Apple's subscription plan: Time for an app work stoppage

Apple's subscription plan: Time for an app work stoppage

Summary: Apple's subscription plan had a bevy of media execs in a tizzy and many were still trying to figure out the new App Store new deal. But these media types were sure Apple's new deal wasn't good. The solution: Walk away en masse.

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Apple's subscription plan had a bevy of media execs in a tizzy and many were still trying to figure out the App Store's new deal. But these media types were sure Apple's new deal wasn't good.

The fuss was raised over the following passage in Apple's statement:

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.

In a nutshell, Apple wants a 30 percent cut of in-app purchases. If you are a publisher of movies or music this could be a big issue. First, companies like Rhapsody and Netflix pay content owners and then pay Apple another cut for the privilege of being in the App Store.

Also: Will Apple find publishing execs 'technologically innocent'?

Here's a look at some of the fallout:

At first glance, this is exactly what a lot of publishers were fearing: Apple setting itself up as a toll-taker on news orgs’ road to a new business model. (Excuse the metaphor.) For publishers who had been counting on a new rush of tablet revenue to support a lagging print model, it’s disappointing to learn that, in exchange for the convenience of a “Buy” button in their iPad app, they’ll have to give up 30 percent of the revenue it generates.

Rest assured that the consternation over Apple's new rules is just beginning. However, let's say Hulu, Netflix, the New York Times and a few others, say Sirius XM, all pull their apps over Apple's in-app move. Apple will have to listen. In tablets, this move may be risky for publishers because the iPad is the only game in town for now. But if enough big content and subscription providers pulled the plug on the App Store and backed Android, Apple's move could backfire.

It appears that Apple has all the leverage, but that's not really the case. If there's an app work stoppage, Apple's loss may be Android's gain.

Topics: Apple, Apps, Banking, Enterprise Software, Hardware, Laptops, Mobility, Security, Tablets

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187 comments
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  • RE: Apple's subscription plan: Time for an app work stoppage

    These guys change the rules of the app store more times than Bart Simpson changes his underwear. I'm surprised more developers don't already back out. From my vantage point, the Apple app store is a risky venture.

    This 30% nonsense is extorsion.
    The one and only, Cylon Centurion
    • RE: Apple's subscription plan: Time for an app work stoppage

      @Cylon Centurion 0005 <br><br>Extorsion?... Its simple business. A, COMMISION, per se... Try being in their shoes. If you owned a store front, would you let other make millions using the market you created from thin air and not ask for a cut?<br><br>If you really say no then you are just never going to run a succesful business.
      Bay Area CA Male
      • RE: Apple's subscription plan: Time for an app work stoppage

        @Bay Area CA Male

        Take off your Apple colored glasses and look at what is really going on.

        30% is a lot of money. Content providers will be loosing sums of money from iBought purchases compared to if I bought directly from them on another device.
        The one and only, Cylon Centurion
      • RE: Apple's subscription plan: Time for an app work stoppage

        @Bay Area CA Male Fanboy much?
        OK, so are Apple entitled to 30% of a transaction if I buy something through the eBay app? Or through the Amazon app for something physical?

        What about if I pay a bill through the Bank of America app? 30% handling fee on that?

        The purchases do not go through any Apple infrastructure, they go across the Internet. Perhaps I should pay Comcast, Cisco, Juniper, HP some money when I buy something on line too?

        If Microsoft was charging a percentage for buying something through IE on a Windows PC connected to the Internet you would scream bl00dy blue murder. And rightly so.

        So why do Apple get a pass? Are you an employee?
        dazzlingd
      • A dose of reality

        @Bay Area CA Male <br>"If you owned a store front, would you let other make millions using the market you created from thin air and not ask for a cut?"<br><br>Say I have a product Widget with advertising on the box for a companion product FizBox. Suppose I place the Widget product in Walmart, do you think it's fair if Walmart insist that anyone who buys a Widget from them and then decides to buy a FizBox, *must* buy the FizBox through them?<br><br>Not only that, but someone who buys a Widget can *only* buy a FizBox from Walmart?<br><br>Of course you can't enforce that in real life (RL), but you can in the digital world.
        Fred Fredrickson
      • Your analogy doesn't wash at all..

