Apple’s New App Store Subscription Rules Are Not Horrible

Apple has served notice on publishers who use the iOS App Store to distribute content. You cannot sell subscriptions unless there is a link from within the app for customers to quickly and easily subscribe. Warner Crocker and Sumocat already weighed in on this issue.

Here’s my question about the whole Apple model. What’s wrong with that? Publishers may not like giving Apple 30% and losing subscriber data. The tech media has been crying fowl as well, saying that 30% is an unfair rate. Google answered saying, “We will only take 10%. Come to Android where the water is fine!”

But if you look at it more carefully, 30% is not that unfair. In fact it is a bargain. There are number of reasons why.

Wired ipad app

Publishers Will Sell More Subscriptions

The easier it is for consumers to buy a subscription to a magazine, the more likely they are to buy. I know it is not that hard to click a link that opens Safari on the iPad where I can enter my credit card data to get a subscription to PC Magazine. But if all one has to do is hit a link, enter a password and tap OK, then even more people are likely to do that. I cannot support this with figures, but it just makes sense. The easier it is to buy a subscription, the more likely people are to buy it. This makes it easier than buying a magazine subscription the old fashioned way. Remember filling out those annoying little cards that used to litter the floors of the magazine rack area of the book store?

Subscription card2

The math is not that hard. If I sell 4 subscriptions for 2.50/month, then I’ve made $7 after Apple takes its cut. I only need to sell two more subscriptions to make up the $3 loss. Two more equals $5 but Apple takes another $1.50 (30%) and I get $3.50. I’m actually making $.50 more.

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  • THE OLD WAY: 4 X $2.50 = $10.00
  • APPLE’S WAY: (6 X $2.50) X.70 = $10.50

There is no guarantee that a publisher will get 2 more subscriptions for every 4. That’s a 50% increase. But when people see what digital magazines can become, I think they will get two kinds of subscribers. First, they will get their regular subscribers who loved the print magazine and just want to read it digitally. Second, they will get new readers who didn’t know about the magazine or weren’t likely to subscribe by filling out cards or a web site form. Finding the magazine digitally was the only way these people would have ever become subscribers.

Publishers will make more money the easier it is to buy subscriptions. But they don’t make all or even most of their money from subscriptions. They get a lot of their money from in publication ads and from selling the mailing lists.

Avatar creative movie posters

Publishers Will Make More Money From Ads Eventually

Right now, if I want to put an ad for my killer summer block buster in Sports Illustrated, I have to come up with a two dimensional poster-like ad. I pay for it. SI runs it.

The iPad is a different animal than a print magazine. The ad in the digital version of SI could have rich multimedia content that the reader is more likely to enjoy. Instead of just the movie poster style ad, I can include a trailer. When it comes out on DVD, I can include a link to the iTunes Movie store. I can include links to the movie web page where fans can interact. I can include a link to the movie video game in the app store. There are probably dozens of other creative things I can do to pad my revenue via iPad mag ads. That ad in SI becomes far more valuable to me. As more and more people buy digital magazines, publishers can charge more and more money for the ads.

Publishers Will Be Able Collect More Valuable Reader Data

Selling the subscriber list is a much bigger cut of the pie than we think it is. I’m not just talking about selling it to people who want to market stuff. Subscribe to a a print magazine and watch the junk mail flow more readily. Publishers do that a lot.

What we’re primarily talking about here is being able to sell to advertisers based on information they collect about us. The more publishers know about their customers, the more they can charge for ads, which are then more targeted. If the publisher knows that they have a lot of men reading their magazine, they will create male-focused advertising and it will be more effective.

One of the issues publishers have is that Apple won’t be giving over the subscriber information. The publishers say that is not good.

If publishers get creative, they can harvest even more useful data about us from within their magazine’s app. Based on what links we are tapping, they know more accurately what we are interested in viewing. This is far more valuable than stuff like age, gender, geographical location, and annual income. Those things are useful. But isn’t it more useful to know that I like gummy bears or tennis shoes because I tapped on links for those things?

