As previously hinted, Apple is rolling out a new in-app subscription system and enforcing a new requirement that the option to purchase a subscription in-app be included. While it does not negate the option to purchase a subscription outside the app, the policy does prohibit links within the app to do so. Pretty strict, but the ways around it are in Apple’s own policies.
“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,” said Steve Jobs, Apple’s CEO. “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.”
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.
So the questions I had about revenue split and pricing are answered, and pushback from publishers is to be expected. One way they can push back is by exploiting a flaw in Apple’s developer agreement that I identified earlier.
The other big problem is the one I mentioned earlier: in-app purchases are not allowed for goods that are to be used outside the app. That means an eBook bought through an in-app purchase can only be read in that app, disallowing access to other devices. If Apple wants to seriously enforce their new in-app purchase policy, then this restriction must be lifted for eBooks and periodicals.
See, the problem for Apple, per their rules, is that in-app purchases can only apply to digital goods used within the app. So if I purchase an subscription to The Daily (not that I would), I can only read it in my iPad. Not a problem for that magazine since it’s iPad-only. But if it were applied to Zinio, then content purchased in-app should not be available on PC or other eReader. In other words, buy a subscription in-app on your iPad and you can only read that content on your iPad (or other iDevice).
Why is that Apple’s problem? Because publishers and distributors can and should spell out that restriction before a purchase and specify that in-app subscriptions are not cross-platform. Granted, even with such a warning a good number of folks will choose iDevice-only subscriptions, particularly those that don’t use or plan to use other devices. However, even if you don’t have multiple devices, most people will seek out the more flexible option if it’s the same price. For folks who want paper + digital, in-app subscriptions are a complete no-go. I doubt anyone would sign up for an iOS-only subscription to Netflix if a subscription that also works on their Internet-connected TV is the same price.
Another flaw in Apple’s plan is that they prohibit links to make a purchase outside the app, but they don’t and can’t prohibit ads that send you outside the app to make purchases. Sure, an ad for a subscription to a magazine running under a description of that magazine violates the spirit of the no-link policy, but it can’t be blocked without blocking ads or targeted advertising from subscription-based apps.
Overall, Apple’s in-app subscriptions system is a good idea that is poorly executed and not that difficult to subvert. I would expect refinements as major subscription-based companies like Pandora and Netflix have their say on the matter and others enact these and other ways to beat the system.
Update: Idea #3: offer iOS-only subscriptions as a separate product from cross-platform subscriptions. Again, in-app purchases only apply to goods/services to be used in-app. Goods/services used outside the app, such as cross-platform digital goods/services, cannot be purchased in-app. Thus, iOS-only and cross-platform should be two separate products, which means they can have two different prices. As long as the price for the iOS-only subscription is the same whether purchased in-app or out, it does not break the rules.
Idea #3.1: offer iOS-only subscription for a nominal fee with purchase of cross-platform or non-digital subscription. Price for the iOS-only subscription is the same whether purchased in-app or out of app (or just make it in-app only), but it requires an existing subscription to the other, separate service to activate it.