Earlier this morning, Apple sent out a press release detailing their new policy on subscription revenue for content sold on iOS devices. Essentially, they’re mandating that any subscription sold within an app will be subject to Apple’s 30% cut and that any in app subscription option be as cheap, if not cheaper than any out of app option.
Steve Jobs:
“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.”
First of all, you gotta love how Steve manages to work the word “delight” into a press release that most people in the general public will not see. Even in what boils down to a b2b communications, he manages to bring a child-like wonderment to the atmosphere. It’s also a good sign that Jobs is still making some “public appearances,” despite his medical leave of absence
Harvard University’s Niemannn Journalism Lab, being the knowledgeable folks that they are, was already on the ball with an in-depth analysis as to what this would mean for news media publishers looking to establish a new business model. We recommend reading their piece in its entirety, but the crux of the fallout is here:
That means news organizations will be incentivized to convert customers they already have relationships with — a.k.a. print subscribers — into tablet-only or tablet-also readers. If you’re a newspaper and you can convince your 20-year subscriber to pay a little extra for a tablet subscription, you get to keep that marginal revenue because you “brought” that subscriber to the app and processed her billing outside Apple’s systems.
In the long run, though, such a strategy could hurt newspapers who already have disproportionately older audiences. Converting 20-year subscribers to a new platform isn’t as valuable as converting non-readers into tablet readers. Part of the appeal of tablets and smartphones is that they promise to put newspapers in front of a younger audience that, frankly, hasn’t picked up a print paper in years, or ever. For those people — people who download an app, like what they see, and decide to subscribe — Apple will take its cut. It’s a perverse incentive for publishers.
Obviously, Apple’s policy is in place to prevent content publishers to price the in-app subscription purchases out. Their line of thinking goes, “If you can get it cheaper on their website, why bother with the in-app option?” It’s pretty clear that this new policy will infuriate content sellers to no end. Not only do they have to figure out a pricing model that grabs and sustains new subscribers, they have to do it in a way that also maximizes their own profits given the rules that Apple has dictated from them.
We can argue about whether “old media” should be given any breaks given their egregious mishandling of moving their businesses into the digital age, but there’s no doubt Apple’s not making things any easier for them. It’ll be interesting to see whether this makes Apple’s competitors in the tablet market give publishers better deals, but we have a feeling things might go the same way as the music industry and iTunes – “Deal with it or don’t get paid at all.”
