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In-app subscription plan makes sure Apple gets a piece of all content

by Phil Hornshaw

Apple (AAPL) has finally announced its in-app subscription plan, a step that has been expected before, during and now after the launch of Rupert Murdoch’s iPad-only magazine The Daily. The plan is finally out, and it makes sure Apple gets a little slice of the pie on all content iPhone and iPad apps handle.

The subscription service is open to all content providers, ranging from music to magazines, as well as books. For each subscription sold through the app, Apple takes a 30 percent cut.

The subscription plan also demands that app developers who offer subscription content outside of their apps also offer an in-app purchase of the same material, again letting Apple get its 30 percent. This was the same thing Sony was throwing a fit about a few weeks back when Apple bounced its e-reader app, and the in-app store it accessed. According to Apple CEO Steve Jobs, Apple doesn’t get a cut of an app’s content if that content is sold outside the app. But you also have to offer users the chance to purchase it using the app -- and if Apple and its apps are the reason content is being bought by subscription, Apple deserves its cut, Jobs said in a statement.

“All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app,” Jobs said. “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.”

Providers can offer subscriptions other ways, as long as they also offer to sell them through in-app purchases. For example, a print magazine that includes a free iPad subscription is allowed, and Apple doesn’t take a piece. But a subscription app itself can’t be in the App Store if it doesn’t allow the in-app purchase capability.

Apps also can no longer link to web stores or other sources to sell content to app users. If you buy a subscription from your computer’s web browser, that’s one thing -- but providers can’t put a link in their apps that route users around the in-app purchase. Also, the price of the content offered through in-app purchase has to be the same price (or less) than the content as offered in other places.

The position Apple is taking makes sense, to a degree, but content providers are kind of out of luck if they were hoping to keep Apple’s fingers out of their revenue streams. The company is firmly entrenched in getting a piece of the subscriptions it sees as coming from its devices. This is not entirely unreasonable, but it’ll be interesting to see if the loss of 30 percent of subscription revenues right off the top thins out the herd of content providers who would like to use the service -- or not. Apple is banking on subscription apps doing so well, the company’s cut won’t stop them from being successful, just like with other apps in the App Store.

The big unanswered question is about other content providers with apps currently in the App Store. Sony’s (SNE) e-reader was kicked to the curb, but Amazon’s (AMZN) Kindle app and Barnes & Noble (BKS) currently don’t offer in-app purchases of their content -- instead, they link to a web store through the Safari browser and people can just download content to the app.

That’s probably about to change. Apple knows how many customers its devices bring to the apps they use, it seems, and it’s going to take hold of that revenue stream. Amazon and other booksellers likely aren’t going to be exempt because Apple feels like being generous.

So the thing we’re left waiting to find out is how content providers are going to take the news. Amazon is probably big enough that it could revolt or jump ship if it wanted to. But the vast majority of content providers will likely be paying-off Apple and hoping their apps are popular enough to make it worthwhile.