Time Inc.’s iPad Problem Is Trouble for Every Magazine Publisher

Time Inc. likes to show off its iPad apps as a symbol of the company’s future. But inside the publisher, the digital editions have become a source of hair-pulling frustration.

That’s because the magazine giant has been unable to get Apple to let it sell and manage subscriptions for its iPad apps–much to Time Inc.’s surprise.

Last month, the publisher was set to launch a subscription version of its Sports Illustrated iPad app, where consumers would download the magazines via Apple’s iTunes but would pay Time Inc. directly. But Apple rejected the app at the last minute, forcing the Time Warner (TWX) unit to sell single copies, using iTunes as a middleman, multiple sources tell me.

Since then, Time Inc. executives “have been going nuts,” trying to figure out how to get Apple (AAPL) to approve a subscription plan. One of the more desperate suggestions, which apparently didn’t get traction: Pulling the publisher’s apps out of the iTunes store altogether.

Subscriptions, whether they’re for ink-and-paper magazines or their digital editions, are a big deal for Time Inc. and every other magazine publisher. They value them in part because they provide recurring revenue, but primarily because they provide a treasure trove of data.

The ability to control digital subscriptions also gives publishers the ability to make their existing print subscriptions more valuable, by bundling the two together. Imagine a scenario where existing Time or Sports Illustrated subs get the digital version free, or at a very steep discount.

No other magazine publisher has approval sell their own iTunes app subscriptions, either. But Apple and Steve Jobs had made a point of reaching out to Time Inc. executives and editors before the iPad’s launch, and encouraged them to build digital editions for the platform.

And Time Inc. executives tell me they had been communicating with Apple throughout the spring as they developed their subscription plans, and had been told that Apple approved.

So what happened? The Time Inc. insiders I talked to don’t have a clear answer, presumably because they can’t get one from Apple itself. One theory: Apple is concerned about the publisher’s plans for the consumer data it would collect with each subscription. A darker one: Steve Jobs loves the idea of digital magazines and wants to control the market for himself.

Time Inc.’s official comment on the topic is oblique: “We are working with a number of partners and potential partners and hope to offer in-app subscriptions some time later this year.” And so is Apple’s: “We have two platforms that we support for apps of all types, including magazines: HTML5 provides an open platform for developers to create and distribute whatever they want, and the App Store which is a curated platform offering customers the largest offering of apps for any mobile device with over 225,000 apps and 5 billion downloads.”

Confusing the issue even more is that Apple already allows a handful of app makers–like Amazon (AMZN) and the Wall Street Journal, which like this Web site is owned by News Corp. (NWS)–to bill customers directly. Amazon itself, meanwhile, has been sparring with publishers over subscriptions for its Kindle platform. Jeff Bezos keeps most of the data and money that those transactions generate, too.

Industry trade magazine Folio: first reported on the Sports Illustrated app’s rejection.

As far as I can tell, Time Inc.’s competitors have yet to even submit subscription apps to Apple. Hearst says it plans to sell iPad subscriptions to its Esquire and Oprah magazine apps when they debut later this year, but they’re not really subscriptions in a conventional sense. Instead, the publisher will sell a bundle of magazines as a one-time purchase, and iTunes will keep 30 percent of the purchase price and all of the billing data.

Hearst Magazines Executive Vice President John Loughlin says he’s not happy about the arrangement, but says it will have to do for now. He hopes that competition from the likes of Google (GOOG), which has announced plans to sell its own magazine apps, will force Apple to relent.

Condé Nast, meanwhile, hasn’t talked about subscription plans except to acknowledge that it has some. Newly appointed President Bob Sauerberg says the company may have more to say about the matter within a month. But others at the company say the problem is a vexing one. One executive at the publisher offers this summary: “Don’t get me started.”