Andrew Maxwell

Has Apple Gone Too Far With The New iOS Subscription Model?

February 16, 2011

Yesterday Apple announced a new feature for iOS which allowed apps to setup a subscription payment method. At first this sounds great, it means that news papers can come to the iPhone and iPad and transition into the digital medium, but Apple had to be monopolistic.

The Curve Ball:

If you read the quotes below carefully, it means that you can no longer let a user subscribe to your service from within an app, without giving Apple 30% of the profits and you can’t give users an alternative method of payment from within the app, even a link to the website.

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.

and

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

Why This is Bad:

This may make sense for news papers since they are gaining subscribers via the iOS and have a larger profit margin, but for companies like Amazon (Kindle, Audible.com), Pandora, and Rhapsody there is no way that they can give away 30% of their profits since their profit margin is already so low and now they can’t even offer a link to purchase the subscription outside of the app, basically killing the apps effectiveness for most companies.

What this means for Developers:

This change will and has already pushed developers away. Rhapsody has already made it clear that they will no longer be able to provide their service on the iOS under these new rules in a public statement.

Our philosophy is simple too – an Apple-imposed arrangement that requires us to pay 30 percent of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable. The bottom line is we would not be able to offer our service through the iTunes store if subjected to Apple’s 30 percent monthly fee vs. a typical 2.5 percent credit card fee.

If Apple wants to keep its developers happy, they are going to have to add the ability to link to external sources to pay for a subscription or change their percentage, if they don’t, the developers will move to a more profitable and reasonable platform… ie. Android or Windows Phone 7, I’m sure many companies are already started looking for a way out.

What This Means for iOS Users:

It’s simple, if the developers leave or if they charge more, customers won’t be happy, which means the customers also will go where their app/services are.

Conclusion:

If Apple doesn’t change this, and change this fast, iOS may be a thing of the past and will no longer have the cutting edge apps and services that it has today.

Photo By: _Tawcan

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