Is Apple Getting Too Greedy? Demands 30% Cut of In-App Subscriptions


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.

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After Fast Start, iPad Now Only Accounts for Quarter of Wired's Sales


The iPad has often been heralded as a revolutionary new outlet for magazine content. One of the publishers that has been at the forefront of this even before the iPad was announced is Conde Nast, the company behind, among many others, the iconic Wired magazine. During the last half of 2010, according to AdAge, which got a sneak peek at the Audit Bureau of Circulations‘ semiannual circulation report, Wired was one of the few magazines that actually saw single-copy sales increase. The magazine’s sales were up 28.2% in the second half of 2010. In total, Wired sold an average of 105,614 copies, including an average of 27,000 iPad editions.

Wired’s iPad edition did extremely well during its first few months on sale. At one point, it even looked as if the magazine’s iPad sales could outpace its regular newsstand sales. Since then, though, sales of the electronic edition have plummeted as the novelty wore off for many users.

While the first edition sold 79,000 copies within the first week of sales, sales in July and August were already down to 31,000 and 28,000 respectively. If the average copy of the iPad edition really only sold an average of 27,000 copies during the second half of 2010, then the last few editions of 2010 probably sold under 25,000 copies.

Current editions of Wired for the iPad cost $4 (and take a long time to download). That means that after Apple takes its 30% cut, Conde Nast is currently making less than $70,000 per iPad edition from single-copy sales. To put this into perspective, News Corps. The Daily is rumored to cost about $500,000 per week to run and operate. Wired probably gets higher rates from its advertisers and includes more ads, so chances are that the iPad edition at least breaks even.

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