Yesterday, Apple announced a new subscription service available to all publishers of content-based apps on the App Store, including magazines, newspapers, video, music, etc.
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.
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.
Nathan Koppel reports for The Wall Street Journal, “Apple Inc.’s new subscription service could draw antitrust scrutiny, according to law professors… ‘My inclination is to be suspect’ about Apple’s new service, said Shubha Ghosh, an antitrust professor at the University of Wisconsin Law School. Two key questions in Mr. Ghosh’s mind: Whether Apple owns enough of a dominant position in the market to keep competitors out, and whether it is exerting ‘anticompetitive pressures on price.'”
MacDailyNews Take: No, and therefore, no. And, when law professors’ “inclinations” become meaningful in a court of law, let us know.
Koppel continues, “‘Millions will be spent litigating how broad the market is,’ said Herbert Hovenkamp, an antitrust professor at the University of Iowa College of Law. Mr. Hovenkamp said digital media is the most plausible market. He said he doubted that Apple, currently, has a sufficiently dominant position in that market to warrant antitrust scrutiny. But, he said, if Apple gets to a point where it is selling 60% or more of all digital subscriptions through its App Store, ‘then you might move into territory where an antitrust challenge would seem feasible.'”
MacDailyNews Take: Then let’s revisit the issue of whether 60% of anything constitutes a “monopoly” if it happens, okay? And, by the way, using 60% share as the criteria would make Coca-Cola a “monopoly” in the carbonated cola market. Surely Pepsi would beg to differ.
Koppel continues, “Mr. Ghosh said courts in antitrust inquiries may look favorably when a company can articulate a legitimate business justification for behavior alleged to be anticompetitive. For this reason, Apple may ‘come up with a business justification’ for some of its restrictive subscription terms, he said. ‘They have invested in a platform so they need to create incentives to use the platform.'”
Read more in the full article here.
MacDailyNews Take: The sooner publishers, especially those of newspapers and magazines, realize that the old rules no longer apply, the better off they will be.
“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.” – Apple CEO Steve Jobs, February 15, 2011
Even if Apple attains a real monopoly in the field of digital magazine subscriptions (which it may do fairly quickly, since nobody else is prepping as comprehensive a solution as this), there would have to be ABUSE of such monopoly in order for an anti-trust inquiry to make sense. Such abuse would require Apple to FORCE publishers to use their own service, at disadvantageous terms, over a competitor’s digital subscription service.
In other words, something equivalent to: “If you want to pre-install Windows on your PCs, you CANNOT bundle Netscape Navigator”.
So, let’s see if this meets the test: A publisher has a magazine app on iOS. That app allows users to view issues of that magazine. The user can subscribe to the physical magazine directly from the publisher, as they used to for centuries. For physical subscribers, the magazine will pay for printing, warehousing and distribution of copies (whether by mail, or by direct delivery if it is a daily paper). Now, since the publisher has that app, they want to sell digital subscriptions. No problem; they can advertise this directly from their physical magazine, as well as on the web, other magazines, billboards, TV and any other media. They can sell those digital subscriptions through their web site, or over the phone, or by (snail)mail order. However, since these digital subscriptions leverage Apple’s entire delivery infrastructure, Apple needs to be compensated for this service. Rather than asking for a cut from EVERY digital subscription, regardless of how it was acquired, Apple is letting magazines keep ALL of their money they make on digital subscription (with ZERO overhead, since Apple is providing server storage and bandwidth for delivery). However, all they are asking is to offer that digital subscription at the same retail price inside their magazine app. Nothing prevents this magazine to advertise and sell their digital subscriptions by themselves. However, if Apple brings in that customer through an Apple device (using that magazine app), Apple will take that 30% cut.
So, the 30% cut that Apple gets ONLY from subscriptions acquired directly through the app is covering the overhead (bandwidth) for both those, as well as all the digital subscriptions that the magazine sold outside of the app, plus credit card processing, user account maintenance and data storage for those sold inside the app.
Is this really so unfair?
That monopoly abuse can also mean if the predatory practices provide barriers to entry for competition. In other words, if nobody else is able to build a competitive service because of the conditions under which the monopolist operates. For example, if Netscape cannot survive by selling their browser because Microsoft is giving away a free browser with every copy of Windows, in addition to prohibiting OEM partners from installing that competing product, as mentioned in my previous message.
There is practically no way that this requirement by Apple can be declared as monopoly abuse or predatory practice. It does NOT exclude ANY competitor. It in fact encourages publishers to develop a competing solution, since it would allow them to avoid paying Apple 30%.
Apple’s App Store is an incredibly powerful sales vehicle. Any independent app developer can attest to that. As Holy Mackerel (above) said, getting 100% (or 95%) of your retail price rather than only 70% doesn’t mean much if the volume of sales outside of App Store is dwarfed by the volume of sales in the App Store. Or, in Holly Mackerel’s example, he will make a $100 from selling his application on his own, outside of the store, but the App Store will bring in $7,000 in the same period, without him doing ANY advertising or additional work.
I’m not convinced this is good for consumers. I believe this will result in content providers raising their prices to compensate for the 30% that Apple will receive. Maybe prices won’t go up 30%, but they will go up. How does this benefit any consumer?
I think the opposite will be true. Many publications may lower their price to remain competitive and to take advantage of the increased volume of sales the App store will net them. Remember these are the same companies that are accustom to paying far more then 30% to distribute physical media. Distribution in the App store essentially cost the content creator nothing.
As for the advantage to customers, there are many. The customer can chose to not share personal data with the company just to read their publication; they can easily sign up for a subscription from within the app saving them time and confusion; if the price does get lowered as I predict it will save the customer money.
Ever bought a professional subscription to a magazine through the trades?
MacWorld for example can be had for as litte as 19-dollars per year and cheaper if you sign a multi-year contract.
That deal is not necessarily coming directly from IDG, but a third-party helping to defray the cost. Even if MacWorld’s publisher opted out of iTS, a third-party might be inclined.
FYI, pro subscriptions are offered to those with more disposable income and are apt to respond favorably to advertising spam.
Until publisher are ONLY able to sell through Apple’s store/software/hardware no one can claim anti-trust or monopoly.
Not so.
Jungle drums report: The news publishers are calling in their favors. This battle will take place in D.C. It has already begun.
Yes and if it ever goes before a judge, that judge will tell these publishers they’re idiots for wasting a judges time. Though i doubt it will ever get that far. Just because some greedy publishers are trying to do something about it, doesn’t mean anything.
Useful to me. jfgoiprjg
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