After a lot of confusion earlier this year, Apple today finally clarified its rules for in-app subscriptions for magazines, newspapers, video and music. The rules are very straightforward: Publishers can continue to sell digital subscriptions on their own websites and give free access to existing subscribers. Apple will not take a cut from these transactions. Publishers who offer out-of-app subscriptions, though, also have to offer in-app subscriptions and the price has to be the same or lower than for subscriptions processed outside of the app. Apple will take a 30% cut from these in-app transactions.

This is a rather hefty fee for processing a transaction given that most credit card processors just charge around 2.5% and a small transaction fee (generally around $0.25). It’s also worth noting that it looks as if Apple will take this same cut whenever a subscriber renews a subscription, though this isn’t 100% clear yet. This new subscription plan will become mandatory starting June 30.

Steve Jobs: “Our Philosophy is Simple”

Just in case developers think they can just provide a link to their regular web-based subscription service in their apps and circumvent Apple’s system, the rules explicitly state that “publishers may no longer provide links in their apps (to a website, for example) which allow the customer to purchase content or subscriptions outside of the app.”

In the words of Apple CEO Steve Jobs: “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.” That does sound fair, but in reality, chances are that the majority of new customers for subscription services will come from apps and given that developers aren’t allowed to route around the system, this 30% cut become a major issue for some publishers.

Can Publishers Afford This Without Raising Prices?

You can currently buy an annual subscription to Wired on Amazon for $10 and getting National Geographic for a year costs $15 per year. Will these magazines have to offer the same prices for the app-based versions of their products? (Or do these “promotional” prices not count?) If Hulu has to give Apple $2.40 of every $7.99 subscription it sells, can it still make a profit? Or will Apple’s move force them to raise their prices across the board?

It is, of course, a good thing that Apple is making it easier for consumers to buy subscriptions and helps publishers acquire new subscribers. Having to pay a 30% fee for these services does seem quite steep, though, especially given that Apple now owns the customer and not the publishers.

36 comments
Killer
Killer 5pts

Wait a minute. At many marketplaces where freelancers sell their work, they pay even more in a commission. Seems reasonable in the light that Constant-Content takes 1/3 of the price if they sell one of my articles!

5pts

In the words of Apple CEO Steve Jobs: “Our philosophy is simple—We're greedy."

Guest
Guest 5pts

That is just plain stupid for any one to think that it is even remotely fair. Just remember no company ever pays taxes (or fees) out of its own pocket. It eventually trickles down to consumers pockets, this can only mean that the prices have to go up.

Microsoft windows has 90 % market penetration and it provides an easy way (via its browser) for users to subscribe to services. So now MS can start charging you for the subscriptions, of course they can if they wanted to but it is just simply not happening. It is not a very straight comparision but it is still valid.

Apple can't use the excuse of ease of payment or its popularity to reach into every ones pockets. They are charging for applications they sell for a price and it should end right there.

Fanboys will obviously miss this point and talk about convenience and how great this is so please let it sink in before airing any defense for apple.

VHF
VHF 5pts

This could give droid more popularity as all apps such as Netflix, hulu, etc pull out if apple store.

5pts

Apple is clearly exploiting its leading position. Lets hope android take over soon.

5pts

Unbelievable how people that don't have a clue how this works spewing the same stuff.

So anyone want to guess what Publisher's Clearing House got for the subscriptions they brought in? Anyone?

Their cut of a subscription ranged from 74 to 90 percent!!!!!!!!

Please...nothing to see here!

Leeg
Leeg 5pts

Pigs get fat, hogs get slaughtered. As a long time Apple fan boy, I hope they get slaughtered. This is a monstrosity.

5pts

You should also mention that Apple's online store is international, providing sales across borders. In addition to credit card processing, Apple handles foreign currency exchanges for publishers. And they have a ready made audience of millions of credit card consumers ready to buy with a single click.

Lady Kascha
Lady Kascha 5pts

Is Apple getting too greedy? Getting? Apple was wrapped in a blanket made of greed and arrogance at birth for crying out loud. And suckled on concentrated arrogance. Maybe some don't remember the days of the Apple 3 when Jobs charged 8-10K for that shoddy garbage while competitors were still under 3K for their own machines, and unabashedly I might add, but I remember well. For most of Apple's existence, buying their products was like buying a brand new Ferrari and being blown past by the Toyota in the next lane. And it wasn't until they replaced the Ferrari motor with a Toyota that they could even get close enough to see the taillights.

And nothing much has changed. The perception of being "cooler than everybody" is still worth 25% more, according to Steve Jobs.

Steve Larson
Steve Larson 5pts

Apple has to start asking, "at what point does the desire for profit become pure immoral greed?" I believe one day, like so many other computer companies of the past, they will collapse on their own arrogance. It's the developers that have made their products such hits. It almost seems as if Apple cannot stand to see anyone succeed but them. I can't wait for the Motorola Xoom and my HTC Thunderbolt. Part of me supports them, simply because of a desire to fight against the monopoly. Apple has some good products and they have great marketing, but what they really have is a closed environment that will not allow competitors to flourish in that system. It's a capitalist system and they have every right to do so, but, in my humble opinion, they have lost their original calling and have become just another immoral, controlling corporation. Sad to see, because they once were great for the computing world.

John Travel
John Travel 5pts

Interesting to see how this turns out. It will be bad for Apple if Sony, Amazon and Barnes/Noble left their devices, but can't see how those companies can make money on these terms.
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Chris McCoy
Chris McCoy 5pts

On the interwebs, Apple and Facebook are the government and the tax is 30%. Taxpayers are premium publishers and developers.

Joe
Joe 5pts

Lesseeeee, everyone is upset because Apple won't let mean ol' publications have FREE SPACE in their store??? Has anyone tried this at Macy's? Or any other store? NO? Well have they been give FREE SPACE on Amazon??? Hmmmmm. Something doesn't add up. Apple builds a store (ecosystem) using their own programmers, one their own computers, and hosts it on their own servers, takes care of all the updates and advertising... and everybody is made because they don't give it away. Am I missing something???

k-0s
k-0s 5pts

Doesn't Apple already split 70/30 the profits on applications int he app store with developers? Also, Facebook already does a 70/30 split with their Facebook credits. I guess I'm not seeing the problem here. Apple is providing access to a medium, if it doesn't fit in the economic constraints of the company then don't sign up.

The CW
The CW 5pts

This is slightly less than the average brick and mortar mark-up (33%) and provides a better service (i.e. my subscription is delivered directly to my hands regardless of my location.

johnkoetsier
johnkoetsier 5pts

What do you think the newstand or grocery store takes?

Anonymous
Anonymous 5pts

Typo: Steve Jobs: “Out Philosophy is Simple”

should be: Steve Jobs: “Our Philosophy is Simple”

5pts

Wow that is really messed up, but what can you do about it? I mean seriously, its their deck of cards lol.

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