Apple Rolls Out Long-Awaited/Feared Subscription Plan

February 15, 2011 at 6:01 am PT

Apple has finally announced its subscription plan for its apps sold through its iTunes store: As previous reports indicated, it both allows app developers to set up recurring payment plans for iPad/iPhone/iPod apps, and mandates that developers who want to sell subscriptions use iTunes in addition to their own platform.

Here’s Steve Jobs, via press release: “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.”

That requirement may not matter much to subscribers, but it will to developers, who will have to hand over 30 percent of their revenue for all subscriptions sold through the store.

Some content companies I’ve talked to have held out hope that Apple’s subscription requirements would apply only to newspapers and magazines. But Apple’s language seems to indicate that this will apply to all subscription apps–”magazines, newspapers, video, music, etc.–which would include video services like Netflix and Hulu Plus, and music offerings like Rhapsody and Spotify.

Apple’s plan will have significant ripple effects, but one of them won’t be a flood of digital magazine offers from big publishers like Time Warner’s Time Inc., which has been quite clear that it’s not happy with Apple’s terms, and will work with other platforms like Google’s Android instead.

Tagged with: advertising, Android, Apple, blogs, digital, Google, Hulu, Hulu Plus, Internet, MediaMemo, Netflix, Peter Kafka, Rhapsody, software, Steve Jobs, subscriptions, television, video

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http://whydoeseverythingsuck.com Hank Williams

I wonder what this means for software services. If I operate a web service for which there is a monthly fee, if I have an iphone app for that service, does apple now get a 30% cut? If so I better fire our iPhone developers quick.
Anonymous

publishers and developers can be mad at apple’s 30 percent take and decide to go with other platforms but are the users going to follow. can Time, Inc ignore 160 million and counting devices for long? the user has the choice here.
$350AShareMakesMeGrin>8-D

Yeah, developers, good luck with your switch to Android. You’ll come crawling back when you make even less money than you’ve been getting now.
Anonymous

It would not apply to Netflix because they don’t sell the online streaming, they give you that as a bonus after you sign up for DVD delivery.
Anonymous

I seriously doubt it (or that you have any iPhone developers working for your fantasy business.)
http://www.twitter.com/rurikbradbury Rurik Bradbury

They do sell online streaming (with no DVDs) – it is $7.99 per month.
http://www.twitter.com/rurikbradbury Rurik Bradbury

Very shortsighted move by Apple. Publishers could find overt and covert ways to offer a 30% discount for subscribers via Android etc. And if Apple retaliates and blocks them from the store, it will have an anti-trust issue.
Anonymous

Go ahead, Time! I won’t miss anything!
Anonymous

Go ahead, Time! I won’t miss you.
http://pulse.yahoo.com/_FPD7LAN7DVYVJPIIIVIY33DCIY Kevin

You can have outside app subscriptions and not pay Apple.

“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.”
Anonymous

That sounds reasonable. Existing subscribers can be grandfathered in at no cost to the publisher…
Anonymous

I understand the value to the consumer of having a clean in-app subscription service. However, customers won’t be served if this move pushes valuable content out of the App Store. I am especially concerned about the impact on Kindle users like myself. Is Amazon going to give up basically all profit on books sold on iDevices?
Anonymous

Hotels learned to live with third party channels like expedia and priceline taking up to a 30% cut of the revenue stream while offering the same low price guarantee.

They did it because these channels dominated the on line space with advertising. It’s a bit of a rip off but they can attempt to market direct to the customer via e-mail later.

Deal with devil some may say.
http://pulse.yahoo.com/_T56NASKUIKQ3AFY5SBSKMVTJ3E Pj Holly

Yeah, actually they can ignore them. Because while there may be 160 million of them, Android is THE FASTEST GROWING MOBILE MARKET ON THE PLANET…
http://pulse.yahoo.com/_T56NASKUIKQ3AFY5SBSKMVTJ3E Pj Holly

How about you become a developer first and the have an opinion? Apples model is the same model that has killed many good things in the past- forcing people to pay fees to develop / sell their products… I’d like to hear what you have to say in 2 years when almost everyone is using an Android device, and laughing at Apple users (as we have forever)… iTunes – I mean seriously? Might rival Windows for the king of Bloat.
Anonymous

I am not interested in the prospect of managing dozens (or more) of seperate acounts with differeing login, usernames, passwords, unsolicited emails, different levels (standards) of customer support etc for my digital lifestyle.

