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.
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.
Here's a look at some of the fallout:
- Amazon has to remove a link to its Kindle store within its iPhone app and offer in-app purchases so Apple can get its cut.
- The Wall Street Journal reports that Apple's move may mean antitrust issues.
- The Neiman Journalism Lab notes:
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.