Apple Reverses Course On In-App Subscriptions

[KnightWRX]

Sorry... wrong. They are WAY more than payment processing. iTunes and the new Newstand is a channel. It's easy access to millions of potential customers and that is worth the 30%.

Nope, there is nothing more than payment processing in the 30%. All marketing and channel distribution is done by the developer for In-app subscription. Apple does no channel work or newstand work. You need to provide your own app, market it, and then are in charge of managing accounts, distributing the content through your own channels. All Apple does is process payment and tell you XX has paid YY$.

You're talking about something else entirely, the Newstand feature in iOS 5.

So wrong yourself bub.

LOL! Again... you do realize Apple is not a Bank? They too have the pay credit card processing fee's when a transaction is done. Visa, Mastercard, AMEX all get their cut along with the actual processor that Apple uses.

No where close to 30%.

If Apple provided more than just a payment processing (they don't provide any channels for in-app purchases or subscriptions), then you'd maybe start having a point. As it stands, you don't.

 

[AaronEdwards]

Sorry... wrong. They are WAY more than payment processing. iTunes and the new Newstand is a channel. It's easy access to millions of potential customers and that is worth the 30%.

Last time I saw any numbers for magazines sold on the iPad, they didn't look very good, and they had fallen quite a lot since the introduction.

The number of songs sold through iTunes, the number of books sold through iBooks, and the number of apps sold in the AppStore were mentioned during the keynote. Can't remember anything about magazines though.

From FT's decision it's obvious that they, based on their data, didn't think that "the easy access to millions of potential customers" was worth the 30%.

 

[samcraig]

In a 1%, 1% and 98% distribution ? Because 30% is quite a hefty fee for simply processing a payment.

Not for the payment processing. For the infrastructure and human resources required by the app store in total. There's equipment, labor, a mortgage, taxes, yadda yadda + profit margin as part of the 30% Apple charges.

 

[KnightWRX]

Not for the payment processing. For the infrastructure and human resources required by the app store in total. There's equipment, labor, a mortgage, taxes, yadda yadda + profit margin as part of the 30% Apple charges.

Again, 1% (infrastructure), 1% (human ressources), 98% (profit).

What kind of infrastructure/human ressources do you think is required to simply process payments ?

 

[samcraig]

Again, 1% (infrastructure), 1% (human ressources), 98% (profit).

What kind of infrastructure/human ressources do you think is required to simply process payments ?

I suppose the datacenter required for all the throughput of the app stores comes free. And no doubt that lawyers, accountants, app reviewers, etc are all free too.

Does that all come out of the 30%. No. Of course not. You did note that I listed several things INCLUDING profit, right? I didn't give any percentages. And clearly there are other aspects of Apple's business which defray costs of running the store/reviews/etc.

Since you (and I) aren't privvy to the actual breakdown of costs and where those monies are appropriated from and to - it's all conjecture. My original point was that there's no chance Apple is paying 5% as someone suggested. That's ridiculous. And I don't think 99 percent of the 30% is profit either. The truth lies somewhere in the middle

 

[KnightWRX]

I suppose the datacenter required for all the throughput of the app stores comes free. And no doubt that lawyers, accountants, app reviewers, etc are all free too.

Are we talking about In-app subscriptions or Apps in the app store here ? Because I'm pretty sure the 30% in the case of in-app subscription requires no throughput of the app store, app reviewers, etc.. and that lawyer and accounting fee for a simple transaction isn't near 30% of the cost of the subscription. (hence, the 1% allocation)

Don't mix the 2 together. Selling actual apps is 1 thing. Apple provides a lot more than payment processing for your 30%. Selling In-App purchases/subscription is a completely different beast and Apple provides nothing but payment processing in that case.

I thought that was fairly clear, but it's obvious some people still don't understand it.

We are not discussing selling apps here. Not at all, whole different game. Much less infrastructure/human ressources required in what we are discussing vs selling the actual apps.

 

[baleensavage]

Again, 1% (infrastructure), 1% (human ressources), 98% (profit).

