Apple One-Ups Facebook With Purchase of Texture
Apple (NASDAQ: AAPL) has watched and learned from Facebook's (NASDAQ: FB) near-faceplant in the news space.
Facebook has been criticized for promoting false news stories and for not doing anything about that when it was first confronted. Now, in response to the public outcry, Facebook is making big moves to correct its wrongs. But its algorithm changes so far have been controversial, causing at least two publishers to shut their doors after seeing their Facebook traffic plummet.
Having watched Facebook's mistakes comfortably from the sidelines, Apple feels confident that it can do better. The tech giant scooped up magazine app Texture for an undisclosed amount, and hopes it can use the business to combat the spread of false reporting.
Texture gives users unlimited access to over 200 magazines. Image source: Apple.
Apple makes bold win-win move with Texture buy
Apple's Texture purchase is a clear sign that it's continuing to devote more resources to content. The buy comes just a few months after it purchased music-discovery app Shazam, and on the same day it ordered its first animated series, Central Park, from Bob's Burgers creator Loren Bouchard and Twenty-First Century Fox's television division.
Texture gives its users access to over 200 magazines, including People, Time, The New Yorker, ESPN The Magazine, and Shape for $9.99 per month, or $119.88 per year. That's a good deal, considering a subscription to ESPN The Magazine costs $29.95 a year and a digital-only subscription to Newsweek for a year costs $99.
It's no secret that the magazine world has been struggling to make money in the age of digital content overload. Most magazines have resorted to shockingly high discounts on their products. To get readers hooked, The New Yorker has been running an introductory rate of $12 for 12 weeks of print and digital. Shape is giving away yearly subscriptions for just $9.98. And National Geographic's yearlong digital-only subscription, which includes 12 issues, goes for just $12.
Texture's purpose, when it launched in 2012, was to help these struggling publishers monetize their content. That was back when they were first learning that online ads mostly benefited Alphabet's Google, and that people aren't keen to pay for online content. By grouping 200 magazines into an affordable monthly subscription, these publishers hoped to protect themselves. Six years later, the move seems to have worked, considering it caught the eye of a Silicon Valley tech company like Apple.
Apple sees a bigger purpose in Texture
There's more to Apple's Texture purchase than just adding more content so it can double its services revenue by 2020.
First, it's important to recognize that Texture is owned by publishers Conde Nast, Hearst, Meredith Corp., News Corp., Rogers Media, and investment firm KKR & Co., and that it's protecting publishers. That means purchasing Texture is a way for Apple to "make nice" with the media outlets unhappy with Facebook.
Second, Apple is now in a position to help promote high-quality journalism pieces as a way to combat the spread of questionable reports. It's almost as though Apple is the parent swooping in to help sort out the issues that have put Facebook on bad terms with reputable publishers. Eddy Cue, Apple's senior vice president overseeing the services business, touched on this secondary goal in a statement: "We are committed to quality journalism from trusted sources and allowing magazines to keep producing beautifully designed and engaging stories for users," Cue said.
At the South by Southwest conference on March 12, Cue took it one step further, saying part of Apple's reasoning in buying Texture was to stop the spread of unreliable news stories. He argued that platforms that promote news have a responsibility to make sure that the content they promote is accurate. When prompted to comment on Facebook's role in this area, Cue kept things civil and simply said, "We're going to step up and do that."
Texture has apps for iOS, Android, Amazon Kindle Fire, and Windows 8 and 10, meaning it could build up a significant reach with an added boost from Apple. There isn't a current figure for Texture subscribers. But back in 2015, Texture CEO John Loughlin told Recode that Texture had "hundreds of thousands" of subscribers, and maintained that estimate in 2016 when he spoke to the New York Post.
Meanwhile, Facebook has been under fire for its big role in spreading misinformation and for being an addictive website. Its solutions to prompt "more meaningful interactions" among users have included reprioritizing content on the News Feed to give preference to content from friends and family, as well as publisher content that prompts high engagement from users. Unfortunately, these changes in its algorithm have already caused two digital Facebook publishers to announce that they are closing shop: Little Things, a "feel good" publisher of positive stories, and Rare.us, Cox Media's conservative viral-news publisher.
Apple's big move to help publishers makes it look like a knight in shining armor to Texture's media partners. And when you look at the strict guidelines Apple sets for creators to get on its iTunes and Podcasts platforms, it's easy to see how Apple could do a better job at filtering content compared to Facebook, which has been a free-for-all platform for content.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Natalie Walters has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, and Facebook. 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 KKR. The Motley Fool has a disclosure policy.