        @Fred Fredrickson.. these guys don't want to sell ANYTHING in the iTunes store they just want to advertise their wares there.. app is free so Apple gets no revenue there, they don't want to sell through Apple's in-app service so Apple gets no revenue there.. The only revenue that Apple sees right now from these reseller is a $99 dev license..

        Would Walmart tolerate someone setting up a little stand inside their store to tell people about their wares that they can purchase in their store down the road, and not pay Walmart for the privilege of doing that? Are you crazy? In your scenario Walmart is getting revenue from selling that product with the advertising on it in the first place in iTunes case they are getting nada.. is that fair?

        Rupert Murdock.. One of the cheapest money grubbing guys in publishing seems to thinks it's a good deal.. a news stand would take 50% of revenue + you'd need to pay for printing.. 30% all in sounds like a pretty good deal to me..
        doctorSpoc
      • RE: Apple's subscription plan: Time for an app work stoppage

        @Bay Area CA Male - Don't you mean TAX vice COMMISION?
        NPGMBR
      • RE: Apple's subscription plan: Time for an app work stoppage

        @doctorSpoc
        "In your scenario Walmart is getting revenue from selling that product with the advertising on it in the first place in iTunes case they are getting nada"

        No this is false, itunes is getting the fee it charges to developers. The issue here is simple: The reason this is bogus is because companies cannot create ipad apps that aren't present in the app store. If Amazon had the right to have a kindle app download from its websote than Apple forcing the app to have subscription within it and taking a cut would be moot, the developer would just keep the app on its website. Apple doesn't allow that. So Fred's analogy is true. If I own a product say Its a Walmard brand. This product can only get services from a walmart, but htose services can be created by other people. I am forced to get that service from walmart. So in the vein of Apple, the ipad can only get apps from the app store. Amazon is paying to do this and not charging for the app. Apple wants to cut into their revenue more for fees that have nothing to do with them.
        KBot
      • I want 30% of your next purchase

        even though I don't have anything to do with it except for the fact that you're wearing shoes made by my company.
        John Zern
      • Apple is only taking a cut ...

        ... of in-app subscription purchases which will be processed through Apple's iTunes sales infrastructure. This is like a department store charging a perfume manufacturer or a clothing designer to set up a sales counter in their store.<br><br>Companies are not required to offer subscriptions through the app store only, and those that sell subscriptions outside of the app don't have to pay commissions to Apple on those sales. So what's the problem?<br><br>The 30% figure is just a number. It's neither too high or too low inherently. For some, it will cut too deeply into profit margins and they will have to adapt or pull out of the app store. For others, the 70% of income that they can make will be more than they ever dreamed of, and they will do extremely well.<br><br>Of course, if too many high-profile apps leave the app store, it may cause customers to leave, too. But this is all basic supply and demand stuff. If the number really is too high, the market will correct it and it will be lowered.
        RationalGuy
      • Ridiculous

        @Bay Area CA Male

        Apple looking for any commission from in-app purchases is a joke. The app store is there to provide distribution of the applications. Once the app is on the phone, no Apple owned system provides technology to facilitate the in-app purchases and therefore Apple deserves no commission. This would be like Sprint or AT&T limiting what pizza places you can call to order pizza from and then demanding that the pizza places pay a commission on each order they take. It's a joke. If Netflix, Hulu and others are going to pay commissions to anyone, it should be to the carriers whose networks have to support the transfer of data involved in those purchases.
        intechpc (GPEN, CISM, CEH, ECSA)
      • RE: Apple's subscription plan: Time for an app work stoppage

        @Bay Area CA Male
        No, commission would be "if you'd like to use our store, our door is open to you. We charge 30% commission."