I have a 18 year history of dealing with Apple as a result of which I trust them on all the above. I would be happy to purchase printed media content via that route. I am not the slightest bit interested in Adroid at any price. Their business model is collecting as much information about me as possible and then selling it to the highest bidder.

If it ain’t in iTunes I won’t ne having it.
demodave

Let’s see how that works out for you now that Verizon customers *can* choose the iPhone. Oh, and by the way, the planet does include markets like China, which largely runs on CDMA. The iPhone just pened up a huge new audience. Many may wait until the iPhone 5 comes out, *but* the iPhone 4 will then become the “cheap” genration of iPhone, surely to compete very strongly with Android phones, and, yes, available in both CDMA and GSM (though probably not in white!).

160 million (and growing) customers offered with no advertising budget by Apple, through the iTunes Store, may be very well worthwhile to publishers.
Anonymous

I am not interested in the prospect of managing dozens (or more) of seperate acounts with differeing login, usernames, passwords, unsolicited emails, different levels (standards) of customer support etc for my digital lifestyle.

I have a 18 year history of dealing with Apple as a result of which I trust them on all the above. I would be happy to purchase printed media content via that route. I am not the slightest bit interested in Adroid at any price. Their business model is collecting as much information about me as possible and then selling it to the highest bidder.

If it ain’t in iTunes I won’t ne having it.
Anonymous

you are missing the point. android is growing and so is the iOS. can developers and publishers ignore apple? look at video on the web. more and more sits are adopting other technologies to display video.
Anonymous

Really? Does anyone actually buy that? I mean, if that’s true, then it’s only a buck more a month to have the vastly larger DVD library sent to you one at at time, WHILE you also get the ‘free’ streaming. But a buck is a buck, I’d be interested to know how many would sign up for that.
http://www.twitter.com/rurikbradbury Rurik Bradbury

I think they have had good take-up. I have no use for DVDs. I never used the DVD service before I downgraded to streaming-only.
Anonymous

No, because it would not force them to pay the 30% to Apple, unless the NEW subscriber signs up that way. See the difference? New subscribers are always a good thing. Please be realistic, we aren’t all hoping for a utopian Roid-verse and hating on the iPhone.
http://www.facebook.com/benvear Benjamin Vear

New subscribers aren’t a good thing if your profit margin was 15%, and apple is now taking 30%; new subscribers means losses, in that model. The idea of this makes me chafe initially, and there may be anti-trust issues here, but I’ll take the wait and see approach.
Anonymous

Does this address the issue of paying once and getting unlimited updates for apps? While I was at Macworld, I talked to several developers who mentioned that if Apple didn’t change the way developers can recoup money for updating apps, then they wouldn’t update them anymore.
http://www.thegamecartel.com/ The Geek

Sounds like Apple’s reality distortion field is back up. How do they think they are going to keep developers on the Apple i platform if they announce policies such as this. Sure, if the iPad and iPhone were the only devices on the market this makes sense. But Android is a huge competitor, and by most metrics, has surpassed Apple’s iPhone for market share, and will likely surpass the iPad for tablets within a year or two. Now is NOT the time to be pushing developers away! Apple is clearly shooting themselves in the iFoot here.

And where the heck did this “Android users don’t pay for anything” idea get started? Apple propaganda probably. I’m an avid Android user and I DO PAY FOR APPS! In fact I PREFER TO PAY FOR APPS, as they give me a superior product without ads, and I want to support good developers. I would GLADLY BUY ANGRY BIRDS if they had a paid ad-free version! With Android’s recent in-app purchase framework, you can have a free app, and then upgrade in-app. You can make money on Android just as easily as you can on Apple products.

