App Store subscriptions: Apple’s on the side of the consumer yet again

ZAGGmate iPad case“Apple’s new App Store rules now mandate that users themselves must decide whether they want to give their own personal info to publishers when they subscribe,” Kontra writes for counternotions. “What would be the reaction of the publishing industry to this?”

Straight from a publisher, Forbes: “Pam Horan, publisher of the Online Publishers Association, says the trade organization’s members — a group that includes Time Inc., Hearst, Conde Nast, Bloomberg, National Geographic and, yes, Forbes — are worried the new regime doesn’t give them the flexibility they need to serve their customers.

The flexibility to serve their customers,” Kontra writes. “What does Apple do to deny publishers that ‘flexibility’ then? One click to opt in to data sharing.”

Pam Horan, again: “Anything that requires the consumer to take yet another step is always going to reduce the number of people that participate in the process. It limits the ability to gather audience insights to build the right products. With this inability to know who your consumers are, it really affects the ultimate product for the consumer.”

“Put simply, publishers don’t want readers to opt in, because they know readers will prefer to opt out. Transparency is not a friend of publishers who for decades made a mint by selling out readers to advertisers and list brokers,” Kontra writes. “Most readers may not be aware of this, but those who are don’t like it. Publishers know that and hate Apple for calling their bluff. If personal info harvesting isn’t essential for publishers’ business model and it is in the interest of readers, then why would they be against an instant referendum in the form of the opt in button?”

Kontra writes, “This, of course, isn’t about the readers. It’s not even about Apple’s App Store. It’s about the clash of two different business models. One that sells the customer to the highest bidder through a product and the other that sells a product directly to the customer.”

Much more in the full article – very highly recommendedhere.

MacDailyNews Take: Kontra nails it. Please click through and read the excellent full article. Don’t be fooled by media companies who try to say that what Apple has set up is a bad thing for consumers. As we wrote the day Apple unveiled their App Store subscription rules: “Apple’s on the side of the consumer yet again.”

[Thanks to MacDailyNews Reader “Chas” for the heads up.]

Related articles:
Google follows Apple, announces subscription plan for digital content – February 16, 2011
Apple’s subscription rules cause some to utter ‘antitrust’ – February 16, 2011
App Store subscription terms for content providers to focus on the consumer – February 15, 2011
Analyst: App Store subscriptions another plus for Apple’s ecosystem – February 15, 2011
Apple’s App Store subscription rules cause concern at media companies – February 15, 2011
Apple debuts subscription service on the App Store; Steve Jobs: ‘Brand new opportunity’ for content publishers – February 15, 2011

23 Comments

  1. If these publishers used this information responsibly and to demonstrably reduce the cost to the consumer then yes, you could view the loss of this information as a bad thing. Of course, in reality they don’t, they just sell it out to anyone who will give them enough money, they then try and charge the consumers as much as possible on top.

    1. Of course, if they used it responsibly they wouldn’t have to worry about people not opting in because people wouldn’t be so wary of giving their information out in the first place.

  2. I don’t buy it. Raising prices is not good for consumers, it is greedy on Apple’s part. Let’s take NetFlix as an example. I think that its safe to say that all of the subscribers that NetFlix has has been due to their own marketing since you are currently unable to buy subscriptions through the app. The person that only heard of NetFlix by browsing the app store is rare. Now if Apple makes NetFlix also offer their subscription through in app purchase at the same price many existing users like me will opt for this since it costs the same price and may be slightly more convenient. Now Apple gets a 30% cut of everything NetFlix makes. This will cause NetFlix to have to raise their prices to compensate. Apple wins, the consumer loses.

    So I currently pay $10 per month for NetFlix. Under Apple’s plan Apple would get $36 per year per user like me. What work has Apple actually done to deserve this? They spent some time reviewing an app and put up a place where people can download it. The majority of the work has been done by NetFlix on this and not Apple. Just because you are the hardware maker doesn’t mean you can charge a “tax” on all software placed on the hardware.

