Tech giant Apple Inc. (AAPL) is acquiring the "Netflix Inc. (NFLX) of magazines" as it doubles down on content with a new journalism platform. The move marks a larger trend among America's leading tech giants who are increasingly building their out software and services business with recurring subscription revenue alongside their hardware businesses. (See also: Youtube's MLB Deal: Google's Big Play in Streaming.)
On Monday, the smartphone maker announced that it would buy digital magazine subscription service Texture for an undisclosed sum. The company, which lets readers access over 200 magazines such as The New Yorker, People, Time and GQ, for a monthly fee of $9.99, is owned by Next Issue Media, which itself is owned by publishers Condé Nast, Hearst Corp., Meredith Corp., Rogers Communications Inc. and investment firm KKR & Co.
The acquisition should help Cupertino, Calif.-based Apple reach its target of boosting total revenue from services to over $40 billion by 2020, as it combats slowing demand for hardware including its flagship iPhone. For the fiscal year ended September 2017, Apple posted almost $30 billion in services revenue, comprised of business such as music streaming and mobile payments.
Mending Fences With Big Publishers
Subscription revenues help Apple hedge against longer product replacement cycles, and should be easy for the company as consumers become increasingly accustomed to paying monthly subscriptions for "key tech utilities" such as Netflix Inc. (NFLX), Spotify and Microsoft Corp.'s (MSFT) Office 365, wrote analysts at Bernstein in a note to clients late last year.
Apple already offers curated news from third-party publishers on its Apple News platform. "We are committed to quality journalism from trusted sources and allowing magazines to keep producing beautifully designed and engaging stories for users," said Eddie Cue, Apple's SVP of internet software and services.
The deal positions the company more directly against Alphabet Inc.'s (GOOG) Google, which offers news through its Play Store, Amazon.com Inc. (AMZN), which has its own subscription reading service and Facebook Inc. (FB), which has faced backlash over the way that its service presents news content. Texture will continue to offer iOS, Android, Amazon Kindle Fire and Windows 10 apps. (See also: Apple Needs Its Own Streaming Service: Bernstein.)