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Apple Vs. Google: The Fight For Digital Media Supremacy

 February 24, 2011 10:29 AM
 


by Tony D'Altorio, Investment U Research
Thursday, February 24, 2011

As usual, Apple (Nasdaq: AAPL) is busy pushing the envelope. This time, it wants to change how internet commerce is conducted, by way of its iPhone and iPad devices.

The company is dictating tougher terms, such as a 30% cut of subscriber content fees sold through its devices.

Its new international rules require content publishers with digital subscriptions to do the same through its App Store. The businesses won't even be allowed to link to their websites from the apps unless they do so through an Apple app.

[Related -Sobering Quarter and Guidance for Long-Time Apple Bull]

This will force more subscribers through Apple's digital content store. It also means content owners lose revenue from the surging smartphone and tablet market…

Apple Bites into the New York Times, Hulu, Etc.

Brands from the New York Times (NYSE: NYT) to Elle, Hulu and Spotify stand to lose from the new rules. Meanwhile, Apple gets a greater chance to bite into booming businesses such as Netflix(Nasdaq: NFLX) and Amazon.com (Nasdaq: AMZN).

[Related -Amazon.com, Inc. (AMZN) Q4 Earnings Preview: Will Amazon's EPS Top Street?]

Digital publishers also worry that Apple will end up controlling billing relationships that would deprive them of valuable information about their customers.

  • If they don't have sufficient data on their clientele, publishers will struggle to implement high-yielding targeted ads focused on those customers.
  • If only Apple has that information, it will of course enhance the value of Apple's iAds which will target those buyers of content.

Needless to say, that possibility makes very few businesses happy. Early reactions from news, magazine, music and video companies suggest that some are examining if Apple is really worth it, revenue-wise.


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