Apple App Store subscription policy FAQ

[UPDATE: 17 Feb 2011: I have moved this back to the top of the page because I believe the comments have now become more interesting than the original post. Enjoy. - Brian]

What is the Apple App Store subscription policy?

On 15 February 2011, Apple made the following announcement: Apple® today announced a new subscription service available to all publishers of content-based apps on the App Store℠, including magazines, newspapers, video, music, etc. Subscriptions purchased from within the App Store will be sold using the same App Store billing system that has been used to buy billions of apps and In-App Purchases. Publishers set the price and length of subscription (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly). Then with one-click, customers pick the length of subscription and are automatically charged based on their chosen length of commitment (weekly, monthly, etc.). Apple processes all payments, keeping the same 30 percent share that it does today for other In-App Purchases. Protecting customer privacy is a key feature of all App Store transactions. 

These are not the droids we're looking, er, I mean, that seems reasonable. Is it?

For Apple, which despite what you may have heard, has no monopoly and makes little profit on iTunes and App Store, it certainly seems reasonable. For customers, it seems both reasonable and beneficial. For some publishers, particularly those with 'legacy' media, like Forbes or Time, for example, this new policy has made them livid, angry, frightened and in denial. These publishers do not want to have to pay Apple a 30% commission on subscriptions. Plus, they have long made a good living by scavening on our personal information. That's why you get so much shit mail and unsolicited phone calls.

Is 30% a lot? Or a little?

Apple built the store from the ground up and, with the App Store, which works only for iOS devices, Apple built these from scratch as well. They have also heavily marketed the benefits of the store. And they are providing the billing, the discovery process, secure payments processing, the entire backend process. Plus, they have a good 100 million or so users. For me, this 30% is a steal. 

Then how come everyone is talking about this policy if it's so reasonable?

Three reasons. 1. It's an Apple policy. All bloggers are honor bound to make whatever Apple does front and center in all their posts. 2. Old media has built up quite an echo chamber themselves. 3. This policy rubs many people the wrong way. There are several reasons for this. 1. They are reflexive Apple haters. 2. Apple has a habit of revising rules and altering enforcement of rules within their store after people come to accept a particular policy. This makes a lot of people angry because it does not seem fair. They are correct. To Apple's credit, however, given how rapid this market is growing and changing, they do not change rules as often as many accuse them.

Given the outcry will Apple back down?

Probably, to some extent. This policy benefits Apple and their users. That occupies well over 90% of Apple's focus. And the outcry from old media is, in fact, 100% irrelevant. Their business model is dying and Apple is under no obligation to susidize it. However, some companies or products (such as Netflix, Kindle and Pandora, for example), are not hampered by business model but by actual costs that they are (for now) powerless to control. These include royalties for published music, for example. I would expect Apple to make an exception in these circumstances. Plus, well-funded, highly capable competitors (including in the US alone: Microsoft, Google, Amazon, Verizon) can offer alternatives to publishers. If publishers leave Apple, Apple and its customers do not benefit.

TiPb has a suggestion: Apple offers tiered service — simple transactional processing for existing media giants at a much lower cut, full on agency for small and independent publishers who need the services the App Store provides. Big media will still have to change and evolve their business models, learn to sell products rather than selling their customers, but just like the App Store it could lead to phenomenal, platform defining success for those that best and most strategically embrace it.

This new policy restricts publishers from gaining valuable personal information on their customers, right?

Essentially, yes. Speaking as a customer, that is a very good thing, indeed. Apple says customers can 'opt-in' and choose to give publishers their name, address, phone number, email and/or other personal - demographic information. Few will because this information has value. If the publishers were to offer something valuable in return, say, a $10 iTunes gift card, likely more would sell their personal data.

Should the government look into this? Isn't iTunes and App Store a monopoly?

This is probably the most laughable accusation that old media has levelled against Apple. Understand, any publisher can *easily* choose whether or not to offer their products/services/content over the App Store. Apple does not hold more than a 25% share of the market in "PCs" or smartphones in the US or worldwide. There are numerous options for *any* person or business to purchase valued digital content from a spectrum of competitors. If Apple has a "monopoly" anywhere it is entirely due to the fact that their well-funded competitors refuse to make products and services that people want to buy. Again, this is not Apple's fault.

You sound biased. What is The Smartphone Wars view on all this?

1. Information wants to be monetized. 2. No cost structure nor pricing structure is safe from the rapid global spread of smartphones and the mobile web. 3.Old world publishers want special treatment. They will not receive it. 4. Competive pressures will force Apple to make some exceptions on this new policy. Plus, they may even reduce the 30% commission structure. Such a reduction is very unlikely, however. 5. I have used iTunes and App Store at least hundreds of times. The purchase was always simple, always correct, Apple (unlike Big Amazon) charged the appropriate taxes, my information remained secure. Why would publishers try and limit this?

But with the 30% commission how will publishers make money online?

How are they making it now? 70% of something is always more than 100% of nothing. Assume the timing is not coincidental that the same time Apple announces this policy, giant old world bookseller, Borders, files for bankruptcy. And Apple hit a 52-week high ($AAPL).

Won't Google try and counter this policy?

They already have. Earlier today (16 Feb), nice timing, eh, Google officially announced their policy on digital subscriptions. From Google: "Google One Pass, a service that lets publishers set their own prices and terms for their digital content. With Google One Pass, publishers can maintain direct relationships with their customers and give readers access to digital content across websites and mobile apps." [Brian: whose side do you think Google is on here? The publishers or the customer?]

Google has said they will charge only a 10% commission, compared to Apple's 30%. Plus, Google already is selling more Android devices than Apple sells iPhones (or iPads and iPod Touches). And they have an Android Market and payments platform, just like Apple Plus, there are already numerous iPad competitors that have been launched or soon will be.