Creative publishers can gather this info without us even knowing that we are revealing this kind of stuff about ourselves. We just think we are reading stories about shoes or checking out where to get cheaper candy. Based on what articles we read, what ads we select, and what info we request, they know what we like and can focus ads. The ads will be more effective because it is for stuff the reader is already interested in seeing.

Publishers Will Please More Readers

It is more enjoyable to get the content we want to view or consume the way we want it. For early adopters of the digital publishing revolution, we will feel more warm fuzzies for a company who tries to give us what we want how we want it rather than treat us like the enemy. The music industry missed out on this. The publishing industry is going down the same road. If they learn from the RIAA that it is a mistake to treat customers rudely, they will make us happier and we will be more likely to buy their content rather than steal it.

Torrent sites will have pirated copies of anything anyone puts out there in digital form. But if it is really easy to buy at a very reasonable price, we are not going to go to all the trouble of finding the content in obscure locations. After all we don’t want to get viruses or malware at these places.

Please publishers, make reading your content easy and reasonably priced! I will buy a lot of it! Make it hard and ridiculously priced and I won’t bother. Right now, the best way to do that for iPad owners – all 15+ Million of us – is making content available in the iOS App Store even if Apple’s rules are a little hard to swallow at first.

  

Comments

  1. Core says

    Your comments are only related to original content creators, which your argument is correct. The issue is for the majority of companies that are impacted by this are the aggregators of content, that typically only make 30% for their service. Amazon Kindle, SiriusXM, Napster, Zinio, NetFlix, Pandora, Press Reader, and Comixology are just a few of the companies that make a small margin for bringing content from the creators to the end user. This is where the issue is, as the current ruling from Apple is about removing those players and inserting Apple as the middle person, which Apple has not been able to do directly.

    If apps, such as Amazon’s Kindle, is viewed as Software as a Service, then there wouldn’t be an issue, but since Apple denied Sony’s Reader application because it violated the rules, Apple doesn’t consider Sony’s Reader, and therefor Amazon’s Kindle, a Software as a Service, when in fact it is. Amazon and Sony don’t own the content, they provide software as a service to allow people to read other original content provider’s work.

    Please do us a favor and make your article a completely informed journalistic piece instead of taking one aspect and coming to a conclusion that the new rules aren’t horrible. Your math only works if the original content creator is selling their work and their cost doesn’t increase by each user. Most services, such as SiriusXM, has to pay a flat royalty fee per subscription.

    THE OLD WAY: 4 x $2.5 = $10 GROSS – 70% of $2.50 per user = $7 NET
    APPLE’S WAY: (6 X $2.50) X.70 = $10.50 GROSS – 70% of $2.50 per user ($10.5) = $ZERO NET

    Apple is trying to get rid of the middle distributors because Apple couldn’t come to terms with the original content creators, which is the issue.

  2. Terrence C. Cort says

    The problem is not with the 30% apple takes. The problem is with the stipulation that content providers MUST use the apple store subscription model (and here is the key) and MUST use a subscription price equal or less to their regular subscription. They are forcing content providers to give them 30% of the fee without allowing them to adjust the price.

    • Anonymous says

      They can adjust the price, but it’s globally, not just to those using Apple devices. That means everyone, whether they use an iDevice or not has to pay the Apple tax. Maybe Apple justifies taking 30% from Amazon by forcing Amazon to raise all its pricing to everyone. Then, perhaps, Amazon continues to make a profit on those items. And consumers get to pay 30% – across the board for everything – so Apple gets theirs.

      Absolutely no upside to all consumers. Only those using iDevices. (Of which I am one – for now. If Amazon leaves the platform, then so will I.)

