Apple debuts subscription service on the App Store; Steve Jobs: ‘Brand new opportunity’ for content publishers

Apple today announced a new subscription service available to all publishers of content-based apps on the App Store, including magazines, newspapers, video, music, etc. This is the same innovative digital subscription billing service that Apple recently launched with News Corp.’s The Daily app.

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.

“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, in the press release. “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.”

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.

Protecting customer privacy is a key feature of all App Store transactions. Customers purchasing a subscription through the App Store will be given the option of providing the publisher with their name, email address and zip code when they subscribe. The use of such information will be governed by the publisher’s privacy policy rather than Apple’s. Publishers may seek additional information from App Store customers provided those customers are given a clear choice, and are informed that any additional information will be handled under the publisher’s privacy policy rather than Apple’s.

The revolutionary App Store offers more than 350,000 apps to consumers in 90 countries, with more than 60,000 native iPad apps. Customers of the more than 160 million iOS devices around the world can choose from an incredible range of apps in 20 categories, including games, business, news, sports, health, reference and travel.

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork, and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple is reinventing the mobile phone with its revolutionary iPhone and App Store, and has recently introduced its magical iPad which is defining the future of mobile media and computing devices.

Source: Apple Inc.

38 Comments

    1. @breeze, re: “It’s Apple’s store, anyone who wants in plays by Apple’s rules.”

      Which is exactly how it should be. Apple is a for-profit company, not a public utility.

  1. “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.”

    How do they police that? Seems extremely cumbersome. They’d potentially have to check the app store price and the outside price for tens of thousands of apps every day. That’s not feasible.

    And honestly, I think taking a 30% cut for in-app purchases is too high. Something like 10-15% would be better, especially since this is, in all likelihood, recurring income.

    1. When you have a brick and mortar store, your typical wholesale price is 30-60% less than your suggested retail price. That means (in case you still don’t get it) your markup ( gross profit) is typically 30- 60%, just for passing along a product to the consumer. Some stores don’t even stock their items, they order as needed. The consumer never gets wholesale pricing…

      Why is that any different?

      1. Brick and mortar stores have far greater overhead and need the extra markup. However when you look further into the brick and mortar business model a 60% markup doesn’t mean that is what the company is making on that particular item. When an item goes on sale or gets marked down to clear out merchandise to make way for the next season, the producer doesn’t take the hit. The retail store does, so actual profit margins are normally quite less than then even the 30% Apple is charging. What about returns or damaged items that the wholesaler doesn’t give credit for? Apple never has to deal with that since it’s just downloads. Do you think Apple is taking a smaller percentage when an item is on sale??? No, they still get 30%. Do they have a risk if an item never sells? No, since there is no physical inventory.

        So yeah breeze, there is a big difference. If there wasn’t, the internet would never be able to consistently offer better deals than the brick and mortar stores do, and the stores would happily meet or beat any internet only price.

        I wonder if Steve Jobs is going to be strong enough to survive the surgery needed to remove your head from his rectum since it is so far up there.

        1. You don’t have a clue about any fundamentals business or otherwise – you have a serious deficit in entitlements too.

          Apple has A couple of hundred million iTunes users and about 10 million iTunes accounts, as a result of many years of investment. Wrap your peanut sized brain around the value of that to retailers, subscribers or Apple itself and you’re gonna need more than a bushel of toilet paper to wipe your head once you pull it out of your own ass dd.

          1. If I have a product that is priced higher than what the general public is willing to pay for it, then it doesn’t matter how many HUNDREDS OF MILLIONS of iTunes users are at my disposal, my product will not sell (business fundamentals.) Magazine publishers rely on many different types of revenue streams to ensure profitability. Normal wholesale products do not. It is these revenue streams that Apple is trying to unnecessarily squeeze out of the publishers. This isn’t an app that is made for “this price” and sold for “that price,” and that is why applying the same percentage to apps and subscriptions is idiotic.

            Just because Apple says it’s so, doesn’t make it right. Apple is not infallible, if you didn’t have Steve Jobs whispering sbd’s in your ear you would see that too.

  2. OK. Why is it expected of Apple to support and maintain the infrastructure and not be compensated for it? Then be called ingrates and selfish for wanting money for it. Give me a break.

