All subscription-based apps will soon be required to offer in-app purchases, with a 30 percent cut going to Apple. That means the profit margins for Internet services will get slimmer as consumers are enticed to get their subscriptions directly through iOS. John Paczkowski at All Things D notes that these apps have until June 30 to provide an in-app purchase mechanism, and, although they can still allow subscriptions outside the app, the pricing within iOS must be equal or better.
Here are five services that could be affected by the policy change:
Hulu charges $8 per month for its Hulu Plus service, which extends streaming video access to the iPhone and iPad, among other devices. But Hulu also has to pay for the content it makes available, and that could be difficult if subscriptions coming through iOS result in $2.40 less revenue per user, per month. My prediction: Hulu Plus users will be treated to more ads on iOS devices to make up for Apple’s cut.
Like Hulu, Netflix charges $8 per month for a streaming video plan that excludes mail-order DVDs. However, I’m guessing the impact of Apple’s subscription policy on Netflix won’t be as immediate because of Netflix’s huge existing subscriber base and abundance of other devices that support streaming. Worst-case scenario prediction: Netflix removes its iOS apps as a kind of power play.
Apple’s policy also states that apps may no longer include links that “allow the customer to purchase content or subscriptions outside of the app.” That means e-book apps such as Amazon’s Kindle and Barnes & Noble’s Nook will have to sell their wares on Apple’s terms. If these services want to stay on iOS devices without destroying profits, they’ll have to raise e-book prices.
All three subscription music services listed above charge $10 per month for unlimited, on-demand streaming music to smartphones, while comparable services on the PC cost only $5 per month. Why the discrepancy? Playback on mobile phones requires additional licensing fees. Although I don’t know how much money these services make per subscriber, I hope it’s more than $3. Otherwise, Apple’s 30 percent cut will wipe out profits for these services, potentially leading to price hikes for new subscribers.
There’s no shortage of online storage services clamoring for your business with iOS apps, all with different pricing models. Expect the reaction to be different for each service, but those who need to change their terms may resort to some combination of higher prices, lower monthly limits, or file size restrictions.