Android may not be perfect by any means, but I sure am glad that Apple has serious competition. This in theory should keep them from doing really stupid moves, and force them to keep innovating.
http://www.twitter.com/rurikbradbury Rurik Bradbury

I’m an iPhone, iPad and MacBook Air user… But I don’t like Apple’s approach to content. It is dated and clunky. Music, movies etc should be cloud subscriptions. And in the cloud model, a 30% cut in perpetuity is an absurd fee to get a new customer.

For apps, 30% is fair (note: a one time fee as compensation for store management + some promotion). But this one size fee does not fit subscriptions. In this instance, it is reasonable for publishers to cry foul.
http://mediamemo.allthingsd.com/ PKafka

30% of new subs are online-only, per company’s last earnings call.
Anonymous

As a developer, in the industry for over a quarter century, I can tell you that you are living in a fantasy world.
First Apple “forcing people to pay fees to develop” — you must be referring to the $100 annual fee to submit your apps for App store approval (by the way Google has one too — for the Android Marketplace which is $25). So according to you the difference between good and evil is $75? Let me just say than anyone who can’t afford $75 is NOT a professional developer.

But back to the publishers: iOS is where the money is. Android users expect to get things for free. If Time hasn’t figured that out yet, they certainly will.
Anonymous

Actually they don’t have to pay Apple for new subscribers either — anyone who they sign up outside the iPad in the future they keep 100% — they only need to pay 30% for new subscribers that Apple signs for them.

You can still argue it is unfair, but considering all the essentially free magazine subscriptions being given away in hope of renewals the following year, 30% for new on iPad subscriptions is hardly a big burden as compared to their existing business model.
Anonymous

Basically. The only reason e-books are $10 is because Amazon/B&N worked hard for that price and got a slim profit margin, making more bank on Kindle/Nook sales. If there is an in app button to buy books, most users will use that. Diminishing an already thin margin, minus the device sales (for iPad/iPhone users), equals screwage for the booksellers. Maybe there’s some clever way they can avoid this – I’m curious to know.
http://www.fatmixx.com sujal

Those free subscriptions usually turn into renewals. Magazine companies actually measure years to full price renewals, and graduate you up to them. This 30% is in perpetuity (for all renewals), so a magazine is never going to get to a full price renewal.

The other way magazines make money is via customer data. Apple is holding back on that stuff, too, so the magazines are getting hit on two fronts of their business model.

You could justifiably be OK with this as a consumer, but it helps to understand why there’s so much consternation from the magazine side.

30% is a big deal, and doesn’t even measure the ancillary damage to their other revenue source.

I don’t have a strong opinion here, but I don’t know what the net benefit is for me, as a consumer if it threatens to pull apps I use and enjoy.
http://www.facebook.com/BryceBridges Bryce Bridges

the traditional retail arrangement for publishing is 40% publisher and 60% distributor. But that involves a lot of middle man costs. I’m sure that org’s like Time have owned that portion of their biz for a long time but for small publishers it has been pay it or else. It’s a tough biz for sure. I don’t know if Apple deserves 30% but they do swing a big stick at this point in the developing world of subscription dig publishing.
http://pulse.yahoo.com/_ROSNCEUH6GSBXAWCKQZK2XQAFY Wikileaks is Democracy

A hidden standard in publishing is to opt out of ads and solicitations in order to for them to sneak unwanted stuff into your life. Apple offers an op in which they hate. This is the crux of their whining.
http://twitter.com/tgikcg tgikcg

Often times I don’t understand tech controversy. It’s really simple. If Time sees it as worthwhile they will simply pass the 30% on to consumers. So the 9.99 subscription will go to 12.99. If not all at once then in staged “inflationary” hikes.
I for one would pay simply because I hate having paper magazines pile up around my house
http://www.twitter.com/rurikbradbury Rurik Bradbury

Dumping paper is a great thing, and Apple should get a reward for enabling it (it does, in its iPad hardware profits). Time should compete based on its content, and charge as much as the market will bear. Apple is not currently in a ‘market’ situation though, but an 84% monopoly of tablets. In a year, when Android has 50%, such a move by Apple would not fly. Until then, it is iWay or the highway.
Anonymous

