Apple Reverses Course On In-App Subscriptions

[KnightWRX]

You have to consider the whole sales cycle. Consumer gets Time Magazine App from App Store.

This part is not under the In-App purchase/subscription based 30%. This part is paid for by the 99$ yearly fee and the 30% of the app's purchase price. Thus it doesn't apply.

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.

How is Apple "bringing" these people exactly ? Unless you market your app, you're just one link lost in a sea of 300,000 on the App Store. Apple does no marketing for you at all.

 

[Rodimus Prime]

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.

30% for maybe small time ones but for larger companies that already have a payment processing set up and other things it is worth at MOST 5%.
Payment processing for them cost maybe 3% so an extra 2% to Apple is not a huge deal.
They are gaining very little.
Add in the fact that Apple is the only place to get on iOS is an issue.

I also feel Apple gave because they knew if they kept pressing they would be facing a world of legal trouble for Antitrust and anti competive practices over in Europe which is a lot less forgiving than the US.

 

[Jaro65]

Will this be enough to help make FT change their mind? The browser "app" is ok, but not nearly as good as the dedicated iPhone and iPad applications.

 

[charlituna]

That seems about fair. It means Spotify etc can now just continue doing what they're doing and all they need to do is display a message rather than a link (they can even say go to spotify.com to buy, and it wouldn't infringe on those terms if it wasn't clickable).

Actually any mention of going outside of the app is likely against the rule.

The only thing this has changed is that they can, if they choose, charge more inside the app than out. It's an ego move to stroke the publishers more than anything else. They didn't like Amazon setting the price for Kindle books, they didn't like Apple setting the price for itunes tracks etc.

But in the end there is no proof any of them would have actually pulled out just like there is no proof that they will charge different prices.

 

[mdatwood]

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

Why do people keep saying something that is completely wrong!? Without apps (ie, CONTENT) the iPhone wouldn't be anywhere near as popular as it is today. No one is taking a free ride on Apple, in fact Apple is constantly pushing the edge of taking a ride on all the content developers. Apple and developers are a symbiotic relationship and Apple needs to be careful to not kill its partners.

 

[BC2009]

This makes sense. I was all for Apple making money on the business they generate for the developer, but clearly that does not give them the right to govern the price outside the app. I think the biggest problem was folks who set up shop inside of Apple's ecosystem selling things to users without using IAP. Apple hosts the "free" app and makes no money on it (actually incurs a cost), then the developer can sell the user content from inside the app but Apple gets no cut of that. I call that free-loading.

The analogy that comes to mind is walking into the local McDonalds, getting a free cup of water, sitting at one of the tables taking up space, and selling sodas out of a ice chest to the customers that walked in. I should be allowed to sit at the table and maybe even sell sodas to those same customers, but I should not be advertising my soda-selling business from within the McDonalds -- I should be generating my business independently or giving McDonalds a cut of the sodas I sell from within their restaurant.

These new rules bring sanity back. If Apple really is providing a large customer base to these developers, then the volume will likely create the incentive to use IAP, else have a competitor who uses IAP beat you out due to convenience. And let the developers create whatever pricing model they want -- it is their business to manage -- just give Apple the 30% cut when the Apple ecosystem is generating the business for you. I know I would prefer IAP purchasing to going to some website after download in most cases.

 

[charlituna]

Smart move, not least of all because it's the Right Thing to do. I also wonder if they were breaking the law a little bit -- as far as I know, you can only dictate the 'minimum advertised price' -- forcing a retailer to sell at a particular price is illegal, and Apple were kind of coercing the publishers in to doing that.

Apple wasn't picking the specific price. Just setting the rule that what you set yourself has to be the same across the board. Rather like saying that a paper book publisher, DVD publisher etc can set a 'suggested retail price' for an item but they can't set a different one for every state. It's one price for everyone.

Now Apple is allowing the publishers to be more like the stores that carry the products. There's the App Store, the web store etc, each with its own markdown from the SMRP. But only time will tell if they go for that rule and actually set different prices.

 

[BaconTime]

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.

A lot of people are arguing along these lines but I simply don't think that this "easy access" is going to translate into anything concrete for established content producers like WSJ, Conde Nast, etc. With the app store, yes, absolutely, there was zero market for most of those utilities and minigames before, but I don't think magazine subscriptions are going to see the same kind of explosive jump in revenue just because they are now available in the app store. I certainly haven't seen any impressive subscription numbers since they were added to the app store. So you can use that on a marketing sales pitch in theory, but in practice I don't it is resulting in enough concrete benefits to match what Apple was asking for.

