The Curious Acquisition of Texture by Apple

Some may see Apple’s acquisition of Texture as a surprising move, but I think it is carefully calibrated but unlikely to deliver any revenues that will be significant for Apple or the magazine companies. As many will know, we have been demoting our position in the B2C subscription magazine market, having previously provided digital publishing technology to many of the top publishing houses. Texture, aka Next Issue Media, began as a joint venture by the big publishers to counter Apple who were getting too much leverage by controlling distribution, and therefore the initial venture was focussed on Android.

I visited their team in Palo Alto, California, back in 2011 when their development team were still getting their Android solution finished, but the reason for my visit centred around iOS. They began to realise that they might need iOS technology if their Android only strategy failed. It was pretty obvious it would do so, and it was not long before they embraced Apple and then, a while later, moved to a “Netflix” for magazine model. The idea was probably that this could fill the gap left by Apple’s withdrawal from the Newsstand, but there was one serious problem. It was nothing to do with technology, but all about marketing. To get the readers to be aware of the service, there was a shed load of marketing dollars that needed to be spent. Next Issue Media was hardly a catchy name, so Texture was born. Enter KKR who lobbed in $50 million to solve this problem. However, to do serious awareness raising, this is still a paltry amount and there is still a question of whether there is a “Netflix for magazines” market.

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Other less well-funded players such as Readily and Magster have attempted to develop this model, but no one has answered the fundamental question about the difference between films and magazines. We choose film genres according to our taste and mood on the day and have no issues watching classics or box sets from years ago. They do not age. Only a few consumer magazines build archives that are successfully monetised: National Geographic and the New Yorker are two examples. But in general, magazines are date stamped and lose relevance quite quickly. Therefore the back catalogue is not able to be monetised as it is with film.

Magazines focus on a specific target demographic or niche. As the internet has taken so many eyeball hours, magazines have had to focus even more tightly on their audience. A reader of a particular magazine is an enthusiast of that subject, they are not magazine buffs like in film, but fanatics of food, fashion, travel, crotchet, fishing, – just about any interest or hobby you can imagine. Therefore access to hundreds of magazines on different subjects is not a natural appeal. For these reasons, the Netflix for magazines model has always been pushing water uphill.

This move by Apple will appeal the to top consumer magazine publishers because the awareness problem might be finally solved, particularly if Apple ships the Texture app with their next iOS release. If anyone can reach the consumer, Apple can. However, this move treads heavily on the toes of the magazine app developers and could cause serious problems for many with this same model. But it is carefully calibrated, as there are no big app firms out there that will be damaged and few with the willingness and deep pockets to sue or cause serious problems for Apple. However, this is another example of one of the major tech giants entering into the app market to steal the lunch from their previous loyal supporters. It is a move to build bridges with the serious journalists at the expense of these app developers, and probably made possible by KKR’s great connections and wish to salvage what has been a poor investment.

By Richard Stephenson, CEO of YUDU

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