Apple's new subscription billing for iPhone and iPad apps allow developers and publishers to charge recurring subscriptions for magazine, newspaper, video and music apps. The system, launched yesterday, is already controversial, however, with music service Rhapsody saying Apple's 30 per cent cut of subscription payments will make music services "economically untenable".
The subscription billing was used first by US news app The Daily, which launched a few weeks ago. Now it's available to all developers. Here's how it works: apps can now charge you a weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly subscription. Subscriptions automatically renew, but you'll be able to cancel this at any time from your iTunes personal account page.
Apple will take a 30 per cent share of all subscription payments -- the same cut it takes from sales of paid apps and in-app purchases. Alongside the new subscriptions, however, come new rules for apps that charge you directly outside the App Store, such as Amazon's Kindle ebooks app or Spotify's music service.
Apple CEO Steve Jobs outlined the changes in a statement. "Our philosophy is simple -- when Apple brings a new subscriber to the app, Apple earns a 30 per cent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 per cent and Apple earns nothing."
Wait, there's one more thing. "All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one click, right in the app." The new rules also explicitly state that apps cannot send users to an external website to buy content or subscriptions outside Apple's system.
Here's what this means in practice. Subscription music service Spotify, for example, currently charges people £9.99 a month on their credit cards to use its mobile app. It can still do that, but once Apple's new rules kick in, it will also have to offer a £9.99-or-cheaper subscription as an in-app purchase, which is when Apple will take 30 per cent of the dosh. Meanwhile, an app such as Amazon's Kindle can no longer sell you ebooks without using Apple's payment system.
US music service Rhapsody is the first company to come out swinging against the new system. "An Apple-imposed arrangement that requires us to pay 30 per cent of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable," it said in a statement.
"The bottom line is we would not be able to offer our service through the iTunes store if subjected to Apple's 30 per cent monthly fee versus a typical 2.5 per cent credit card fee."
What does this mean for you, though? On the plus side, Apple's new subscriptions will be simple and quick, and equally easy to cancel if you tire of an app's content. They could also spur new and innovative apps, following in the footsteps of The Daily.
Judging by Rhapsody's reaction, however -- with other services expected to protest publicly later today -- there's a danger that Apple's new rules could drive some of these services from the App Store. A scenario in which Amazon, Spotify, Rhapsody and others abandon iOS, leaving Apple's own ebooks and music services to dominate would not be good news for iOS users.
It's early days though. Can these companies make the numbers add up for their subscriptions even with Apple taking a 30 per cent share? Will regulatory authorities get involved -- particularly in the US -- as is already being suggested by the Wall Street Journal? Will the services switch to Web-based apps accessed via the Safari browser to get around Apple's new rules -- but sacrifice features in doing so?
Apple's new rules are provoking more questions than answers at the moment, but keep it Crave for more on this as it happens.
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Comments 13
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Nyadach 16 February, 2011 09:30
Seeing cash go outside Apples garden with Kindle and Spotify has caused Apples continued greed to cause yet another wall. Soon (as with the Sony game store) we'll see Spotify and Kindle removed due to them "breaking" Apple's cash farming until they hand over there 30%. Quite frankly the behaviour is anti-competitive, criminal and also typically Apple.
Dean Shepherd 16 February, 2011 10:26
awwhh apple you crazy crayz kids, what WILL you think of next!
maybe death penalties for people who hold the phone the wrong way? lol
slaguru666 16 February, 2011 10:57
I suppose that giving the user ease of access to paid subs is just too difficult a concept to grasp for all the people who think this is some sort of bad thing.
But again, as Apple are the fun target for all the hip cool 'we know better' kids its always easy to just say that this is typical Apple.
I suppose they don't deserve a share on the return of revenue due to the fact that their own App Store, Infrastructure, Marketing and the like are services all developers use on the store, and are responsible for bringing those developers millions of paying customers.
People will vote will their cash.
If apple have screwed up, we shall see all the app makers jumping ship for other platforms, and if that happens I expect Apple to U turn. If the App makers want access to the biggest App store and paying user base for mobile devices however, they stay on the store and take the hit. Simple.
anonymous 16 February, 2011 13:07
Easy for comsumers no doubt, Apple does easy very erm...... easily, anyway its not good news for companies as essentialy what apple is doing is clever by asking for money for nothing. Apple are very sneaky at taking money without you even knowing it. In fact I'm convinced a mini Steve Jobs pops out your iphone, ipad or mac and makes a bee line straight for your wallet in the middle of the night.
Anyway companies wont stand for this and I don't blame them, IOS isn't the only platform in the world.
slaguru666 16 February, 2011 13:44
Pete, cant see how Apple are getting money for nothing ???, they own the technology, the servers, the maintenance, the bandwidth, the knowledge, the R&D budget ...
What other platform will do this for nothing ???, Google maybe, except that you need to factor in all the Ad dollars and the big one which is the way that Google takes information collected at the purchase point and will use it for shared marketing information with its ad partners. This is why the other companies dont like the idea, its because Apple will not share that information on the person subscribing to the service (app). Only the name and address.
