open and transparent rules, it's a rigorous process. Because we care so deeply about privacy and security and quality, we do look at every app before it goes on. But those rules apply evenly to everyone.

Rep. Hank Johnson pointed specifically to the special deal with Amazon and asked if reduced commissions were available to any other developers. Cook replied, "It's available to anyone meeting the conditions, yes," without specifying what those conditions are.

What are those conditions?

Digital Context Next, a trade association representing major news publishers including Bezos-owned The Washington Post, Bloomberg, and The New York Times, among others, has sent Cook a letter asking for clarification on how its member organizations could receive similar treatment.

"On behalf of Digital Content Next (DCN), I am reaching out to you to better understand the 'conditions' you mentioned in your July 29th remarks before the House Judiciary Committee," CEO Jason Kint wrote. "We would like to know what conditions our members -- high quality digital content companies -- would need to meet in order to qualify for the arrangement Amazon is receiving for its Amazon Prime Video app in the Apple App Store."

Apple News app displayed on a MacBook Pro laptop

Image source: Apple.

Kint notes that almost all of the association's members offer iOS apps and have to pay the normal commission structure of 30% for the first year before dropping to 15% thereafter. Those companies would naturally prefer to pay the reduced fee, and Kint is asking what those vague conditions are.

Even outside of the App Store, news publishers already have a complex relationship with Apple. The company reportedly keeps half of all Apple News+ subscription revenue, with the remaining half split up among publishing partners based on engagement. Those terms are why many prominent publishers have chosen not to participate. The New York Times pulled out of the Apple News platform altogether over the summer.

Publishers certainly don't have the type of sway that Amazon does, but they're now trying to call Cook out for apparent discrepancies in Apple's policies.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Amazon and Apple. The Motley Fool owns shares of and recommends Amazon and Apple. The Motley Fool recommends The New York Times and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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