Apple's New Subscription Model: Pros and Cons
Apple recently said it wants a 30 percent cut of all subscriptions sold on iOS devices, including services that offer music, video, newspapers and magazines. But Apple's move may force digital publishers and content providers such as Netflix, Amazon and Hulu to think long and hard about continuing to offer apps for iPhone, iPad and iPod Touch devices.
Music subscription service Rhapsody is already vowing to fight back, arguing that Apple's 30 percent cut would make Rhapsody's iOS apps "economically untenable." "We will be collaborating with our market peers in determining an appropriate legal and business response to this latest development," the company said in a statement.
Apple's new policy
Under Apple's new in-app subscription model announced Tuesday, all businesses offering content subscriptions on iOS apps must use Apple's new subscription service. That means Apple gets a 30 percent cut of all subscription transactions that happen on an iOS device.
As a trade off, digital publishers can still offer content within an iOS app for free to existing subscribers, as long as they also offer a "subscribe" button within the iOS app.
But the part that has the potential to upset digital publishers is that all links to make purchases outside an iOS app have to be removed. That means links such as Amazon's "Shop in Kindle Store" button, which boots you from the Kindle app and into mobile Safari to purchase books, may have to be removed.
So what are the possible implications for Apple's new mandatory subscription model? Let's take a look.
Easy To Buy
For the average iOS user, Apple's new subscription model will let you buy a subscription within your favorite apps with just a few clicks. You won't have to worry about entering your credit card information or filling out a form on a cramped iPhone screen since Apple already has all your information.
Although buying Kindle e-books on an iOS device is a pretty good experience, it is a bit of a hassle. You have to go to Amazon's website, buy your book, then reopen the Kindle app and go to the archived section to download your new item. Sure, buying a Kindle book is relatively easy once you get the hang of the system, but it's far from a seamless experience.
Compare buying a Kindle book with getting a comic book on the Comixology iOS app. Let's say you want to buy an issue of The Green Hornet. All you do is hit the buy link, enter your Apple account password and the comic book starts downloading. Two steps instead of four.
Boon for the Little Guy
Major publishers might be upset over Apple's subscription model, but it could be a huge advantage for smaller publishers that don't have any content royalties to pay. If you wanted to create your own magazine or local newspaper, for example, having an in-app subscription model makes it that much easier to introduce people to your product and encourage them to subscribe.
Highly Unfair To Music and Video Businesses
Sharing profits with Apple isn't so bad if you own what you're selling -- news content, for example. Apple is footing the bill for all that iOS infrastructure to sell your app, so giving Apple a cut is inevitable. But subscription-based companies that have to pay royalties on content such as music (Rhapsody), TV shows (Hulu) or movies (Netflix) could end up getting screwed in the deal. "An Apple-imposed arrangement that requires us to pay 30 percent of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable," Rhapsody said in its statement.
Marquee names go out?
Apple will apparently require Amazon to remove its "Shop in Kindle Store" link from the bookseller's iOS app, according to Computerworld. Amazon already prices many of its Kindle books below the cost of buying the same content on Apple's iBooks app. Under the new rules, not only would Amazon have to undercut its competitor, but Amazon would also have to turn around and give Apple a 30 percent cut of its eBook sales.
Companies such as Amazon and Netflix haven't made any public statements about Apple's new subscription model yet. But you have to assume they're thinking long and hard about this new policy and whether they should pull out of iTunes altogether.
DRM is Evil
Amazon Kindle books are locked down with digital rights management technology so you can't read a Kindle book on anything but a Kindle app. You probably thought you were safe doing this since Amazon's Kindle software is available on almost every digital platform you can think of. But what happens if Amazon pulls its iOS Kindle reading app in protest over Apple's new policies? You didn't bank on a spat between Amazon and Apple did you?
If you've got a growing library of Kindle books on your iOS apps, but no physical Kindle device, that means you'll be reduced to reading Kindle books on your PC or Mac if your Kindle app stops working. Amazon's DRM digital locks mean you can't transfer Kindle books to another e-reading app such as Stanza or eReader. Eventually, Amazon's Web app will let you read full Kindle books online, but it's not ready yet.
To be clear, this is just speculation; Amazon hasn't made any announcements about its Kindle app, and it's not entirely clear whether its policies will be affected by Apple's new in-app subscription policies.
If you're a regular user, iOS subscriptions are good news, but whether content providers will bristle under Apple's new subscription regime remains to be seen.
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