Apple’s New Subscription-Based Model: What’s the Big Deal?


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Apple Finally Introduces Subscriptions 

Apple today announced that they will be offering subscriptions on the App Store. Their subscription model was first introduced with News Corp.’s The Daily, which is essentially an iPad-exclusive daily magazine featuring everything from world news to gossip and sports. The new subscription model will be available to all publishers of content-based Apps, says Apple’s press release, which includes anything from magazines, newspapers, video, music or whatever it is they may offer. The billing system that all iOS and iTunes users are familiar with will continue to be used for subscriptions, so it will be an easy transition for many of them to make. Still, opinions seem to differ on whether or not this is fair. Some call it Apple’s “My way or the highway” approach and keeping their walled garden shut, while others just see it as Apple taking their cut on material sold through their devices. 

The Split 

Apple will use their standard 30/70 model in which Cupertino gets 30 percent and the seller will get 70. Some argue that 30 percent is too high, but it’s the same cut they’ve been taking since they launched the App Store. Amazon now offers the same 30/70 split for content publishers. This was an increase from the older model where it was almost the complete opposite as Amazon was known in some cases to keep up to 70 percent of the revenue. Even with the new 70 percent share to the publishers, the amount is calculated after delivery by Whispernet, which runs about 15 cents per MB, according to Amazon’s FAQS.

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Is it Fair?

In this business, a publisher is free to publish on the iPad or the Kindle if they like. On that very same note, they are free to refuse to do so. If the publication is being sold on Apple’s device, why should they not want to receive their cut? As Steve Jobs put it in today’s press release, “Our philosophy is simple – when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing,” adding that “All we require is … 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. 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.”  

Sounds about right. If Apple pitches you the product, they get some of that revenue. Think of it as a commission. However, if you buy that Kindle book outside of Apple’s device device, they don’t get their piece, because it wasn’t sold through them. Sounds simple enough.


This is Good For Publishers

As it is, developing content for iPad is much, much cheaper than doing so with ink and paper. Sadly, most content providers didn’t seem to see it that way, as taking a look at TIME magazine on the iPad will show you. All you will find in the App Store reviews are (valid) complaints saying that the magazine costs $260 a year (or $4.99 per weekly issue). It’s as if TIME is trying to push away potential iPad purchases. There is no way we are going to pay more for the digital copy than we would to buy it at our local Barnes & Noble. 

You know what we will pay for? How about four to five dollars a month? That’s a dollar or so an issue, and most subscribers would be happy to pay for that. After all, printing and shipping costs are no longer a factor. It’s a few bucks a month, and most subscribers are more than willing to fork over the cash if you give them great content.

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Anything Else?

It seems that Apple wants subscriptions available through the App Store to be priced competively with other platforms. As noted in the above quote by Jobs, he says that Apple asks that content available though the App Store costs the same or less than the same content available somewhere else.

We also remember in recent news hearing that Sony’s e-ready App was rejected from the App Store. This is becuase it offered its own purchasing method rather than going with Apple’s. What’s interesting, however, is that Amazon updated their Kindle App just yesterday, yet you can still shop the Kindle Store through Amazon’s App.  We purchased a $10 book directly from our iPad to test it out, and were able to do so without issue.


What Do You Think?

What’s your take on this subscription plan? Is Apple taking too much of a cut, or are they playing fair? Will publishers move onto another platform, or take what they can get? Let us know in the comments.


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