  3. Guest says

    The other problem with this model is that it gives Apple control over what you can subscribe to. I have no problem with Apple selling devices and having the app store model. I have a real problem with Apple deciding the only way I can load apps, and now subscriptions, is through Apple approved content in the app store.

  4. Allen Cross says

    You know, I’m beginning to come ’round to the author’s way of thinking. It’s all about making business work, right? So, in that sense the Gambino ‘family’ was being perfectly reasonable for adding their Mafia tax to poorly-organized enterprises like freight hauling, cement-pouring, plate glass installation, commercial laundries, etc. After all, Mr. Gotti et al also helped them in critical areas; they provided aggressive cross-promotion, kept an eye out for union problems, lined up a parade of new customers, and strongly discouraged outside competitors from moving in…all by use of bribes, threats or even deadly force, if it came to that. Such a deal! In retrospect, the mob sounds like a business partner to die for. ;-)

    So, beyond driving many of those businesses into receivership and forcing the end-users to pay higher prices, where’s the harm? I mean, forgetting for a moment the occasional murder…

  5. TheEponymousBob says

    Content providers who have a 30% or greater margin and/or sell ad-containing content might be able to hope that more subscriptions equals more profit, fine. But what of companies such as Spotify, who sell ad-free music streaming, and for whom Apple’s 30% cut from their existing subscription revenue would translate into a heavy net _loss_. What can they do? Hike the IAP-only price? Not allowed. Hike their prices to _all_ members, including those who don’t own an iDevice? That’ll go down well. Or pull out of iOS, since without Apple users taking cash out their pockets every month, they earn more?

    There’s no point in Apple’s prestiguous user-base if it turns out to be nothing but a poison Apple.

    • Colin says

      If this really starts to affect the market, I’m pretty sure Apple will change their tune, or at the very least properly refine what these new rules mean and who it affects. After all, at the end of the day Apple is a company interested in long term strategies… Remember when all iPhone Apps were going to be created using webkit? :)

      • TheEponymousBob says

        Aye; I am generally working on the assumption that something will be worked out. In fact I wonder whether we’ll hear something in the next day or two; it would surprise me if Apple let something as critical as the iPad relaunch be overshadowed by content worries. But it alarms me to see people posting opinion pieces defending the model as it was announced.

        Here, it seems pretty clear that the author is thinking only of news/magazine content, and even then, on single-platform sales, where 1) the publisher can simply set a price to take Apple’s cut into account 2) the margins on in-house owned material are high enough, and 3) they can take advantage of the format’s scope for advertising.

        What I dislike most about the rules as they have thus far been explained is that it is the buy-once-use-anywhere products that take a beating, since they would struggle to adjust prices within the rules without alienating their non-Apple users. Buy-once-use-anywhere is a great model, and it seems crazy to implement a system that penalises it over single-platform products.

        • Anonymous says

          The average Joe knows nothing of this. Don’t count on any free market solutions kicking in. Perhaps, if one-by-one the services (apps) people like stop working because that company either pulled out if the iOS exosphere or completely went belly up, then the average Joe MIGHT take note.

  6. Dave says

    Usually I find GBM articles to be very well informed, definitely disappointed by the lack of insight on this one. If 30% was such a bargain for easier subscriptions, they wouldn’t have to make it mandatory to have this as the only subscription method.

    • Anonymous says

      Not just lack of insight but lack of depth, in understanding that this is hardly about magazine or movie type subscriptions alone.

      GBM is – or should (and has been) – better than this.

  7. Pierce Wetter says

    The issue isn’t subscriptions. The issue is that this applies to everything, including the Kindle App.

    Apple is mandating that Amazon must remove the link to Amazons own web store, and then additionally, they MUST add in app purchase for any Kindle book, after which Apple will take 30% off the top.

    Since Amazon only makes 30% on Kindle books, they’ve basically made the Kindle app a no go.

    So…if you have a player for purchasable content, purchases from iOS must go though Apple.

    I don’t know what they’re thinking. They really Fubared this one.

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