 

[Jcoz]

This part is not under the In-App purchase/subscription based 30%. This part is paid for by the 99$ yearly fee and the 30% of the app's purchase price. Thus it doesn't apply.



How is Apple "bringing" these people exactly ? Unless you market your app, you're just one link lost in a sea of 300,000 on the App Store. Apple does no marketing for you at all.

Its completely foolish to try and establish a global value that apple would provide to each publication via in app purchasing.

Some would benefit, and other clearly benefit very little of nothing.

Questions regarding this would be are they getting new customers, or are existing ones just transferring over or adding services?

To act like every pub is in fine shape without this channel is just being intentionally dense.

And I'm not saying that you believe that, but it seems to be the way you assess this situation.

I've already said I'm happy with the results, so its not me arguing that apple needs 30%, just saying nothing is ever so black and white.

 

[charlituna]

This makes sense. I was all for Apple making money on the business they generate for the developer,

That has always been the way the game was playing. Apple was only getting a cut of what went through their system.

but clearly that does not give them the right to govern the price outside the app.

The notion was that they didn't want publishers to be able to punish users that picked to go through IAP where Apple's privacy rules would cut off demo data etc. Now Apple has decided what the hell, if a publisher wants to play games let them. Apple can say they don't control the prices and let the bad PR fall on the other guys.

 

[KnightWRX]

I think the biggest problem was folks who set up shop inside of Apple's ecosystem selling things to users without using IAP. Apple hosts the "free" app and makes no money on it (actually incurs a cost), then the developer can sell the user content from inside the app but Apple gets no cut of that. I call that free-loading.

That's patently false. First, free-apps are not "free loading". They provide value to Apple. It's called "Hey, look, we have 300,000 apps! We have 4 Billion downloads!". Users use the platform because of the apps. No "There's an app for that!", no iOS.

Second, developers pay 99$ yearly fee. That is what Apple decided to charge for the possibility of having free apps on the app store. If that is not enough money, then that isn't the developer's problem, that's Apple's problem.

So let's drop the notion that Apple is trying to make back some kind of profit on the In-App stuff because of the free apps. They are far from losing any money as it stands, they get great value out of the free apps in the form of platform viability and they also get a 99$ yearly fee.

Its completely foolish to try and establish a global value that apple would provide to each publication via in app purchasing.

Some would benefit, and other clearly benefit very little of nothing.

Same as it is completely foolish to ignore the value that each publication brings to Apple by simply making a native app for the App store. Hence why bother to try to put this in the equation ? The relationship as far as the presence of the app goes is symbiotic and both entities profit from it. It's also paid for, not through the 30% IAP/IAS stuff, but through the 99$ yearly fee and 30% of the app purchase price itself (if it isn't free).

Thus, again, the use of Apple's IAP/IAS service only provides payment processing. That is the only tangible and calculable value the publisher is getting. 30% for payment processing is astronomic.

Now that Apple relaxed the rules, it's much better, they are now completely optional as a payment processor. The only thing that I think still stinks in the whole deal is 1.14 and the restriction against linking to another payment processor directly in the app.

 

[KnightWRX]

double.

 

[theBB]

43% premium, not 30%. Apple take 30% of the in-app price. So if an item is selling outside the app for $1, it would need to sell at $1.43 inside the app to return the same $1 to the developer. (30% of $1.43 = $0.43)

That only makes sense if you assume the handling the subscriptions were not costing any money to the developer or the media company in the first place. Most magazines use third party junk mailers to bring them new subscribers, who may be taking an even bigger cut from them. Magazines offer larger discounts on top of that if you accept automatic renewals.

 

[samcraig]

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.

Actually - working for a major IT firm - I do. And you're being very basic and simplistic in your argument against costs. You're not accounting for the mortgage, staffing, utilities, bandwidth, security, monitoring, and so on. It's not like Apple just has a bunch of cheap hard drives and is good to go... Your summation is either naive, an attempt to be sarcastic/clever, or something else entirely. But it's not exactly accurate.

You're missing the point.

I didn't miss anything. I was responding to someone's post which was factually incorrect. That's all. Nothing more - nothing less.

 

[KnightWRX]

I didn't miss anything. I was responding to someone's post which was factually incorrect. That's all. Nothing more - nothing less.

If you're referring to mine, I have explained it to you how my post is factually correct.

 

[blueskymike]

This move just prevents any sort of anti-trust litigation that surely would have come if Netflix, Barnes and Noble, and Amazon had their apps banned from the platform. But will it prevent further HTML5 app alternatives? If I were any of those media companies I would not bee too happy about not being able to link to my site and/or store.