Anonymous 16 February, 2011 14:21
slaguru666 - your argument (which has been made by various people on other sites, many of whom are fan boys, not saying you are) ignores key issues: firstly, Apple makes a veyr healthy profit on the hardware, and one of the major selling points of the hardware is the availability of apps;
secondly, if Apple is looking to cover their costs in running the App store (many of which are self-imposed, such as the approval/review system), then 30% of revenue for subscriptions is massively inflated; and
thirdly, by combining (a) the unavailability of other methods of distribution onto i-devices (banning Flash and preventing other browers which could implement Flash) (b) a requirement that apps offer subsriptions in-app and (c) a restriction of linking-out to other methods of purchasing from in-app Apple are giving developers no middle-ground. They can either be on the i-devices and give 30% of revenue to Apple or not have access to that market at all. For many operators both options are likely to be un-economic and likely lead to close-downs (think Spotify, for whom the paid mobile app on the iPhone has been a major source of profit).
If Apple drives the likes of Spotify out of business and then enters the subscription music (or, with another example, movie) market, then there actually could be anti-trust issues (as Apple certainly does have market power in that market).
Anonymous 16 February, 2011 16:13
Just a thought, Apple never said that you have to have in app purchasing of subscriptions, they are just making it so that if you offer a button to purchase in your app from the web that you also offer the opportunity to purchase using your apple id from the app store.
Now this in no way means that Amazon, Rhapsody and other companies that offer subscription services could not just give you instructions to go to companies website and create your own account and purchase that way. They are not blocking these companies from making money, I mean after they buy a subscription from Rhapsody how many times do you need to use the in app purchasing? These subscription services all rely on the fact that once you subscribe, we being the lazy human's that we are, are not going to want to deal with re upping every month, it's called auto-renew.
Personally, if I purchase anything in app, I don't want to type in my credit card info on the phone in public.
People....People.....People..... If I created a subscription service and have an iPhone app to supply access to that subscription service but do not allow for signing up from the app in any form. I make the people have to subscribe using a browser that they have to type the address in manually and subscribe that way. I do not have to pay Apple and I am not violating any rules. What Apple is saying is that if you create an app that allows the user to click on a buy button or a subscribe button that then takes you to the web site, that you also need to give the option of doing it through Apple. So if you do not give that ability you do not have to give anything to Apple. Read people read!!!
slaguru666 16 February, 2011 16:37
@annon
Thanks for not calling me a fanboy, at least someone here does not instantly insult you as soon as you admit to favoring Apple stuff.
I will counter point your points if I can.
1. The iPhone and Touch when they were first produced had no App store, so Apple has (for better or worse) created an entire market that others make money from. I see no reason why they cannot profit from that.
2. If a distributor can make a service that rivals the App store for subscriptions for less than 30% of the cost of getting media out there then they have every right to create that service and put it on another OS. If however they cannot, then the 30% that Apple charge is a good deal given the number of potential customers they have.
3. Like the above your argument is that some smaller distributors might go out of business because Apple is charging too much, but it it was not for Apple being there to make the devices that people want, with the service that people like then they would have no business at all.
As a Spotify premium subscriber myself I have would not like to see it pull out of the iOS market, but if it does then so be it. I cannot see how this is an antitrust issue, as Apple is not banning them, it is giving them the same deal as anyone else.
If Spotify were to be given this service (app subscription) free in the Android market place, but Google demanded all your purchasing information for marketing use and 3rd party marketing intelligence would that be better ???
Anyone doing this type of service is not doing it for free, Apple want to make money of course, but so do MS and Google and RIM and HP. Can you honestly say that if any of these companies were in the same position they would say 'no keep it free' and leave money on the table.
Anonymous 16 February, 2011 18:16
You may argue that %30 is to high a price, but you can't argue that Apple is allowed to do this.
It would be the same as if I developed a product and carried it down to the local Sears store and set up a booth right in the store.
I don't want to pay Sears anything, they can pay the rent, electric, heat, taxes, etc.
Sears thinks otherwise, they want to charge me something.
I can either pay Sears part of my profit, or I can leave and set up my own store elsewhere.
Anonymous Circle 17 February, 2011 01:17
I don't mean to sound like a fanboy, but at the end of the day Apple is a business. Despite their rather unsavory ways of making more money, it's their store and they can do whatever they want with it (not literally - they can't sell drugs) if the developer wants to use Apple's store then they have to follow Apple's rules - if they object then they make no money (the App Store is the most popular way of selling Apps - not many mainstream consumers use Cydia). I don't know about other people; but I'd rather have a 70% profit as opposed to no profit at all.
Leszcz 17 February, 2011 09:22
man, the only comment that comes into my mind is 'greedy bastards' :(
The worst thing is most of the people will unconsciously be taking 30% from the developer's earnings.
Anonymous 17 February, 2011 12:07
"I don't know about other people; but I'd rather have a 70% profit as opposed to no profit at all."
This is the common misunderstanding - it is 70% of REVENUE not profit. Most of the subscription services involved make less than 30% profit, meaning that they would lose money on every sale using this approach.
Anonymous 17 February, 2011 13:15
Apple know how to do business and this is the price you pay to play with such an amazing brand.
i think that the % share is good because the subscribers would not have the business if the ipad was not invented so this is money for using the hardware which is fair enough, i can never see Microsoft doing this but apple think ahead of the game and this is why they are market leading. you can compare apple iphone 4 contract deals at white-iphone4-deals.co.uk