Yesterday, Apple dropped the equivalent of an atomic bomb on App Store developers whose apps feature content subscriptions. The App Store now supports subscriptions via the In-App Purchase mechanism. For everyone from Netflix to Bob’s Valentine Cards, this is officially a ‘big fucking deal’.
As expected, this news provoked the typical anti-Apple reactions as rabid Internetizens commented on the company’s perceived motivations: greed, control and, well, greed. As a developer that’s lived with the App Store’s 70/30 split for a few years, perhaps I’m a little more conditioned to accept this sort of arrangement. The whole ‘Apple is evil’ trope is incredibly boring and not worthy of anyone really doing any thinking about these issues. My first reaction was not to foam at the mouth but for whatever reason, I couldn’t get the details out of my head.
Being on the App Store has been great for my app, Vegas Mate. Without it, I doubt I could have reached the many tens of thousands of users that I’ve sold copies to. Search for ‘vegas’ in the App Store and Vegas Mate is the first result. That’s extremely valuable when there are millions of potential customers with credit card numbers already on file. 70% of a big stream of sales is a lot better deal than 100% of zero.
In a perfect world, this new subscription model will provide the ‘missing link’ that has so far eluded magazines and other periodicals on the App Store. Despite some strong starts, many of the banner publications have reported declining sales since launch. It’s hard for a subscriber to the print edition of ‘The Economist’ to justify paying again for the digital version but up until now, that’s what was required. In App Subscriptions will solve all that.
So, publishers must be excited, right? Well, not exactly. I’m sure some may be but there have been some pretty vocal dissenters as well… and it’s not just the 30% thing. The other issue is access to subscriber data such as email address, zip code and demographic info. For decades, these publishers have used this data to sell their advertising and who knows what else. Apple is willing to make this available but only if a user has explicitly allowed it. Without some kind of discount incentive, I bet that opt-in rate ends up being close to 10% if not lower.
Apple’s new system, while potentially offering an upswing in subscribers, is incredibly disruptive for traditional publishers and their classic model.
Will jilted publishers run into the arms of competing tablet makers? Maybe they’ll try. 2011 should bring competing offerings from Motorola, HPalm and others. Will this work out well for them? I think that’s far less certain. Show me the big content success stories on platforms like Android. Even the uber-popular Angry Birds is advertising based when running on Google’s smartphone platform. Apple seems to still have the monopoly on users that actually are willing to pay for stuff.
For existing content sellers that have apps in the store that are going to be impacted by this, I’m sympathetic. Some of the business models around that content simply won’t support 30% going to Apple. That’s a real problem – if apps like Amazon’s Kindle and Netflix leave the App Store, customers will notice and that could translate into cascading trouble for the platform if left unchecked.
For new businesses that want to sell content, it’s no big deal – they’ll just factor these costs into their overall profit modeling and move on, putting their wares in front of millions of users that can purchase through a trusted, easy to use platform.
I’ve reviewed the new App Store guidelines and while I haven’t yet shipped anything with In App Purchase, from the perspective of a developer, I really like the system Apple’s built. It’s super convenient for users and fairly simple to implement. I think that MG Siegler is right when he says that it could be the best subscription management system ever conceived.
Despite the fact I think the new In-App Purchase subscriptions could end up being a hit with customers, I’ve been stewing on this news since it was announced and I just can’t get past the fact that 30% feels excessive for this type of content especially on a recurring basis. Is it too much? We’ll see – the market may force a correction, be it through device sales, the number of apps being published or overall developer interest in the platform.
What would a correction look like? The simplest thing would be to lower the percentage for this type of content. Moving down to 10% or even lower would go a long way to calm the hordes.
What about dropping the ‘price match’ rule that requires subscriptions to be priced the same both inside and outside of the app? This would then rely on users picking the In-App Purchase version just because it’s easier. Depending on the cost difference, this would probably be enough for many people and it would certainly make content providers chill out a bit.
Removing the ‘no linking to external stores’ rule would probably be welcomed by publishers but it alone wouldn’t be enough in the cases where there simply isn’t 30% margin to give to Apple.
Yesterday’s press release makes me wonder if Apple is overplaying their hand. We’ll see.
The other issue here is NFC (near field communication). If the rumors about NFC coming to iOS this year are true, there’s no way that Apple could get away with a 30% transaction fee for facilitating transactions in a world that’s dominated by credit card fees of 2.5%.
One unfortunate side-effect of the above is uncertainty in the marketplace. No one is quite sure how these changes will impact existing and future apps and as anyone can tell you, uncertainty is bad for business.