Is Apple’s Subscription Program Self-Destructive?

This morning Apple formally announced its long-awaited subscription program. What has been contentious and feared is the requirement that any subscriptions generated via apps themselves trigger a 30% rev share with Apple, in accordance with the normal rev share. Here’s what the release says: 

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.). Customers can review and manage all of their subscriptions from their personal account page, including canceling the automatic renewal of a subscription. Apple processes all payments, keeping the same 30 percent share that it does today for other In-App Purchases . . .

Publishers who use Apple’s subscription service in their app can also leverage other methods for acquiring digital subscribers outside of the app. For example, publishers can sell digital subscriptions on their web sites, or can choose to provide free access to existing subscribers. Since Apple is not involved in these transactions, there is no revenue sharing or exchange of customer information with Apple. Publishers must provide their own authentication process inside the app for subscribers that have signed up outside of the app. However, 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. In addition, publishers may no longer provide links in their apps (to a web site, for example) which allow the customer to purchase content or subscriptions outside of the app.

Here’s what it means as a practical matter: 

  • Publishers may sell subscriptions to iPhone/iPad apps outside Apple’s iTunes. There’s no rev share in those circumstances
  • Publishers must, however, make in-app subscriptions available at the same price (or less). If the user comes through the app then there is a rev share to Apple 

Apple doesn’t want publishers punishing Apple with higher pricing to ensure outside subscriptions.

Apple could have reduced the rev share to a smaller percentage for subscriptions but it chose to have a consistent policy. The “workaround” that allows publishers to sell iPad subscriptions outside of iTunes is a bit of a concession to publisher complaints. But many will still be unhappy.

That will likely mean that publishers will either do everything they can to grab iPad subscribers outside of iTunes or they will avoid the iPad altogether and place their bets on the forthcoming Google newsstand instead.