How Apple will crush its competition with iTunes Online

ZAGG Sport Leather for iPhone 4“Rhapsody. Napster. MOG. Rdio,” Ed Bott reports for CNET. “What do these four music subscription services have in common? Each company survives on monthly subscription revenues. Each one has an iPhone/iPad app that is prominently featured on its home page. Each one offers a free trial that they hope you’ll love and that you’ll convert to a paid subscription when the trial runs out.”

“And under Apple’s new subscription rules, each one will soon be forced to start paying 30% of its revenue for each of those easy, one-click subscriptions it gets through an app on an Apple device… Yes, Apple says it won’t take a cut if you place your order elsewhere. But they’ve made it inevitable that most of those subscriptions will come from the app,” Bott reports. “In short, each of those four services has just been torpedoed by Apple. Each one is taking on water. The question now is deciding in what order they go under.”

Bott reports, “Profit margins in the music business are awful. Even if one of these companies can figure out a way to make a decent profit after paying its 30% Apple tax, they’ll never survive the second direct hit they will take when Apple brings out its own service, integrated with iTunes.”

Read more in the full article here.

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

19 Comments

  1. This isn’t a 30% Apple Tax. This is Apple ending a 30% gift to these subscription music companies. These companies should be grateful for the gifts Apple has given them in the past and now they are on their own. No more subsidies from Apple. They either make it or go under. Capitalism at its finest! Now if our own Government would just follow Apple’s example!

    1. What a thought! You need to propose this to congress. Our government gets a straight 30% cut of everyone’s paycheck, every corporation’s profit, etc. You’ve just solved the deficit problem in one stroke!

  2. Typical cnet hit piece. Frankly, I haven’t anything about any of those companies in a good long while. Perhaps they need Apple to advertise their existence, and that might just be worth the 30%.

  3. Can someone explain how it’s even possible to “place your order elsewhere”? Like if you go to the publisher/developer’s website and pay for a “subscription code” and then go back to the app and type in the code? Apple will allow that?

  4. Is it just me or have others noticed that Ed Bott’s Microsoft Report is morphing into Ed Bott’s Apple Report?

    I never thought I’d see the day when Microsoft fanboys like Bott would be writing articles complimenting or at least not dicing Apple.

  5. Typical Apple.
    Not giving a crap about their customers.

    Those services should act like the other media and boycott apple.

    This is why Adroid devices will easily win they only take 10% thats a much more reasonable price for someone to pay.

    1. Apple’s iOS devices are worth the 30% because iOS device users buy things.

      Android’s device users are not even worth 10% because Android device users don’t buy things other than Android phones.

  6. I know we all love Apple, but the crushing of the competition is nothing to celebrate! Two facts: Choice is good and Apple loves us most when we are spending money. The subscription cut needs to make sense based on the business being charged. We can’t buy music directly from Amazon from iOS devices, rightfully so, Apple earned that territory. Should their integrated iTunes product crush the competition, good for Apple. If they simply squeeze out other options with fees, may be seen as a smart business move in the short run but consumers suffer and an antitrust suit is sure to follow.

    TechCrunch has an opinion piece on the matter that’s also running on CNN.com currently:
    http://www.cnn.com/2011/OPINION/02/17/siegler.apple.subscription/index.html?hpt=C2

  7. Rhapsody, et al are welcome to design their own mobile device, mobile OS, desktop/laptop client app, have someone manufacture it, distribute it, put up a server farm to feed it and go it alone…
    If you want to play in the walled garden you get to play by the gardener’s rules, otherwise, build your own garden and maintain it on your own dime.

  8. It is only 30% if Apple brings a new customer to the subscription via the app. If you are an existing customer already subscribing on e.g. Rdio, Apple gets nothing when you resubscribe, right?

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