What am I missing?
If a publisher sells their subscription for $1 on both the App Store and the Android Market, they will make $0.7 and $1, respectively, for each unit sold, x.
Why give up 0.7x in revenue?
Anonymous

where is the uproar when a magazine stand takes it’s cut?

it is just amazing that people aren’t up in arms that a magazine retail store is taking it’s cut, or the guy with a push cart selling papers on the street takes his cut…

are people really that naive? let’s get a life out there….

these newspapers want to charge the same price, even though they have no printing costs, WHICH IS A HUGE SAVINGS…..

let the person hawking your magazine or newspaper take their cut… geesh…

what’s next? a lynch mob for the paper boy?
http://mediamemo.allthingsd.com/ PKafka

Sure. What else do you want to know?
Anonymous

the difference between an Android developer and an iOS developer…

iOS developer makes 10 x more money than Android developer for the same type of app, AND MORE…

iOS developers have half of their marketing done for free by even having an Apple App store and iTunes app for going on 5 years before an Android Developer even had an option. Along with all payments taken care of for you as an iOS developer, including sales taxes….

an iOS developer gets customers because they trust the Apple App Store, an Android Developer has to deal with customers who have had their data stolen by other apps looking exactly like the apps that Android Developers are trying to sell… and Android customers that assume it is about to happen to them. (and the main reason that 66% of Android apps are free, because people are so gun shy they don’t want to even download them when they are free)… let alone pay for them….

of the 350,000 iOS apps, only about 33% are free, WHY? BECAUSE THEY DON’T HAVE TO BE TO be successful… and by the way, you do get what you pay for when it comes to apps in very many situations…. (and why there are 3 times as many apps for iOS than Android)….

by the way Apple added 50,000 (or fully half of all Android apps) in just a few months, and this rate is INCREASING….

an iOS developer knows that his app will work on the two devices that are running 350,000 apps, because it is easy to test for the two devices…. an Android developer has no way of testing all 200 Android devices without having to purchase 200 Android devices and adding about 12 purchases of new devices a month…. such is the horrific fragmentation of the Manufacturers, the screen sizes, keyboard layouts, and processors used, let alone the 4 MAJOR versions of the ANdroid OS, NOT including two new ones that you have to test for that Google just announced…, along with dozens of minor versions that manufactures plug on top of them….

but other than that, hey go for it if you want to be an Android developer…. someone’s got to be poor, might as well be you than us.
Anonymous

“Android” (as if it was a single entity) is the fastest growing “FREE” markets, and that is plural for a reason..

you can not even give Android’s away for free in some cases… they are so out dated by the time they are one month old, companies literally have to give them away in two for one sales and 1 cent sales….

most of the unit sales of Android are an unknown chinese manufacture making such low end phones that the memory and processor speed will not play most all Android apps….

this is the market that publishers (and App developers for that matter) do avoid… and with extreme prejudice….

at least Developers that know what they are doing anyway…

and as an added bonus to not have to join that crowd, you don’t have to test for 200 different low end pieces of kludge hand sets….
Anonymous

———-
Android is a huge competitor, and by most metrics, has surpassed Apple’s iPhone for market share
————–

which “Android” are you talking about? and what market share?

if you want to see who has got what “real” market share, (the kind that involves money) simply look at the stock market, it has a way of showing you who has the most “market share”… in where it counts… MONEY…..

it’s like saying hey las vegas has more “weddings” with the “Android” crowd… uhh have at that market share, if you can access it….

meanwhile the rest of us who know what “market share” is for, think “money” can really see what is going on.

it is like (if you are a photographer) that you will make more money in a chapel in Vegas, because it has “more market share”

i guess we have to have poor and stupid people in the world too….
Anonymous

The question is who has the better negotiating position, Apple or the subscription content providers. Apple clearly thinks that it has the better connection with its millions of iPhone and iPad users as well as all the people that use iTunes on their PC’s and who use iTunes but sync it with Android devices. And you know, Apple is probably right.
Anonymous

Tell that to Amazon, who will lose money on every Kindle title sold via in-app purchase.
http://www.facebook.com/people/Tony-Mills/1099638671 Tony Mills