Actually, this is incorrect. For example if I wanted to use Paypal to process my transactions, I would be looking at a 3% fee plus 30¢ per transaction. That adds up. They have a micropayment model as well which does 5% and a smaller per transaction fee. Either way, if you are looking to do any online business between merchant account and credit card processing fees, you are looking to pay at least 5% in basic costs, more likely something like 10% when you figure in secure certificates, etc. Of course that still leaves something like 66% profit for Apple which is a very high profit margin. I guess the important thing is to never underestimate just how much the credit card companies are screwing the public.

 

[darbus69]

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So you people want Apple to forfeit their cut of this market, they have created, while maintaining the store servers, software, APIs, billings, paying for the data transfers etc.?
And they should maintain the same level of excellence while not receiving a penny, right?
The app dev, the movie and music producers, the editors profiting of the reputation and stability of the store, of the tools Apple provide while never having to pay anything.

Somehow I feel it wouldn't be such a great business model, if you wanted to turn a profit from time to time.

well put! Who wouldn't love to take a free ride to profitability on Apple's back, it's a sound capitalistic principle!

 

[Rodimus Prime]

Apple doesn't make money decisions based on "it's the right thing".

From jobs I've been offered, publishers are planning a major move into Android.

Without outside pressure, Apple would keep iOS as tightly controlled as possible.

I am not surpised Apple back down but of course they waited until last minute so the damage has been done.
Apple knew that if they kept pushing the big players would more or less say FU to Apple and walk away. Apple for example Amazons kindle Apple a hell of a lot more than Amazon needs Apple for it. Nook would be the same way. ibooks is still way to limited being on ONLY Apple. I know for my Ereading I do most of it on my Kindle because eInk is by far better than LCD but I do use kindle app on both my phone and my iPod for times when I am at school and need to kill time.;

All this does is slow down the move but I think the publishers and others are done putting any faith in Apple and going to move quickly to other plateforms so if they have to cut off iOS the damage is not as bad and it hurts Apple a lot more than it hurts them.

I suppose the datacenter required for all the throughput of the app stores comes free. And no doubt that lawyers, accountants, app reviewers, etc are all free too.

Does that all come out of the 30%. No. Of course not. You did note that I listed several things INCLUDING profit, right? I didn't give any percentages. And clearly there are other aspects of Apple's business which defray costs of running the store/reviews/etc.

Since you (and I) aren't privvy to the actual breakdown of costs and where those monies are appropriated from and to - it's all conjecture. My original point was that there's no chance Apple is paying 5% as someone suggested. That's ridiculous. And I don't think 99 percent of the 30% is profit either. The truth lies somewhere in the middle

Do you have any idea how cheap storage space is. Price today it is about a $100/TB for data storage. Given that most apps are under 5 megs and big time for things like the subscription service that should show you that it is dirt cheap for Apple. Just 1 iPod or iPad sell from due to having that App is worth more than it cost Apple to run its data storage and service for that same App.

 

[darbus69]

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So you people want Apple to forfeit their cut of this market, they have created, while maintaining the store servers, software, APIs, billings, paying for the data transfers etc.?

Apple doesn't transfer subscription content. They don't host it, nor store it either. For the in-app subscription and in-app purchase, all Apple does is cover billing. If you're going to go on this wild emotional "Apple is a victim!" tangeant, at least get the facts straight.

Apple is a payment processor. They are charging 30% to process a payment and you are left on your own with : Server storage, content transfer, account management, marketing, etc...

That's one hefty payment charge, even Visa and Mastercard don't charge that much to process payments.

And they should maintain the same level of excellence while not receiving a penny, right?

Who said not receiving a penny ? They should simply charge reasonable rates for payment processing. What's the industry going rate for that ? Under 5% ? Do they even do percentage based transactions or is it fixed charges ? Charge that. You still get money for processing the payment and maybe a few more devs will embrace your service.

These new rules at least let the service stand on its own in the market. You now at least have a choice of payment processors for your in-app subscription stuff. Will it be Apple at 30% or Visa at 5% or a fixed rate payment processor ?

Are you forgetting that the app store app was the vehicle which led the customer to purchase??? What is being said was all the standards of excellence that encourages people to use the app store is not a free nor easy service for apple to provide.

 

[dvkid]

The fact is, publishers don't need Apple as a payment processor to reach these customers.

