Apple’s App Store subscription rules cause concern at media companies

ZAGGmate iPad case“Apple Inc. launched a new service for its App Store that allows for magazine and newspaper subscriptions for its popular iPhone and iPad devices, but publishers and other suppliers of content aren’t rejoicing,” Nat Worden reports for The Wall Street Journal. “The service is setting up a conflict with some major media companies that are wary of allowing the computing giant to come between them and their customers.”

Worden reports, “Most publishers have yet to reach agreement with Apple to sell subscription apps, due to issues such as pricing disputes and the company’s privacy policy, which requires subscribers to opt-in to share their names and addresses with the publishers of the magazines or papers they will get digitally.”

MacDailyNews Take: Apple’s on the side of the consumer yet again.

Worden reports, “Under the new service, companies can no longer provide links in their apps that allow customers to purchase content or subscriptions outside of the app—a requirement that could have major repercussions for the way movies and books are consumed through Apple devices. An Apple spokeswoman said apps that currently aren’t in compliance with this requirement will have to change. Popular media apps that could be affected include Netflix Inc., Amazon Inc.’s Kindle app, Hulu LLC’s Hulu Plus app and The Wall Street Journal.”

Read more in the full article here.

MacDailyNews Take: Publishers who don’t like Apple’s terms are more than welcome to invest in the creation of apps for tablets not named iPad if they mistakenly believe that will net them more profits.

“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. 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.” – Steve Jobs, Apple CEO, February 15, 2011

Related article:
Apple debuts subscription service on the App Store; Steve Jobs: ‘Brand new opportunity’ for content publishers – February 15, 2011

44 Comments

      1. breeze, which do you think is more likely to happen, the publishers will happily subtract 30% from the profits, or the publishers will pass the 30% tax on to the consumers in order to keep their bottom line the same? In reality, it will probably be some of both, in which case both the publishers and the consumers have a share in paying the 30% tax.

        I really don’t see how this corporate-like tax is going to spur growth and consumer choice.

        1. @realist – So do you think that Apple should let them use their infrastructure and ecosystem and not get paid for it? Apple host and deliver their content and they DON’T get a share in the profit? Yeah, that sounds like a great business model for Apple.

          1. They should pay a commission on any software and content that goes through the iTunes store.

            They should not try to control the prices of content that is purchased outside of their store and delivered to my already purchased app that is installed on my already purchased iPhone, all o which Apple already got its commission from. It’s this price manipulation that bothers me and deters competitive choice.

            1. Regarding music sales, Apple still allows the user to purchase content from other sources and doesn’t try to control the prices outside of its store. This is a good thing.

        2. Considering the fact that the publishers thus far have decided to charge more for digital versions of their publications compared to print versions, I’d say they deserve exactly what they’re getting from Apple.

          What I can’t for the life of me understand is peoples reactions to side with the media companies over this. The same companies that will try anything to screw over their customers in the name of a dollar. Not only do they charge for to allow us to read their content, but they also fill their magazines with advertisements.

          In the digital realm it has always been one OR the other. You either get it for free and have to deal with the ads, or you pay to have an ad-free experience.

          I don’t blame Apple for wanting a cut. The publishers are making money off subscriptions, they make money from advertising and they aren’t spending a thing when it comes to distribution of their content. Through iOS Apple is providing a platform for these companies to get their content into the subscribers hands.

          If the publishers continue to charge more or even the same price for the digital versions, then 30% is not going to affect their bottom line.

          Apple takes a 30% cut of every song sold through the iTunes Store, is that hurting the music industry. No it is not, and it won’t hurt the publishing industry either.

          Where it may make the biggest impact is with other resellers, like Amazon’s Kindle app. Amazon is not a publisher, they only resell books, so they may see a chunk of their profits slowly erode away, if enough people buy books through the iOS app and directly from the website or Kindle book reader.

        3. Retail 101:

          Publishers sell their products ( newspapers, magazines, books, etc…) to all retail distributors for at least for 30% off the newsstand/end user price…( amazon, kiosk etc…).

          Now they have a cultivated fully developed NEW outlet – Apple’s App Store. It’s NEW found money and revenue.

          Why should they reap the rewards of Apple’s resource in any different measure???

        4. The publishers will take the 60% they save by not producing/distributing a paper edition, pay 30% to Apple for bringing them a new customer and still make more than they did before, w/o raising the price. The only person that gets screwed in this equation is the junk mail industry that won’t be able to buy your name and address from the publishers.