        Extortion is "If you have a store and you sell things, you HAVE to use our store or we'll pull your app. If we catch you charging more inside our store than outside our store, we'll pull your app. And we mandate 30%, not of your profit, but of your gross."

        End result is that companies like Amazon either pull their iOS apps entirely, our have to raise their prices everywhere - for everyone, not just iPad suckers - or else face losing money, because on much of their retail, profit margins aren't anywhere near 30% to begin with.

        And speaking of basic business 101 - profit margins are what they are to cover the expense of the business. If Apple mandates sales that not only swallow the entire profit but some of the expense as well, that won't lead to a profitable business.
        If you really say YES you aren't going to run a profitable business. You'll either need to charge 20%-30% more than any competition on the web who doesn't have an iPad app - and see your business suffer as a result of being noncompetitive outside the iPad bubble world - or you'll need to lose money on every sale made inside the iPad app, with no recourse outside of those two options.

        Good luck with your business success plan there, genius.
        Trump would fire you.
        geolemon
      • RE: Apple's subscription plan: Time for an app work stoppage

        @Bay Area CA Male Thing is you already have to pay a fee to get the SDK, then you have to pay a recurring membership fee to sell apps in the app store. Every update of every app has to be hand-inspected by Apple every time. And now you're not even allowed to link to web pages to sell your own product?
        Snowsong
      • RE: Apple's subscription plan: Time for an app work stoppage

        @Bay Area CA Male - The problem is that Apple forces the subscription sold through the i-app to be cheaper or at the same price as the subscriptions sold through any other channels, including the publisher's own website - where the publisher doesn't pay any commission.
        So, Apple is forcing the publishers to raise their prices in over 42% (original price = 70, raise 30), all of it going directly to Apple if the subscription is sold through the i-app.
        Joaquim Amado Lopes
      • the developers have no other choice - the only way to put an App on the iPd

        @Bay Area CA Male
        stevejg61
      • Please explain how, CC0005

        Yes, 30% is a lot of money, 70% is a lot more. Guess who's getting that 70%.
        Guess who's not having to pay for paper.
        Guess who's not having to pay for ink.
        Guess who's not having to pay for for maintenance of multi-million-dollar printing presses which cost ever more to maintain as they age.
        Guess who doesn't have to purchase printing presses to replace defunct ones over time.

        Please explain to me how these content providers will be losing (I will NOT copy your misspellings) from digital purchases when hard-copy costs so much more to produce.
        Vulpinemac
      • @intechpc: Here's where you are wrong ...

        @intechpc

        <i>Once the app is on the phone, no Apple owned system provides technology to facilitate the in-app purchases and therefore Apple deserves no commission.</i>

        All transactions for in-app subscriptions will go through the iTunes purchasing system. So, you are 100% wrong. Therefore, according your own argument, Apple does deserve a commission.
        RationalGuy
      • RE: Apple's subscription plan: Time for an app work stoppage

        @Bay Area CA Male Commission? How is this a commission when the publisher pays nothing if they bring the subscriber to the app? Try being in their shoes, if you have an excessive charge that inspires the market to create a new model that reduces your sales you are never going to run a successful business.
        Zontor_z
    • @Cylon Centurion 0005

      30% is standard in the industry for commission. It's also the standard cut for distributors. And, oh, let's see. It's also what Google charges in the Android marketplace. And what Amazon charges if you sell a book through their storefront. Because, um, it's STANDARD in the industry.
      fr_gough
      • RE: Apple's subscription plan: Time for an app work stoppage

        @frgough@... But you're not buying the subscription through Apple's storefront. You're buying it through an application purchased through the storefront. Should Apple require a 30% cut of purchases you make via an alternative browser like Skyfire that you downloaded through its app store? According to this logic the answer would be yes.
        jporter1000