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Apple’s Landgrab Could Chill Or Cheer Content Subs

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Subscription digital content is one of the most promising opportunities for moving troubled media forward. Still wedded to its traditional single-purchase model, Apple (NSDQ: AAPL) operates no such business of its own – instead, it’s trying to claim a large chunk of everyone else’s

Today, many providers facilitate in-app subscriptions using their own mechanisms, usually pointing to an external sign-up website. But Apple is requiring that new subscriptions must be processed using iTunes Store, and “publishers may no longer provide links in their apps (to a web site, for example) which allow the customer to purchase content or subscriptions outside of the app”.

It means services like Spotify, Netflix (NSDQ: NFLX), Hulu and more, whose apps currently let users click out to a web page to become new subscribers, must either use iTunes payments (and give up 30 percent of income) or go home.

Such services are not even allowed to bypass the dilemma by simply offering read access to existing subscribers, by yanking a sign-up of any flavour. Apple tells paidContent.org that providers of apps bearing subscription content must offer a subscription mechanism (and that mechanism must be Apple’s).

That could be a horror story for the creators of content which is distributed by such services – the likes of newspapers, movie studios and record labels, which are all looking to subscription access as a next-generation consumer model to offset stagnating sales of individual units.

Yes, in reality, it’s likely most people today use subscription apps using multi-platform subscriptions they already took out on the desktop web. But many new consumers are now taking out their first subscriptions using these gadgets – iPad generated a tenth of all new Financial Times subs last year, and Spotify wouldn’t have 750,000 premium customers were it not for iPhone.

Seamless, Apple-esque in-app subscription payments could grow those numbers significantly. But, if providers baulk at the cut sought by Apple, they would have to disembark from iPhone and iPad entirely – subscription content would be dealt a blow (If they don’t baulk, Apple is about to become even more filthy rich).

Despite persistent rumour, Apple still shows little sign of launching a subscription-access iTunes of its own, even though iTunes music sales’ U.S. growth has stopped – instead, it has turned iTunes Store in to a subscription facilitator for third parties. This is smart (because it is getting a foot in the subscription door relatively early) and it’s greedy (because it is claiming such a high revenue percentage from businesses it has played no part in building).

Even a subscription billing mechanism as seamless as Apple’s will be a recipe for frustration amongst publishers, who have already protested for a while now that they get insufficient consumer data from iTunes Store.

Apple shouldn’t bet that content owners will necessarily be on its side. Some, like Warner Music Group (NYSE: WMG), are keenly encouraging subscription music services, which it hopes will pick up from plateaued iTunes music sales and which could give Apple its first real competition in the digital music space.

2 Responses to “Apple’s Landgrab Could Chill Or Cheer Content Subs”

  1. But what if it’s not the publisher complaining? Netflix isn’t a publisher. They still have to pay the exact same amount for the content they syndicate, but now Apple is claiming 30% of their revenue (NOT profit), which might just make them lose money hand over fist. Perhaps they’re operating at a margin of 30%? Then they’ll make no revenue whatsoever, but will still need to pay for the infrastructure to support their service (since Apple doesn’t offer that, it only handles transactions). How about if they have a 10% margin? Then they’re operating at a 20% loss before even looking at the costs of operating their businesses.

  2. “…and it’s greedy (because it is claiming such a high revenue percentage from businesses it has played no part in building).” Ha. Publishers have always taken a huge take of something they had no part in building–a book publisher, the platform, keeps 80%-90% or more of a book’s sales, the writer–who ‘built’ the work–getting only the leavings. So publishers’ complaint here about still getting the larger part of the sales when they’re not even the platform is…?