    I’ve been a life-long Apple fan ever since my first Apple 2 in the 80s. I’m sorry Apple, you are just wrong here.

    1. How is apple raising the prices?
      With netflix, you have to have the sub BEFORE you can use the app.
      Same with hulu.

      Apple is just offering subs to the magazines through apple. And blocking the use of personal data, thank you apple.

      Magazines do not make the majority of their money from subs, they make it from advertising. Look at all the “free” magazine subscriptions you can get, just give all your personal info to this third party company that will then sell that info to 1000 other companies. And your mailbox starts filling up with junk mail. But the magazine was free!!!!!!!!
      Hulu drops ads on you, but Netflix does not.
      I doubt Netflix would fall into the new rules for subs.

      1. Netflix will be required to add in-app subscriptions at the same rate as those outside (this was already announced yesterday). I believe they all have until end of June to submit modified apps with the in-app subs, before their apps are pulled from the store.

        Netflix and Hulu are a bit different examples from the rest of the publishing industry, since they provide their own delivery services (Akamai and similar), and Apple only handles customer authentication, credit card info and limited bandwidth for such transaction. While Apple would be getting 30% of monthly revenue, Netflix would still be doing the heavy lifting of delivering all the streaming video to their customers’ ISPs’ doors. Some direct negotiation between Netflix and Apple might convince Apple that it may not necessarily be all that reasonable to take 30% off the top, when the ‘publisher’ still has to do all the heavy lifting.

        With magazines, however, I can’t possibly see why not. Magazine publisher has ZERO overhead expenses per each digital subscription. Apple leverages the popularity of the iOS platform to bring in the customer, Apple stores the digital copies of magazines, Apple uses their own bandwidth to deliver that digital copy to the subscriber, Apple uses their own infrastructure to collect the payment, the publisher receives money with absolutely NO involvement.

        1. There is a real risk of missing the big point here because it is the traditional print media that are doing most of the whining. This is not about publishing. Apple is not ‘taxing’ or ‘charging’ or ‘increasing prices’. Apple is the new warehouse-retail store for this new digital age. One that is well marketed and that has millions of well-heeled customers. Apple is simply saying we provide this retail opportunity for anyone who wants it, and if you do our mark up is ~43%. No obligations, no anti-trust issues, just good old-fashioned retailing.

        2. I think Netflix will be fine. They already have an overhead on their subscriptions to pay for things like mailing millions of DvDs. Also if they end up getting a significantly large amount of new people signing up in the app, I think the new volume will more then make up for the 30%. Conversely if they don’t get a bunch of new folks from the app store then they haven’t lost anything since they must have gotten the bulk of their subscribers outside the store, it’s win win IMO.

    2. Not quite. As I said yesterday:

      Here is an example. 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?

    3. Since you are an existing customer they would be exempt from your subscription dues, however, you are correct, for any and all new subscriptions apple is taking cream off the top. IF ALL apple was doing was blocking the app from collecting data, great. But they are not. And I am sorry but i dont know about NetFlix because there is an app in the app store, I know about it independant of apple. Ill wait to see how this pans out, but if it means netflix and hulu and other start pulling there apps, Ill pull my dollars and my next purchase will be Android based.

      Now all you fan boys can beat me up, but if you have not thought through how the 30% is a catch 22 for content providers then you really dont know what you are talking about.

      1. Joe, saying you’ll abandon your investment in the iOS ecosystem because Apple is charging for access to that system is like saying the city won’t fix the sidewalk in front of my home so I’m going to shoot myself in the foot so I don’t have to walk on the damn sidewalk.

        Don’t try to talk me out of it. I have a right to shoot myself if Apple charges third parties 30% to sell their goods in Apple’s mall.

      2. My you certainly take a pessimistic view. And by using words like, “fanboy” and dismissing all other opinions other than yours, you belittle your own argument.

        “30% is a catch 22 for content providers”

        That’s not true as we haven’t seen the outcome, all we’ve heard is a reaction to an announcement and a bunch of conjecture without precedent. The 30% fee COULD be a catch-22 that could result in pricing going up or content providers pulling out, but it is not definitive. Especially when you consider that 30% is not far from the norm. In fact Amazon takes as much as 70%+ for some content.