Apple's change of terms did not go far enough. They are still making some powerful enemies of some very big companies.

 

[theBB]

How is Apple "bringing" these people exactly ? Unless you market your app, you're just one link lost in a sea of 300,000 on the App Store. Apple does no marketing for you at all.

Magazines keep sending me reminders mails to renew my subscriptions, which has a substantial cost. Subscribing through the App store would move the customers to automatic renewals, which most people refuse when they subscribe through mailed forms. It also makes it easier for magazines to up sell to the same customer base. There is certainly some value in having an App store, otherwise they would not do it in the first place. Apple wants a cut of that value. If that cut is too much for you, feel free to leave that avenue.

 

[samcraig]

If you're referring to mine, I have explained it to you how my post is factually correct.

No. And it's frustrating in general (not directed at you) that people jump into threads or skip pages, don't read posts, etc to see the development of the conversation. Some people come in - see a single post and it's taken out of context completely.

So I'll explain for those people. A poster intimated that Apple's CC transaction fee with the CC companies was 5%. My post which countered that was simply stating that there is NO way Apple is paying 5% for a CC transaction from their bank or 3rd party vendor. With the volume they do - they are at MOST paying 1-1.5% per transaction. And I think even that is being kind. But NO way is it 5%

 

[KnightWRX]

Magazines keep sending me reminders mails to renew my subscriptions, which has a substantial cost. Subscribing through the App store would move the customers to automatic renewals, which most people refuse when they subscribe through mailed forms.

Not a property of the App store at all. You could have auto-renewals through "mail" by charging the same CC:. You could have automatic-renewals through the magazines website by charging the same CC: too.

There is nothing inherent about the App store infrastructure that removes the need for renewals per se.

It also makes it easier for magazines to up sell to the same customer base.

How so ? What does a payment processor help with up-selling ?

There is certainly some value in having an App store, otherwise they would not do it in the first place. Apple wants a cut of that value. If that cut is too much for you, feel free to leave that avenue.

The App Store itself is not what we are discussing. Access to the App Store is not paid for by the 30% of IAP/IAS.

 

[Rodimus Prime]

Actually - working for a major IT firm - I do. And you're being very basic and simplistic in your argument against costs. You're not accounting for the mortgage, staffing, utilities, bandwidth, security, monitoring, and so on. It's not like Apple just has a bunch of cheap hard drives and is good to go... Your summation is either naive, an attempt to be sarcastic/clever, or something else entirely. But it's not exactly accurate.

Then provide better numbers.
I know for a fact that 3-4 years ago I could buy for less than $1/gig server data storage no problems off companies that would never expire.
End of store is data storage is dirt cheap and dropping like rock.
You put all the accounting in place (mortgage, staffing ect) and those are more or less fixed cost per server. HD space per gig is dropping like a rock and has been for a long time. So your fix yearly cost stay the same but the amount of storage increases.

Data storage is very cheap per gig and getting cheaper all the time.
No getting around that fact.
Bandwidth cost is getting cheaper for Mbit so you are getting more and more bandwidth at the same cost.
Staffing cost that is not growing at the same rate and it is becoming cheaper and cheaper pure gig (along with everything else)

 

[BC2009]

30% for maybe small time ones but for larger companies that already have a payment processing set up and other things it is worth at MOST 5%.
Payment processing for them cost maybe 3% so an extra 2% to Apple is not a huge deal.
They are gaining very little.
Add in the fact that Apple is the only place to get on iOS is an issue.

I also feel Apple gave because they knew if they kept pressing they would be facing a world of legal trouble for Antitrust and anti competive practices over in Europe which is a lot less forgiving than the US.

Rodimus, I am rarely in line with your point of view, but I am pretty much in agreement with what you said here.

1) Payment processing is NOT worth 30% to a big-time seller of an established product.

2) Price fixing the outside-of-app-purchase price was not going to hold up in many countries (likely even the US).

However, it is important to note that the 30% certainly covers more than payment processing. For example (today):
(a) App is hosted by Apple (distribution)
(b) App can be found on App Store (marketing)
(c) App description or buttons can direct the user to an external website (marketing)
(d) IAP reduces barriers to purchase since dealing with known entity (sales channel)
(e) Payment processing provided by Apple (fulfillment)

I won't cry for Apple on (a) since they forced all developers to sell on their App store which means nobody else can host their own app. Points (b) and (c) are fairly significant for small-time developers; however, big-time players like Amazon should be able to manage advertising their iOS apps along with how to subscribe to the service without doing it from within Apple's ecosystem (free-advertising which is no longer allowed under new rules). Point (d) is Apple's biggest focus when they spoke about the IAP rules and if they are right that they are truly generating a significant portion of the developer's business, then they deserve a cut. By allowing developers to set their own price though, competition will surely make it obvious if the 30% cut to Apple is truly worth the amount of business they generate on a per-developer basis. The last piece of this is of course payment processing (e).

