Update on Apple’s 30%; Outrage and Strategies

Apple’s 30% Take Triggers Outrage and Strategies

Let’s update where we are on the Apple “30%” issue. As you probably know by now, Apple announced a week ago that they will keep 30% of the revenue from new subscriptions and media purchases made in an iPhone or iPad application through its App store.

Wrote Rob Pegoraro in his Washington Post Fast Forward column on Sunday: “Because Apple doesn’t just want to offer the store’s one-click buying as an option to companies that sell subscriptions or extra content inside programs. It will require that they add App Store transactions—and demand that they offer users the same price in the App Store and at their own Web site… Essentially, Apple proposes to annex a developer’s subscription business—then charge that firm 30 percent for the privilege.” (his italics)

Apple’s argument is this according to CEO Steve Jobs: “…when Apple brings a new subscriber to the app, Apple earns a 30 percent share…We believe that this innovative subscription service will provide publishers with a brand new opportunity to expand digital access to their content onto the iPad, iPod touch and iPhone, delighting both new and existing subscribers.”

According to a Wall Street Journal article on Friday, Apple’s restrictions could make the selling of subscriptions by the publishers themselves “less attractive to customers, and steer more sales through its own system.” This is mostly because buying subscriptions through the iTunes store requires just a couple clicks and uses billing details already on file. Further, “Apple would prohibit media companies’ apps from linking to stores outside its App Store or from offering better terms to subscribers elsewhere, making it difficult for them to attract buyers to their own sites. Legal experts say some of those rules could pose antitrust problems.”

According to the WSJ, the Justice Department and Federal Trade Commission “have begun looking at the terms Apple Inc. set this week for media companies who want to sell their content on its popular iPad and other devices…” It’s preliminary but with the European Commission also “carefully monitoring the situation,” Apple’s actions are not going unnoticed.

The legal question is this: Is Apple “running afoul of U.S. antitrust laws by funneling media companies’ customers into the payment system for its iTunes store—and taking a 30% cut…”?

Pegoraro mentioned the growing disenchantment among publishers (also apparent on the SIPA listserve). He wrote that “Time Inc., has already given up on Apple and is instead bringing publications like Sports Illustrated to Google’s Android and HP’s webOS.” And the Rhapsody music service has suggested it might pull its application from the app store. “Apple didn’t have to take this route,” he wrote. “It could have made App Store billing an option or taken a smaller share.”

He gave an example—Google “just launched its own subscription feature called One Pass that takes care of billing and subscriber authentication across multiple devices. In that, Google will keep 10 percent of the proceeds.”—and pointed out that the efforts of third-party developers have made Apple’s devices more valuable.

For SIPA members, not getting customer information and demographics may be a bigger obstacle to buy-in than the 30% take. Wrote Lucretia Lyons of Business Valuation Resources: “In our existing partnerships I wouldn’t give up the requirement that we exchange customer data, but maybe in order to get into broader channels like Apple and Google we’ll be forced to consider sacrificing some of that in exchange for reaching these other audiences? I would at least expect a clear path back to the publisher for the buyer who wants more.”

Phil Ash of Capitol Information Group agreed “that if one wants to find new customers which they could not reach ordinarily, there may be sacrifices to make.”

He then added one possible solution. “I absolutely think we all have the power to ultimately get a lot of the customer data in spite of Apple. Seems to me this can be accomplished through repeated calls to action within the subscription product. So if Apple sells them your paid service that has a complimentary ezine, they would initially get only the paid service via Apple. But in that content, you would inform the reader that they NEED to go to www.xyz.com in order to get the ezine and know the full story. You could ask for just email address or full customer info. Once you have their email address, you can do most of the cross-selling and renewal sales that you wish. And if the reader wants a complimentary print version, they can give you their postal info too.”

Good advice. Stay tuned.


This issue is sure to be discussed at the:
2011 Winter Publishers Roundtable
March 14-15, 2011
McGraw-Hill Conference Center
1221 6th Avenue, 2nd Floor
New York, NY 10020

Please remember that attendance is limited
at this event and it really is filling up fast.
So sign up today!

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