Apple demands subscription revenue from publishers
Apple describes the subscription option it just launched for iPhone and iPad applications as a convenience to customers. That it may be. But to any company looking to do business through an app for Apple's mobile devices, it's more like a form of financial hijacking.
The Cupertino, Calif., company's press release is remarkably straightforward in laying out this land grab:
Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app.
So with one hand, Apple requires that any application that offers access to extra-cost content or services now let users make that purchase through Apple's App Store as well as the developer's Web site. With the other, it keeps 30 percent of those App Store transactions--and won't share the details of those customers with the developer, undercutting its ability to try to sell other subscriptions.
This is what publishers feared when Apple rejected Sony's e-book application. Except it's worse: As outlined at the end of the press release's fourth paragraph, an application can't even include a link to an outside Web store.
Essentially, Apple proposes to annex a developer's subscription business--then charge that firm 30 percent for the privilege.
That 30 percent figure is the same share Apple keeps from sales of applications. There, it provides valuable hosting services, copious bandwidth and one-click installation and updates. But in providing subscription billing, Apple will do little more than run a cash register.
Apple only cites one exemption: subscriptions that come free with purchase of something else, such as a print subscription to a newspaper. It's unclear how this would change bundled deals that, for example, combine iPad and print access at a discount.
Web-based applications remain unaffected by Apple's App Store rules.
Representatives for Netflix, Hulu and The Post declined to comment. Publicists at Amazon and the Ongo news service (as well as Apple itself) have yet to reply to e-mails sent this morning.
Time Inc., meanwhile, already seems to have given up on Apple and is instead bringing publications like Sports Illustrated to Google's Android and HP's webOS.
Yes, customers seem to like buying through the App Store, and that may itself accelerate subscriptions. Apple quotes chief executive Steve Jobs as saying: "Our philosophy is simple--when Apple brings a new subscriber to the app, Apple earns a 30 percent share."
Tech blogger Steve Wildstrom, formerly of Business Week, notes that acquiring new subscribers can be expensive for magazine publishers.
But in other cases, handing over 30 cents of every subscription dollar to Apple amounts to economic suicide. Maybe that explains why Apple isn't letting publishers opt into App Store billing but is demanding that they add it--with a June 30 deadline for them to correct existing apps.
Just how greedy is that 30 percent commission? Consider others that you might pay for an easier, faster transaction.
The check-cashing place a few blocks from my house charges a 2 percent fee.
Walmart charges a flat $3 fee to cash checks of up to $1,000.
Square ships an iPhone app that lets you take credit-card payments in the field; for that high-tech convenience, the San Francisco firm charges at most 3.5 percent plus 15 cents.
Real estate agents usually charge a 6 percent commission, which you can sometimes negotiate for less.
At Kagi, a small software store I've used to buy Mac shareware over the years, developers pay a maximum of 8.74 percent of a transaction plus 75 cents.
If you auction off something on eBay, the site will keep 9 percent of its selling price--up to a $50 cap.
Facebook does take a 30 percent commission on transactions conducted in "Facebook Credits"--but it only requires those in social games, not other applications hosted on the site.
I did, however, find one example of a steeper surcharge: the $4.75 "TicketFast" print-at-home fee Ticketmaster proposed to add to the price of a $10 ticket to a March 5 Wizards game (on top of its $4.40 "convenience fee").
So you can't say Apple is charging the most expensive sales commission in the world.
You can, however, accuse the company of breathtaking arrogance in presenting this extortionate arrangement as a benefit to anybody but Apple.
2/16, 12:41 p.m. As noted by Hayley Tsukayama earlier today, Google launched its own subscription feature this morning. Called One Pass (not to be confused with Continental's frequent-flyer program), it handles not just billing but also authentication across multiple devices. Google says One Pass lets publishers "customize how and when they charge for content while experimenting with different models to see what works best for them." Google will keep 10 percent of the resulting revenue.
| February 15, 2011; 3:37 PM ET
Categories: Apple, E-books, Shopping, The business we have chosen
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