Apple has rolled out a new subscription service that lets users of its popular iPhone, iPad and iPod touch gadgets subscribe to content like news, video, music et al from its AppStore digital media repository.
Publishers of content-based apps like Netflix, Amazon, Wall Street Journal et al can set the price and length of subscription (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly). With one-click, customers select the length of subscription and are charged based on their chosen length of commitment. Customers manage their subscriptions including canceling and automatic renewal from their personal account page.
Not Good for Content Folks
But in an age of high piracy and consumer reluctance to pay for content it’s not a good deal for content publishers for the following reasons:
* Apple processes all payments and keeps a greedy 30% of the subscription value of the in-app purchase. Publishers are allowed to sell outside the AppStore and pay nothing if they bring a new or existing subscriber to the app.
* Content publishers may or may not get subscriber details since buyers are provided the option of giving their name, e-mail address and zip code when they sign up via the Apple AppStore. We doubt many subscribers will want to let Apple share their personal info with the publishers.
* 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.
* Publishers will no longer be permitted to provide links in their apps allowing the customer to purchase content or subscriptions outside of the app.
Content publishers in the U.S. are caught between a rock and a hard place.
As traditional media like newspapers, CDs and DVDs lose favor with audiences who increasingly love all things all digital and FREE, publishers are forced to raise prices further reducing their paid customer base. Their attempts to replace lost traditional revenue (print, CD/DVD et al) have had only limited success compelling many publishers (particularly newspapers) to slash their workforce, a move that inevitably impacts quality.
Services like Apple’s AppStore only make it worse by levying a whopping 30% fee when publishers target the digital crowd.
But the enormous success of Apple’s iTunes and AppStore (with 350,000 applications) means content publishers have little leverage in negotiations.
In the medium to long run, we see devastating consequences for publishers, particularly the newspapers folks like New York Times, Wall Street Journal and scores of others.