    1. I have no problem with the App Store model, but the problem is that the only reason Apple is expected to maintain the infrastructure is because they won’t let anyone else do it. “Expected” is not the right word, it’s “required.”

      1. You forget that App Store users are Apple’s customers. They do not belong to the New York Times, for instance. If a third party signs up subscribers, like a paper boy/girl, they get a cut and a bonus for finding a new customer for the paper.

        Apple is charging for the use of the infrastructure and the access to Apple’s customer database. 30% sounds more than fair to me.

        1. Actually, from what Jobs said, I think Apple is doing us a solid and going one better. Apple is not requiring that you purchase subscriptions through the App store in order to take advantage of a subscription. All they require is that if the publisher provides the option to purchase a subscription to content provided in an App, that they also provide the “OPTION” at the same price in the app store.

          So if you want to go to the publishers site directly to buy, they do so, no issue, but they can not offer you an incentive to go there instead of buying through the app store. Fair enough!

    2. I don’t think anyone is saying that Apple shouldn’t get something, however the way they have it now is hampering the ability of magazine publishers to take full advantage of the platform while offering the content at a price that will cause mass adoption.

      Why are the magazine companies being demonized because they want the information of the people subscribing to their magazines? They are their customers too and are entitled to that information and Apple should not have steps in place to easily block that information from the publishers.

      Just because Apple decides to do something one way doesn’t make it the right way. Apple tried to do it their way when they launched the iPhone at an unsubsidized price. They quickly learned that if they wanted mass adoption of the iPhone they were going to have to change the way they did business. First came the price reduction then came the subsidization and then came the true revolution.

      Does anyone truly believe if Apple left the iPhone unsubsidized that it would have the same market penetration it has today?

      It’s the same thing with magazines and subscriptions. They will never become what Apple wants them to become if Apple doesn’t make major concessions. This is reoccurring revenue, not one shot deals. Do you think the gas station down the block makes the same percentage on gas as the local electronics store makes on a tv purchase? No, because gas is a reoccurring purchase and tv’s are bought once every couple of years or more.

      Magazine pubs should be allowed to offer different deals to subs if they aren’t being forced by Apple to surrender 30%. Why shouldn’t this savings be passed on to the consumer? If Apple is making it prohibitively easier for the consumer to purchase the subscription through the App Store how are the pubs going to effectively drive traffic to their sites? This is a blatant money grab by Apple that could have serious implications for the magazine and subscription industry.

      And all this happy B.S. is on it’s way to a Mac near you as the Mac Store gains more and more popularity. Pretty soon you will not be able to install anything on an Apple product unless it’s been approved and a percentage of the profits are taken by Apple itself. IMHO, that will be a very sad day indeed.

      1. When you have a brick and mortar store, your typical wholesale price is 30-60% less than your suggested retail price. That means (in case you still don’t get it) your markup ( gross profit) is typically 30- 60%, just for passing along a product to the consumer. Some stores don’t even stock their items, they order as needed. The consumer never gets wholesale pricing…

        Why is that any different?

        1. breeze: I agree. Apple fills the roll of retailer.

          PS: Your math is a bit fuzzy. Percent of increase and percent of decrease are not equivalent. For example, a $1000 retail price for, say, a laptop in the Apple store, less 60% = $400. But a $400 cost plus 60% = $640 (does not get you back to the $1000 starting point). 🙂

          Cheers,
          Dave

  3. Over on Yahoo finance ATnT CEO Stephenson is complaining that all apps should be cross-platform and should be sold by the telco. I guess he forgot he’s a dumb pipe.

  4. Bad news for consumers.
    1. Content providers will raise the price to compensate.
    2. Content providers with mobile web setup will have huge advantage. This can drive the content providers away from AppStore.
    3. Apple will push for higher prices to get larger profits.
    4. There will be a lot more ads, a lot.

    All this is more as a step backwards.

    1. I call bullshit on 1, 2, 3 and 4. Content providers already pay carriers, newsstands, drug stores, grocery chains, convenience stores, you name it. Paying Apple for distribution and sales will not raise any prices.

      When the same deal happens on your Android device you’ll change your tune in a hurry.

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