Apple's subscription model is boon to consumers, bad for publishers

When I opened tuaw on my iPhone this morning and I saw the blurry picture of that magazine staring at me for the third day in a row with the headline "breaking news" I could feel my eyes getting all crazy... It's like the digital version of nails on a chalkboard.

With the new rules, consumers will pay higher price and publishers won't be able to price it to be attractive. To give you an example, lets say that the cost of creating content is $.80. Assuming publishers want to have 25% profit, the price would be $1 which is what the consumer would pay excluding tax. With the new rules, Selling it for $1 means publisher will lose money as Apple takes 30% cut. So publishers are forced to price it as $1.43 ($.80+ 20% profit for publishers + 30% cut for Apple) if they have to retain their margins.

http://thecaseagainstapple.blogspot.com/2011/02/apples-new-subscription-model-beginning.html

You guys are all crazy.

your focus is all on the short term and not the future.

Subscriptions are all about two things (at least as far as print subscriptions)

1. Greed, the publishers make all the dough on advertising, the subscription fee is just icing on the cake for them. no business would incur the cost of publishing a print magazine based on a subscription rate that they cannot control.
aslo remember that we are talking about digital publications, so the physical (manufacturing) costs are zero, and distribution costs are also zero.

2. Residual income. you all keep talking about the "initial cost" of the subscription and how apple is hurting the profits in a major way. and while yes initially this may be true. the cost of a subscription is on a sliding scale. the longer you remain with a subscription the lower the cost is from the publisher.

That being said, I think 30% is extremely fair. I work for a brick and mortar company that sells subscriptions and we take a lot more than 30%.

To give you an example, when we sell a netflix pre paid card for 60 bucks we keep 53 dollars of that and we get $7 of the $20 bucks a month as long as the customer stays with netflix.

Wow... that has to be one of the most inane commentaries ever written on this site.

I see this ending in one of four ways:

1. Content providers absorb the 30% hit... unlikely as margins are very tight on some of these forms of media and they've already stated it's not a tenable business strategy.

2. Content providers raise prices ~42% across the board to pass the Apple Tax on to consumers. Again, not viable as even non-iOS users would see a sharp increase in the cost of their media.

3. Content providers abandon iOS. A very viable option with Android nipping at the heels of iOS. Although I'm a fan of iOS, I hope this happens because Apple is repeating the arrogance it showed back in the 80's that lost it the PC market.

4. Apple is forced to back down due to massive content producer revolt and/or litigation.

I think Apple has realised that revenue from apps is attractive but ongoing revenue from the content is far more attractive. They're aiming for #2 in order to thin the herd. This has NOTHING to do with streamlining the user experience or being pro-consumer by offering more choice and EVERYTHING to do with poisoning the well for any other method of purchasing content. Why would anyone buy a $14 book on Amazon when they can buy the same book through iBooks for $10?

Although I love iOS, I don't have the same love for Apple. As much as I love my iPad, this decision has made me decide to hold off on buying an iPad 2 and, depending on the outcome, I think I may well be switching off iOS next time I'm ready to upgrade my hardware.

hello to all the retards. Magazines have eliminated the physical product and all the costs associated with production an transportation of said physical product. Hell yes it should be alot cheaper for a digital subscription!

Considering the fact that publishers make very little (or nothing at all) from magazine subscription fees themselves this should make no difference to them.

Publishers could offer free subscriptions which makes apple nothing. However the publishers will increase their verified distribution figures and be able to make more from in magazine advertising (advertising is where they actually make their money!)

Another way to avoid paying anything to Apple would be to offer free digital subscriptions with physical subscriptions. They would obviously have a cost shipping magazines out but wouldn't have to pay Apple anything.

How is it great for consumers when it leads to less choice like Rhapsody pulling out of the App Store or Amazon pulling it's kindle app from the app store? It's either that or they raise their prices by 30% across the board which they will not since there are other platforms. So the only ones that lose out are the iOS customers. Nice going Apple.

With all due respect, those of you who are arguing that Apple is no more than a payment transaction broker and should charge a small percentage accordingly (think Global Payments or Paypal) are wrong.

It would be more accurate to consider Apple a retail store. And in that context 30% is absolutely fair.

Although the word being bandied-about today is 'subscription', what we're talking about is magazines. We are purchasing magazines from a reseller (Apple) that has costs to cover. It is no different than if you went into a corner store and bought something; the store has costs to cover (like rent, hydro, payroll) and their markup (ie revenue) is how they do that.

It isn't more complicated than that. Apple built be store and keeps the lights on. And they built a store in a really great location that has a ton of walkby traffic so that producers would fight over shelf-space.

That's retail. And that's what we're talking about.

I see how this works for content that is only targeted at iOS devices - such as The Daily. Either buy an issue from Steve Jobs and give him 30% - or buy it from Rupert Murdoch at the same price and give him an extra 30%.

Apple doesn't seem to have thought it through for content that is targeted at multiple devices. If I have a Kindle reader and I buy ebooks for it from Amazon - why should the price of my ebooks suddenly go up because of Apple's pricing policies?

I think the folks at Amazon will be thinking right now that they will shortly be selling 2 different versions of the same ebook. One version will be iOS enabled and the other version won't.

Either you buy the non-iOS version of the ebook from Amazon for $7 and it can be read on the Kindle reader, the Kindle app for Android, and the Kindle app for Mac - but it CANNOT be read in the Kindle app for iOS.

OR you buy the more expensive iOS-enabled version of the same ebook from Amazon, also available directly via in-app purchase, for $10 and it can be read on all those other devices PLUS the Kindle app for iOS as well.

Users of iOS devices will be paying 30% more for ebooks than their cousins on Kindle readers for Android or other Kindle apps.

It seems to me that Apple is getting too greedy for its own good and is forgetting that the whole purpose of the App Store is not to make money but to sell iOS devices. Apple shouldn't care if the App Store side of the business just breaks even - that's not where they should be focussed.

Last I checked e-books on the Kindle were not generally subscription based so that has no bearing on this discussion. It is true that Apple also will not allow purchases of products from within as app that does not use their system which sort of applies to e-books in the Kindle app but again Amazon could decide not to offer their books for sale through their app on the iPad. If Apple tried to do anything about an app that only allowed viewing pre-purchased books they would be slapped down for restraint of trade so fast it would make your head swim. I can buy MP3s from anywhere and use them in iTunes. I can buy e-books from anywhere that does not use proprietary DRM and use them in iBooks, or the other e-reading apps available for iPad. I find it very difficult to believe that Apple will try to prevent applications from reading certain kinds of files. Apple does have some content based restriction but I think format based is not somewhere they are going to be willing to go. Another way around this is to build an app as a pure web app. Google's book reading app is already effectively that anyway (admittedly that is one of the reasons it stinks).

Finally for Netflix assuming that this would apply to them which is not clear to me at all. They should be able to add IOS access as an additional fee on top of their existing subscription fee just like they charge extra for blueray. Apple would be entitled to 30% cut of the IOS fee but I am pretty sure they would lose the court case saying they had a right to the main subscription fee. More to the point how many people who sign up for Netflix are likely to do it from their IOS device? For the majority of people it is an adjunct device to their main Netflix viewing platform. Finally existing subscriptions are exempt from this requirement (because again Apple would most likely lose any case about that too). If you already have a Netflix account and you add IOS support that is very clearly all that Apple could legally charge a fee for.