Apple has announced their subscription plans. For the most part, great stuff. I do have a big concern, though.
It’s not hard to see how Apple can pitch this: Here is a graph of your subscribers currently:
Maybe the decline is more steep, or maybe not, but it sure isn’t rocketing upward.
Now, here’s what an iPad subscription plan can do for you:
Just look at all that new revenue! Your publication on iPad, blah, blah, blah. We don’t want to touch your existing revenue, of course. We’ll need 30% of new subscriber revenues to help cover our costs (we don’t run this operation as a profit center, but we don’t run it as a charity, either), but that’s just for new subscribers that we bring to you, not your existing subscribers.
Given a pitch like that, which is more important, the light green wedge that Apple keeps, or the dark green wedge, slightly more than twice as large, that Apple delivers to existing publications?
This is essentially the same pitch Apple made to existing Mac developers with the Mac App Store, and some were outraged at Apple’s 30% cut, while others jumped in with both feet. Pixelmator jumped in with both feet, and are positively giddy about the results. (Full disclosure: I scribbled out the above charts with Pixelmator.) Those who disdained the Mac App Store have not much to report, except that they still hope the Mac App Store doesn’t catch on, and maybe it will, or maybe it won’t. So, Apple can say, do you want to be a Pixelmator, or site on the sidelines? Do you want to try to explain to people that they can’t subscribe to your publication on iPad like they can your competitors?
Given those choices, it seems like an easy answer for the majority of publishers. They’ll want in. Print publications have a long history of spending large amounts of money to acquire new subscribers, such that many (most?) publications don’t actually profit from people who cancel after less than a year has passed. They’re much more likely to make money sooner with iPad.
There are a few more wrinkles, some of which make good sense, but one of which bothers me.
Apple doesn’t want companies making offers outside the app that aren’t available inside the app, which makes sense. “Subscribe today for half-off!” in print, with only full-price options within the app, means few subscriptions within the app. A clause preventing that is pretty common in most industries, and understandable. Any offer made outside of the app will have to be supported by a fulfillment process of some kind, and while those fulfillment costs may not be 30% of the subscription price, they’ll be non-zero.
Let’s consider a few hypotheticals. Netflix has been extraordinarily successful with iPad, and with streaming in general. The process to date has been to sign up at Netflix.com, then download the app. Or download the app and follow the link therein to sign up at Netflix.com. That’s going to change. The wrinkle is that subscription apps must allow in-app purchasing (with Apple’s 30% cut), and that the app may not link to a website where people may bypass that in-app purchase.
Consider now the rules for Netflix. People responding to mailers may sign up at Netflix.com and then download the app, at which point Netflix keeps all the money, the same as they do now. People may instead download the app first, at which point there will be no link to sign up at Netflix.com, so presumably people will use the in-app subscription option, and Apple gets 30% thereafter. That said, Apple can legitimately claim to have brought that subscriber to Netflix, and whether that subscriber would have found Netflix otherwise is debatable, so you could say Apple has earned their 30%. Overall, not too bad for Netflix.
Print magazines want to get onto iPad, and Netflix is a true subscription service. Where things get ugly is with Amazon’s Kindle app.
Amazon’s Kindle app currently sends users to Amazon’s website for every purchase. Those purchases are not subscriptions, so one might assume Amazon would be unaffected by the new subscription rules, except that Apple has already applied these rules to Sony’s Reader app, which seems very similar to Amazon’s Kindle app.
If Amazon is asked to give up 30% of all purchases, the most likely outcome is that the Kindle app disappears. If Amazon is granted an exemption from these new rules, then every developer from Sony to the tiniest magazine startup will want to know why.
Amazon is quite successful already, maybe successful enough on their own without new downloads of the Kindle app. Existing users, like me, will presumably be able to continue to buy Kindle books through Amazon’s website and download them onto my iPad, but what about new users? Will Amazon be required to offer an in-app purchase option with the same prices as Amazon.com? I have a hard time seeing that happening.