        People also scoffed at Apple’s 30% fee for app sales, but the developers signed up and the prices remained VERY low. In fact, I would argue that the AppStore has forced the rest of the mobile app industry to LOWER prices, not raise them.

        I do agree that some resellers are going to take a hit, and may decide to pull out. But they need to ask themselves, if the exposure is worth taking that hit? While an app like Amazon’s Kindle cannot point a user to the Kindle BookStore, it could link to Amazon’s main store to purchase an actual Kindle. Would that marketing ability be worth it to them?

    4. Netflix is a bad example. First of all we don’t know if Apple is going to force “services” into offering IAP. Netflix is a streaming service. You don’t actually get content on the device, it is streamed to the device. You are not subscribing/purchasing content, but rather paying for the service of streaming.

      Second, Netflix subscriptions offer DVD rental service, by Apple’s own rules, Netflix cannot offer these types of services through IAP. IAP is designed specifically for the acquisition of IN-APP content, features or services. Having a DVD sent to your home is not in-app. Netflix would only be forced to offer its streaming-only service. All other services would still have be done through Netflix’s own sales system, i.e. website and they could in fact direct users to that website without violating any rules.

      Third, Apple didn’t just put up a place to store and distribute the app, they built the entire platform from which all that can happen. A platform that has a world-wide user base that is the envy of the entire industry, many industries. Users of iOS devices are willing to spend money; orders of magnitude more money than all other mobile platforms combined.

      It will not force prices to go up, that’s ridiculous to think so. The more subscriptions you have, the cheaper the overhead, the less you need to make on each subscription.

  3. The best thing Kontra pointed out was that publishers have always made the BIG bucks on advertising and customer data, NOT on selling content, i.e. subscriptions.

    Hmm, kinda like, you know, let’s see, Google? They will make a great couple.

  4. @phxdoc
    your argument is a little shortsighted. Apple doesn’t require that you purchase a sub from them only that consumers are given the opportunity to purchase within the app. I signed up with netflix online so apple recieves nothing from my sub. Apple is perfectly justified to require an in app choice to subscribe and charge co.’s a fee for that service. Companies can either offer it and recieve access to all of Apple’s 120 million users and use Apple’s pay system and app store or they can choose not to. I would choose to use Apple if I were a publisher. Consumers win.

    1. The problem here is that when it comes time to renew your membership even though you originally got yours online, you would be likely to renew through the app. Now what has Apple done to now deserve 30% of all ongoing revenue?

      “Companies can either offer it and recieve access to all of Apple’s 120 million users and use Apple’s pay system and app store or they can choose not to.”

      This by definition is a tax. What if microsoft said that the only way that users can load 3rd party software onto PCs was to go through the microsoft store where they had to approve all the apps and then microsoft would get 30% of all software sales.

      1. It’s not a tax, it’s a commission and compensation for using Apples infrastructure. Apple is actually providing a service to these companies and should be payed for it. As for being an existing customer, Apple said they get no cut if you’re an existing customer. Most subscriptions renew automatically. If your subscription is not the kind that auto renews then it’s not that hard for the company to show Apple you are an existing customer when you do renew. Therefore no commission goes to Apple for bringing you to the company.

  5. Apple want to give power back to the people and big companies doesn’t want to allow that.
    When did we get fair pricing for music? when the iTunes music store was born.
    When did we have better data and calling plans? when the iphone was born.
    When did we have better and inexpensive applications? when the app store was born.
    So to all greedy companies, stop complaining, even you work for work better for the people that pays your salary or go FYS.

  6. These whiners don’t want to pay Apple for bringing them many more new customers, but yet want to profit by charging other companies and advertisers for passing on the customer data and eyes? Who is guilty of being greedy? Netflix got me as a new customer when I bought an AppleTV. Netflix is utilizing Apple’s platform to suck dollars from me.

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