That's certainly true. My company uses Authorize.net for magazine sales outside our app, and pays far below 30%.

However, I'd make the same argument to you that I made to my boss when he scoffed at the 30%:

We are getting much more than payment processing for that share of our profit. In Monday's keynote, Jobs brought up one very important element of the App Store when he mentioned the 225 million iTunes Accounts, all with credit card numbers attached to them.

Would I have trusted Rovio with my credit card if asked to buy Angry Birds from them directly? What about Chillingo if I fancy some Cut The Rope?

Maybe, maybe not.

With the App Store, I don't have to. Apple has created a sense of security between the user and the publisher.

Moreover, the same mechanism creates an idea of "play money" that have had me spend two or three bucks on something without thinking twice about it on more occasions than I care to admit.

All in all, when looking at sales of our digital magazine, I am quite satisfied with what Apple gives us for our 30%.

Sure, I wish they weren't so stingy, but to say it is nothing more than a credit card fee is to discount a lot of benefits of selling within the App Store(s).

Edit: Just to clarify, I'm not talking about apps here, either. Apple still provides the same trust-inducing experience for in-app subs as they do for anything else. That one-click mentality that has caused so many of us to spend so much in the iTunes and the App Store is what we get for our 30%.

 

[KnightWRX]

Are you forgetting that the app store app was the vehicle which led the customer to purchase??? What is being said was all the standards of excellence that encourages people to use the app store is not a free nor easy service for apple to provide.

The App Store app itself is covered by the 99$ yearly developer fee or the 30% of its price on purchase. The 30% for in-app purchases/subscription has nothing to do with the app itself, which is paid for through other means.

So no, I am not forgetting it. It's not even a factor in the equation.

 

[addicted44]

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Common sense has prevailed.

It does happen from time to time.

+++

Hopefully this is the first few steps to Apple releasing their iron grip on the App Store a little bit.

Don't get me wrong. The curated nature of the App Store is what has made iOS such a hassle-free experience for me, as opposed to Android. However, I think Apple has swung the pendulum too far to the control side. They need to achieve a better balance.

 

[jeffsonderman]

This makes subscriptions more difficult outside of the in-app purchase

My reading of the guidelines, as well as looking at Newsstand, suggests that this is going to make it more difficult to sell subscriptions that don't go through Apple. Here's the explanation I wrote on Poynter.org: http://journ.us/jAK43A

 

[waldobushman]

Bad math. I don't know any company paying 5% on charges let alone a company with the kind of volume Apple does. Banks charge LESS for volume transactions. I'd be surprised is Apple is paying more than 1-1.5% on credit card transactions.

You're missing the point. It doesn't matter what Apple is paying for CC transactions, the calc of the Apple premium is the same from the vendor's standpoint, because the especially small vendor, charging $1 for an app add-in might be charged by a PayPal-type 5% + 5 cents per transaction which amounts to 10% to the vendor. That Apple's cost is less is not relevant. The premium to use Apple in-app purchase still means the vendor will need to charge $1.30 to use the in-app process to get the same revenue-cost that the original $1 charge would bring.

If the value to the vendor that Apple brings to the in-app purchase process is worth the premium then it's a good deal.

I would also be willing to bet that in-app + iCloud + RFID purchases will be part of the Apple biosphere.

 

[PeterQVenkman]

Hell. It's about time.

 

[manu chao]

With this said, will it be enough to keep developers happy? Will the Financial Times return? And most importantly, will consumers respond by closing their wallets?

The FT has already invested in their web app, they might as well let it run for a while to see how it works and whether customers like it. Apple might have come to late with this move, any serious content provider by now has drawn up contingency plans (eg, the FT's web app). Apple might have set something in motion they could regret in the future.

I also think that Apple's change of heart is proof that the free market works. Ever since their original decision was made, some people have been crying out for regulators to get involved.

While we have some clues (FT's web app), we cannot say for sure whether it was mainly commercial or also feared regulatory pressure that forced Apple's hand.
(Though I think it is more likely commercial pressures, we cannot not take is as a proof that the market works, the available clues are certainly indications but there is a difference between indications and proof.)

 

[MacAddict1978]

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Providers who charge the same will do well. Those that try to jack up prices for iOS access will find people much less receptive.

