Anti-Trust Battle Brewing Over iPad Magazine Subscriptions

Apple’s iPad tablet computer may be the perfect vehicle to view glossy magazines, but the iTunes subscription model has some publishers ready to turn the page.

On both sides of the Atlantic, publishers are grumbling about Apple’s iTunes store. Some popular US publications, including the New York Times and Playboy, recently announced web-based subscriptions that will offer more flexible options and control over content than iTunes. But in Europe, Apple faces a probe by Belgian antitrust authorities over whether it is abusing its market position by requiring that publishers only sell subscriptions through iTunes.Hundreds of magazines- – from the AARP Bulletin to Vogue UK — are available at Apple’s iTunes store for perusal on the iPad’s 9.7 inch high-resolution screen. But not all publishers want to rely solely on iTunes for distribution — especially since Apple takes 30 percent of each sale.

And Apple’s iTunes store rules are so complex that start-up Urban Airship has carved out a niche helping publishers navigate that system to offer more flexible subscription options — as it has for publications like Newsweek and The Atlantic.

“Beyond traditional publishers, the subscriptions model is growing quickly as a viable business model for any business that wants to monetize its apps,” said Urban Airship’s Jessica Davis. “And for now, this is all through iTunes. So the future is very bright for subscriptions, regardless of how the publishing industry reacts to the Apple model.”

Rumors currently abound that Apple will launch a new subscription model and digital storefront for magazines in iTunes that makes it difficult, if not impossible, for publishers to sell subscriptions except through iTunes.

Those rumors prompted Belgian economy minister Vincent Van Quickenborne to urge his country’s antitrust authorities to investigate Apple. There may be a case, said Carlo Piana, a lawyer who worked extensively on the EU antitrust competition case against Microsoft.

“It depends on how you define the market. If we mean the online news market, Apple is not in a dominant position. If you mean online news on mobile devices — including Kindle, for example — there may be a case. If we consider the Apple store as the relevant market, there’s definitely a case.”

Although publishers aren’t necessarily keen about being forced to pay Apple a cut of each subscription they sell, that’s not the only issue. Sales through iTunes means that Apple controls subscription data — and access to their own subscribers.

“If Apple allowed real subscriptions in iTunes and shared the user data they collect with publishers, that might end the war right there,” said Marco Formento, Global Digital Director at De Agostini Editore, an Italy-based group which publishes in 13 languages and 30 countries. “Otherwise, a lot of publishers will go around Apple to keep that contact with their clients.”

The tablet market grew 45% in the third quarter of 2010 alone, IDC reported— but 87.4% of that share belongs to Apple.

“The iPad will dominate for some time, despite the surge in popularity of Android devices,” said De Agostini Editore’s Formento. “It’s a perfect ecosystem and has no comparable competitors yet.”

[Ed note: The author has worked with The Daily, an iPad-only publication]