For the small-time developer, (a) through (e) is a pretty good deal for 30%. For the established developers it seems a bit much since those companies are capable of absorbing the marketing and payment processing for less money. For developers who are themselves middle-men reselling somebody else's content through an agency model, then Apple's 30% was completely unmanageable.

The new rules are what they should have been all along. Allow the developer to sell content or subscription outside the Apple ecosystem, but make those developers 100% responsible for their own marketing of those features that are available from outside the Apple ecosystem and make them responsible for fulfillment and payment processing.

I think the end result will be a Kindle app that says you can read all the books you have purchased on Kindle with no links to purchase content from Kindle's bookstore (not even in the app's description). Basically, Amazon will be responsible for making users aware of how to get to their ecosystem and users will be able to access things purchased from the Amazon ecosystem on their iOS device. Essentially Store B won't be allowed to walk into Store A holding banners advertising for Store B (which is fair to Store A), while users who purchased something at Store B are not going to be banned from bringing it into Store A (which is fair to the user and Store B).

 

[KnightWRX]

No. And it's frustrating in general (not directed at you) that people jump into threads or skip pages, don't read posts, etc to see the development of the conversation. Some people come in - see a single post and it's taken out of context completely.

Agreed, I find myself often having to repeat the same things over and over in a thread because people fail to take context into account or fail to read the whole thread before replying to a post that was posted early in the thread that might have gotten clarified later.

However, it is important to note that the 30% certainly covers more than payment processing. For example (today):
(a) App is hosted by Apple (distribution)
(b) App can be found on App Store (marketing)

This is not covered by the 30% of IAP/IAS. Stop equating it to that 30%. This is covered by the 99$ yearly dev fee and the 30% of the App purchase price.

The 30% IAP/IAS charges are on top of that and only provide payment processing for the IAP/IAS service as defined in the StoreKit framework.

Also, simply being listed in the App Store is far from marketing. There's 300,000 apps in there, good luck making a decent living without doing your own marketing.

(c) App description or buttons can direct the user to an external website (marketing)

Built inside your app, thus not provided by Apple.

(d) IAP reduces barriers to purchase since dealing with known entity (sales channel)

Other well known entities exist. They charge much less. Is Apple really more well known than Visa ? MasterCard ? PayPal ?

(e) Payment processing provided by Apple (fulfillment)

The only service provided by Apple for IAP/IAS. 30% for (e). Compared to Visa or MasterCard or Paypal that charges much less, yet was prevented by Apple's rule based monopoly before these adjustments.

 

[a.gomez]

well done!

 

[Jcoz]

Same as it is completely foolish to ignore the value that each publication brings to Apple by simply making a native app for the App store. Hence why bother to try to put this in the equation ? The relationship as far as the presence of the app goes is symbiotic and both entities profit from it. It's also paid for, not through the 30% IAP/IAS stuff, but through the 99$ yearly fee and 30% of the app purchase price itself (if it isn't free).

Thus, again, the use of Apple's IAP/IAS service only provides payment processing. That is the only tangible and calculable value the publisher is getting. 30% for payment processing is astronomic.

Now that Apple relaxed the rules, it's much better, they are now completely optional as a payment processor. The only thing that I think still stinks in the whole deal is 1.14 and the restriction against linking to another payment processor directly in the app.

Incalculable does not = meaningless.

So you have two large variables in an equation which you'd like to just say are worth the same?

So magazines and newspapers are doing great then in your opinion? I doubt it.

I'd say its just impossible to say how much value that newstand and inapp subscriptions will benefit the publishers vs Apple.

You might disagree, but one thing that simply makes no logical sense whatsoever is you canceling out those to things and saying that clearly the only service here to a publisher is CC processing.

There is easily more tangible evidence that paid publications have more to gain by having that channel than apple does them. Simply look and the two businesses.

The two businesses have been on opposite trajectories.

 

[theBB]

But will it prevent further HTML5 app alternatives? If I were any of those media companies I would not bee too happy about not being able to link to my site and/or store.

Are you sure about that? Most media companies wishes there were no websites, where people can get content for free, in the first place. They are all trying different ways of putting up paywalls.