But unless I'm reading this wrong, while buying direct through the app is the most convenient, you have the option to shop around for a better price and still use the app.

I'm glad they relaxed those terms, but I think the sore spot for most content providers was more the 30% cut than matching their best subscription offer they were offering consumers anyway. For many companies, 30% is a big chunk of their profit margin, and in some cases, most of it.

 

[Popeye206]

Last time I saw any numbers for magazines sold on the iPad, they didn't look very good, and they had fallen quite a lot since the introduction.

The number of songs sold through iTunes, the number of books sold through iBooks, and the number of apps sold in the AppStore were mentioned during the keynote. Can't remember anything about magazines though.

From FT's decision it's obvious that they, based on their data, didn't think that "the easy access to millions of potential customers" was worth the 30%.

I think subscriptions stink because the pricing stinks. Which has nothing to do with Apple's 30%... it just has to do with what consumers will pay.

If you look at the offerings, the cost is about the same as the list subscription price. Which most people know, you can get a year subscription through a clearing house like Publishers Clearing house for 50-80% off that price.

Publishers need to get more aggressive with the pricing. They also need to make digital versions standard if you're a print subscriber (which some have) and give the option to go 100% digital.

If they would just allow a check box on their standard subscriptions of Digital, Printed or Both and nothing else would change, at least they would get more action.

But to be honest... this is part of the industry I serve... subscriptions and magazine sales are down across the board. The internet is making them more and more irrelevant. Publishers are looking for ways to change this and timely, media rich content will be the key in the long run. But it's not easy going from print to screen for these guys. Big investments with little initial return.

 

[jdechko]

This is how it should have been written in the first place. It's good to see that Apple is willing to change its course when it comes to some things. While Netflix is a beneficiary, I suspect that this is mainly to keep Amazon on iOS.

 

[ep1curus]

Looks like the removal of in-app purchases is to protect developers from Lodsys. No in-app purchase, no Lodsys looking over your shoulder. Just slapping them in the face.

 

[manu chao]

Again... It's called Channel. That is what the 30% is for.

Exactly, and companies sell the same product via different channels for different prices, taking into account that some channels offer more to the customers and they are thus willing to pay more.

Before, Apple was not allowing this.

 

[Popeye206]

Nope, there is nothing more than payment processing in the 30%. All marketing and channel distribution is done by the developer for In-app subscription. Apple does no channel work or newstand work. You need to provide your own app, market it, and then are in charge of managing accounts, distributing the content through your own channels. All Apple does is process payment and tell you XX has paid YY$.

You're talking about something else entirely, the Newstand feature in iOS 5.

So wrong yourself bub.

No where close to 30%.

If Apple provided more than just a payment processing (they don't provide any channels for in-app purchases or subscriptions), then you'd maybe start having a point. As it stands, you don't.

Sorry I'm not.

You have to consider the whole sales cycle. Consumer gets Time Magazine App from App Store. See's in-app click for subscription. Buys subscription.

Again... Apple is bringing 100's or thousands of pre-qualified customers to the table. Even if the customer is just coming in the door and picking up a coupon. There is value in the ease of access.

In my example, the customer could have went directly to Times web site and bought the subscription, but they didn't. They used their Apple account to make the purchase. Why? Probably because it was easy. They are right there at the Virtual Apple Store and all they have to do is click "Buy".

This has value. Just like store promotions do to bring in customers and sales. No difference.

Retailers have played these sorts of games with manufactures for years. It's all about the bottom line. Get the sale. And if in-App purchases make the sale happen, then Apple deserves their 30%.

Remember, there is nothing to stop the retailer from doing their own marketing outside of the App in order to drive direct sales.

 

[KnightWRX]

Looks like the removal of in-app purchases is to protect developers from Lodsys. No in-app purchase, no Lodsys looking over your shoulder. Just slapping them in the face.

What removal of In-app purchases are you talking about exactly ?

 

[Popeye206]

Exactly, and companies sell the same product via different channels for different prices, taking into account that some channels offer more to the customers and they are thus willing to pay more.

Before, Apple was not allowing this.

+1

And with the price restriction gone, they are in line with everyone else and let the consumer decide.