February 15th 2011, Apple sent out a press release announcing in-app subscriptions for the AppStore. The new subscription service brings mostly benefits, but there’s one HUGE drawback…
From the press release (everything in red is copy ‘n’ paste from the press release):
Subscriptions purchased from within the App Store will be sold using the same App Store billing system that has been used to buy billions of apps and In-App Purchases. Publishers set the price and length of subscription (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly). Then with one-click, customers pick the length of subscription and are automatically charged based on their chosen length of commitment (weekly, monthly, etc.). Customers can review and manage all of their subscriptions from their personal account page, including canceling the automatic renewal of a subscription. Apple processes all payments, keeping the same 30 percent share that it does today for other In-App Purchases.
What this mean is that it will become a lot easier for content publishers to provide subscription based services for their customers at the cost of 30% of their revenue. This is the standard business model from Apple “We provide the marketplace and we want a 30% cut of what goes through there” As they say:
“Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing,” said Steve Jobs, Apple’s CEO. “All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app. We believe that this innovative subscription service will provide publishers with a brand new opportunity to expand digital access to their content onto the iPad, iPod touch and iPhone, delighting both new and existing subscribers.”
Oh, here it begins to sound sketchy.. “All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer (MUST) be made inside the app..” In essence this more or less say that you cannot opt out of the Apple subscription service, you MUST implement this as long as you provide some form of subscription based service in apps available in the AppStore. It’s potentially really bad news for services like Spotify, Wimp, Netflix and any newspaper app.
Publishers who use Apple’s subscription service in their app can also leverage other methods for acquiring digital subscribers outside of the app. For example, publishers can sell digital subscriptions on their web sites, or can choose to provide free access to existing subscribers. Since Apple is not involved in these transactions, there is no revenue sharing or exchange of customer information with Apple. Publishers must provide their own authentication process inside the app for subscribers that have signed up outside of the app. However, Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app. In addition, publishers may no longer provide links in their apps (to a web site, for example) which allow the customer to purchase content or subscriptions outside of the app.
Again, you MUST use the Apple subscription service if you want to get paid through subscriptions from your customers. You have no other alternative if you are subscription based.
From the business side there’s the question around the 30%. Who’s pocket will it come from? Will the subscribers get a late notice that “Ooops… we upped your subscription fee 30% so that Apple could get more money without having to loose anything yourself”.
I have a hard time seeing Spotify sending emails to the record industry saying that they’ll be making 30% less from now on because Apple want a piece of the cake. Spotify is already under great pressure from the record industry for not generating enough revenue for their streams.
The subscription service from Apple could be of help to new service providers. New service publishers will have an easier job of getting acceptance for the extra 30% from their subscribers, but the existing “first movers”, the ones that adopted the Apple technology early and showed that subscription based services on mobile devices is a functional busniess model see now is that they’ve just paved the way for Apple and have to pay for it (again).
The complete press release can be found here: http://www.apple.com/pr/library/2011/02/15appstore.html
Trackbacks/Pingbacks
[...] This post was mentioned on Twitter by Alexander Viken and Alexander Viken, App Czar. App Czar said: RT @AlexanderViken: #Apple and in-app subscriptions, #Spotify, #Netflix and subscription based services http://t.co/wBKkBZc via @AgileMo … [...]