The Orange View (on hiatus) Because Apple is great but it isn't perfect

15Feb/11Off

Apple’s new subscription rules are better for users? No way

John Gruber, explaining away Apple's subscription money grab:

You’ll seldom go wrong betting on Apple doing something that’s good for Apple and good for its users — no matter what the ramifications for everyone else.

-DaringFireball, Feb. 15, 2011

Huh? Users don't get much of anything out of the new policy. In theory, users might get some tiny bit of extra convenience from being able to buy subscriptions inside of apps instead of having to use a web site. But, the cost is that Apple grabs 30% of the publishers' revenues.

This isn't Candyland. Publishers who sell subscriptions on the web can't magically give up 30% of their revenue and give it to Apple. Can the Wall Street Journal or Financial Times just hand 30% of their  revenue to Apple? Hulu and Netflix? What about cloud services like Evernote or Readability? They'll all have to either cut back on the quality of their product or raise prices. And publishers can't raise prices just on the iOS version of their product because Apple prohibits any premium pricing. The main result may be publishers opting not to offer an iOS app at all. Make no mistake, this new policy is good for Apple, not users.

As I've said elsewhere, however, I do think the policy is a form of business model democracy. Small upstarts who don't have the legacy costs of major publishers could flourish with the 70/30 revenue split. It reminds me of when Apple put podcasting in the iTunes store, opening up the whole ad-supported radio show model to anyone with a great idea for a show.

Posted by Aaron Pressman

Filed under: link Comments Off
Comments (12) Trackbacks (1)
  1. Just a thought, Apple never said that you have to have in app purchasing of subscriptions, they are just making it so that if you offer a button to purchase in your app from the web that you also offer the opportunity to purchase using your apple id from the app store.
    Now this in no way means that Amazon, Rhapsody and other companies that offer subscription services could not just give you instructions to go to companies website and create your own account and purchase that way. They are not blocking these companies from making money, I mean after the buy a subscription from Rhapsody how many times do you need to use the in app purchasing? These subscription services all rely on the fact that once you subscribe, we being the lazy human’s that we are, are not going to want to deal with re upping every month, it’s called auto-renew.

    • You obviously did NOT read Apple’s statement:
      “…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.”
      So no, they are not making it easy at all to find any other source other than the iTunes Store.

      That being said, I disagree with the author’s premiss. The reality is that publisher’s have for years used middle agents to sell subscriptions, often for more than 30%. I can’t tell you the number of ads I get via email to sign up for magazine subscriptions… I’m sure the 30% is very much in league with what these services charge.

  2. What most people seem to either not know or forget or just fail to understand, newstand or subscription revenue for a print publication has nothing to do with covering costs, except possibly postage if one gets it in the mail. Newspapers’, for example, big revenue was actually classifieds as much if not more so as general advertising.

    It has everything to do with marketing. There are all sorts of services out there that offered subscriptions in exchange for a cut. Then there were the newsstands. No one did both except the publisher. That Apple (and other mobile platforms, now, too) is in such a position is unprecedented. Subscriptions AND newsstand sales have everything to do with market research. With this research in hand they could weight their ad space pricing accordingly. They could offer targeted subscription offers in any number of conditions to test their market research or shore up areas that may seem weak.

    The publishers really don’t care that much about subscription revenue as much as they are fighting for the ability to do their own form of market research, not the least of which is the customer information from iTunes purchasers. Publishers have really intricate detail about their market, which days, time of day, region buys what when and who those people are (demographically and psycho-graphically. With Apple in the middle, they lose a lot of that, not just credit card data.

    Price is also a value proposition. Outside the Apple eco-system, they are able to experiment with all sorts of discounts and offers to target markets for any number of reasons. A newsstand/iTunes store price of $5-10 each has nothing to do with publishing costs. It has everything to do with providing the appearance of subscription value. Subscriptions provide infinitely more user data than newsstand sales. All that information is value to advertisers.

    Don’t think for a minute the publishers are trying to save you money and look after your interests. They want the market data.

    Joe

  3. Huh?

    1. Users do not have their personal information automatically offered up to publishers. That is a tangible benefit. I do not subject myself to a flood of unwanted junk mail simply by signing up for a newspaper or magazine.

    2. This isn’t Candyland. Publishers who sell their own subscriptions under the current system already incur a cost to solicit, process, and maintain subscribers. It costs actual money to hire phone banks to cold call me at dinnertime every two weeks to offer me subscriptions to the Boston Globe. It costs actual money to set up and maintain the e-commerce sites necessary to take my name, address, gender, race, and credit card information and add me to their subscriber database. They also incur a cost to distribute their publication to their subscribers. Under iOS, publishers don’t need to cover that overhead. They can focus on their content, and making money from their advertisers, which is where the bulk of their profits come from. 30% is what Apple charges to handle all of the rest.

  4. Gruber’s right – Don’t underestimate that “1” click – The same click they’re already used to making.

  5. Unbelievable how people that don’t have a clue how this works spewing the same stuff.

    So anyone want to guess what Publisher’s Clearing House got for the subscriptions they brought in? Anyone?

    Their cut of a subscription ranged from 74 to 90 percent!

    Please…nothing to see here!

  6. @tim,

    1-You obviously did not grow in the age of junk mail. But that isn’t the tangible that publishers sell, not anymore. That was just a side benefit until people complained long and loud enough to get it to mostly stop.

    2-Subscription revenue does not in any way cover those costs. They make their money selling ads, based on info from the subscription information or other type ads (like the classifieds I mentioned). The publishers aren’t losing money by giving Apple a 30% cut. They are losing money by not getting the subscriber info and having the flexibility to handle their marketing as they see fit. I lay you odds that if Apple offered up all the usual data they normally get by handling subscriptions on their own, this would not be an issue.

    Joe

    • Hi there Joe, take a look at my comment again, I think you’ll find that you’ve misinterpreted it. Re #1, the tangible benefit to which I refer is “not being subjected to junk mail.” Re #2, I am also in agreement with you. Cheers, Tim

      • Also, my “Huh?” was in response to the blog post.

        One of the perils of having moderated comments is that there may be a lag time before they appear. At the time that I submitted my original comment, there were no other comments visible, so I thought it would be clear that I was responding to the original blog post — not to you, Joe.

        (For some reason, comments seem to be appearing immediately now, though. Is moderation turned off?)

  7. Apple is a business so is Apple wrong in asking for 30% of everything purchased from their store.

    I know google give away everything of others (contents owned by others) for nothing so they are ok but then they are making money out of ads not something tangible.

    Btw publishers can still publish on their websites and google steal it to give to the world for free.

    Go figure.