So, does the publisher get to keep all the add revenue? Last I checked, the subscription price was just suppose to pay for distribution on news papers and magazines. Books, on the other hand have a whole different model. If memory serves, the author only gets about 10% of the revenue from the sale of a physical book. The rest goes to printing, distributing, wholesaling, marketing, retailing, etc.
Now for its 30%, Apple maintains the Server Farms, infrastructure, pays programmers, system support, does marketing, etc. They collect the money, keep the books, and deliver the check. Amazon’s real task, figure out how best to make Apple earn its 30%. What else can they get Apple to do in the way of services.
Anonymous

Developers or anyone bitching about this plan is like bitching about paying a toll to cross the Panama Canal – just like the Us slogged through malaria and moving tons of dirt to bridge two oceans, that is what Apple has done for media producers and consumers – if you don’t like this 21st century digitial canal, either DO NOT use it, build your own or SHUT UP ALREADY. There is NEVER a free lunch anywhere else. What do you call slotting fees? Or co-op? Or publishers should know best of all – how many magazine distributors are there? 3? They not only decide if they want to carry you but they decide how many you should print … or those magazines at costco – placement/slotting fees – HUNDREDS of THOUSANDS … you think WM lets you have the checkstand for free – again, hundreds of thousands to get placement … SAME DEAL. Here is the terms of being in OUR STORE. Deal with it. At minimum, riase prices 30% and OMG, you have no way to get an email or address from your readers – how lame are u? What are you, Nokia? Make your own canal but stop whining. As consumers, who cares – this way as a stakeholder, we can go to Apple for customer service.

Running to Android? Sure, how many Time subs have seen sold through the Android store – hundreds? It’s just not a robust platform. It’s fine for free but 90% of the serious business is on the iphone platform. It’s like a guy slinging oranges versus whole foods. onecosts more … because it’s WORTH MORE. Deal with reality and stop whining.
Anonymous

If magazines normally give ~30% of retail price to stores not including return magazines, and if you look at subscription discounts but handling and shipping costs, its seems from a cost bottom line Apple’s 30% cut [with a lot of costs covered by Apple] is not unreasonable. If this is true, then the real reason for magazines [and newspapers] “fear” is not the cost, and certainly not the potential for much wider sales or subscriber base, but rather the limitations on subscriber personal information. This gives a hint how valuable consumer personal information is compared to all other costs and income. This is where the business model is at risk, not the costs.
http://profiles.yahoo.com/u/3M7U73TMW54LPZ5C25ZXU6BTTY Adam Chew

Yes the publishers will be offering their contents for free when they deal with the android platform.

I wonder who are the developers who do subscription model.

Maybe I fail to grasp the concept that publishers are now known as developers….
Anonymous

Benjamin, both you and Rurik talk of Anti-trust, but to have anti-trust you have to have a monopoly, AND you have to abuse your monopoly power. Apple’s iPhone does not have over 70% marketshare in smartphones (in fact it’s less than 30%) and while the iPad is growing very quickly, there are still more kindles in the market Moreover, it would be hard to say Apple had a monopoly of say “keyboardless tablets with a screen smaller than 9″” because the whole market is only about a year old. Let’s wait and see how Apple acts if they ever get a monopoly, not beforehand.
Anonymous

Rurik,

I replied to you above on this, but saying Apple has an 84% marketshare of tablets is absurd. It’s impossible to define a market by the single product in that market. Even in the EU, where anti-trust law relies on harm to competitors rather than harm to consumers, you still need an actual market to exist. Let’s revisit this topic in a year or so, once there are tablets running Google and WP7 in the wild.
http://www.twitter.com/rurikbradbury Rurik Bradbury

Well Apple *does* have a monopoly of the ($multi-billion) tablet market for now. If they didn’t, there’s no way they could even suggest such an egregious arrangement with a straight face. Sure, it will be very different next year, and antitrust proceedings would be pointless. But this new ‘deal’ for publishers means another 12 months of pain until they get some leverage against Apple.

Apple Rolls Out Long-Awaited/Feared Subscription Plan

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