  1. “some major media companies that are wary of allowing the computing giant to come between them and their customers”
    The point is that Apple is sharing ITS customers with the publishers and deserves to earn a profit for providing the connection. The customers bought the Apple product and may choose to use the Apple product to obtain their publication in a superior format made possible by Apple’s product..

    1. It’s amazing how many times this point’s made by so many and how many different analogies are given to underscore it, yet there’s still this righteous indignation in the idot section that is thick as a brick or wants to ignore it.

  2. Hundreds of thousands of people will discover various publications via their iPads and the App Store that would never, ever have visited a publisher’s website previously. If publishers are afraid of Apple, they’re stupid. Rupert Murdoch saw the future, and it’s simple:

    Let Apple market my product for me, and I just rake in the dough!!

    These companies who complain that Apple is taking 30%, well, they can probably reduce their marketing and advertising by 50% because Apple does it for them.

    1. I would agree, plus there is very little overhead costs, printing and distribution is all gone. No need to warehouse magazines and store on shelves. All they need do is a one time scan into a digital copy. Oh wait, they already do everything in digital, so all they need to do is upload the content to a server accessible from the app. Wow that must really be expensive.

      These publishers have nothing to fear, they can spend there ad dollars getting users to visit their website and sell the subscription through there, then direct the user to the app. Whats the issue?

  3. “when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing.”

    I think this is quite a good deal for media co’s… 0% cut!

    1. It also means that if you already bought a book through amazon or whom ever, your content is still avaliable.

      But the problem is however, they cant only allow you to buy from the amazon store as to not pay the 30% mark up, and since the app store price must be on par with the amazon prices, hmm? So to make up for the difference amazin must either raise all prices 30% or take a 30% hit on app purchases? Hmm. seems no way out on this one.

  4. I do not understand the detail here. Does anyone really understand it.??
    “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.”
    So, if someone buys online at the companys web site, Apple gets nothing but if they buy thru the App, Apple gets 30 %… ???? But the price needs to be the same at both places?????

    Hmmm,
    en

    1. eldernorm…

      Say you develop a magazine, Elderweekly, and sell it on your website for $1. If I go to elderweekly, and buy, I pay a buck, you keep the whole buck.

      If I decide to use itunes, and buy within Apple’s world with one click… I pay a buck, you get 70 cents, Apple gets 30 cents.

      the plus for me, wicked easy (Hey, I’m from Boston) for me to 1Click within itunes and get your mag. If I have to remember to go to my browser, fire it up on the ipad and search for your content, chances are, I’ll get bored or tired and give up. Apple is saying, if YOU use itunes, you get Apple customers much easier, and chances are, more of them. Apple wants a cut (30cents) for the itunes software, customer ease of use, payment system, marketing ecosystem and servers.

  5. Does anybody have any figures to show what percentage of traditional publication is spent in manufacturing, distribution and retailing costs ?

    I would be very surprised if the figure is less than 30%, so Apple’s deal doesn’t seem at all unfair to me, in fact I would have thought it’s a very attractive offer.

    1. Publishing a book. This is how it works. You work for years to build a company with a reputation, then you accept a submission, promising to pay the author 5% or more or less depending on how famous she is. You commit to print, let’s say, 20,000 (it’s not going to be a big hit) which costs you $20,000 and you decide the retail price ought to be around $10. The distributor will pay you $3 for that book IF he sells any. So after nine months or so the distributor tells you he sold 1,000 at $5 (the retailer gets the other $5) and sends you $4,000. He retains a percentage against returns. You then pay the author $200.

      As you can see the publisher loses money. The distributor and the retailer do not. They get to return unsold copies for credit. The publisher depends upon occasional hits to pay for all these loss makers.

      Here comes Apple. No printing costs, no large runs, no returns, instant (nearly) payment. Our publisher sells 1,000 books and gets paid $7,000. The author gets $350.

      Publishing magazines is EVEN WORSE.

      The publishers are biting the hand that is offering to feed them.

      It was the same when CDs replaced vinyl. Production costs were halved but the publishers took the opportunity to tell the bands that costs and risks had gone up and they cut their royalties.

      I sincerely hope new publishing houses will emerge, alongside self-publishing, and these graceless, greedy luddite, dinosaurs are wiped out.

      Those of you who deludedly think Apple is doing us, the consumer, anything other than a huge favor are just plain wrong.

  6. The publishing world has seen the pot of gold at the end of the rainbow and they want it all. If they could get the content for free instead of paying writers, they would. They deserve a fair return on investment. They certainly don’t deserve it all.

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