Apple's subscription model is boon to consumers, bad for publishers
As we reported earlier, Apple announced the arrival of new subscription services for apps in the App Store today. According to the press release, subscriptions purchased from within the App Store will utilize the same billing system currently employed for app and in-app purchases. Publishers are free to set the length and price of the subscriptions, which can be weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly. Then with one click, customers choose the length of their subscription and are immediately charged for it.
The great thing about these digital subscriptions for customers is that they can cancel their subscription at any time with very little hassle. They simply need to go to their personal account page to stop re-billing or cancel a current subscription. Anyone who has ever dealt with the headache of getting out of a magazine subscription will recognize this as a huge benefit of Apple's subscription model.
However, as we've already seen, many content-based app publishers might not like all the new terms that Apple has laid out. All publishers of content-based apps (like Netflix, Hulu, etc.) must comply with Apple's new subscription service guidelines by June 30 or risk removal of their app from the App Store. The guideline compliance was originally rumored to go into effect March 31, but it seems that app publishers have four more months to make their apps compliant. Content-based app publishers are still free to sell content outside of the apps (like buying a Kindle magazine subscription from Amazon.com), but they now must offer the same content available for purchase directly within the app itself at the same or better price.
Steve Jobs justified the in-app content requirement as somewhat of a fair finder's fee: "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. 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." Translation for publishers: You're going to collect less on iOS subscriptions than you do on conventional subs, and you can't raise in-app prices to make up the difference. Make it up in volume!
One other thing publishers might not be too keen on is Apple giving the power to consumers regarding whether or not to share their personal information with the publishers when buying a subscription. When a customer signs up for a subscription, they'll have the option of providing the publisher with their name, email address and zip code. This is "opt-in" each time a subscription is purchased, not "opt-out" -- something privacy minded consumers are sure to like.
In-app subscriptions will be available immediately upon the release of iOS 4.3, which is expected by the end of this month.
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