Apple's App Store Subscription Plan Isn't Worth Celebrating
With a much-anticipated press release this morning, Apple clarified the rules governing its new App Store subscription plan in which magazine, newspaper and other content publishers (think video and music) can finally start charging customers a recurring fee to access their regularly-updated material. Before this new feature, magazines, for example, had to sell their digital issues individually, resulting, presumably, in a steep drop-off rate. If we could implement a standard subscription model, the conventional thinking went, and charge readers monthly or annually, we would be able to retain more customers.
Oft-quoted statistics for which I can't find a source at the moment suggest that frequent newsstand visitors will pick up only seven magazines each year. The actual number isn't that important though. Subscribers, obviously, are more valuable to a publisher: Yes, they receive every issue that is put out, but, more critically, they represent a committed reader to potental advertisers who want to know something about the people they are trying to reach. If only Apple would help to provide those.
This isn't the first time that publishers hoped an Apple product would help to save the industry. When the iPad was announced by Apple last year, magazine publishers treated it as a savior. A way to sell the same content twice, publishers would be able to earn more for their product. In a way that a smartphone couldn't and on a device that traveled more easily than a laptop, magazines on the iPad would be portable and glossy while still incorporating the social media and sharing features that are only possible on a digital platform.
Things didn't go as well as was anticipated. Wired sold 100,000 copies of its first iPad issue, but, despite a rapidly increasing number of iPad owners, that figure fell to just 31,000 copies between July and September 2010. Glamour's sales dropped 40 percent between September and November and Vanity Fair and GQ reported similarly disappointing numbers.
In this second coming of Apple, publishers will find a new figure to be disappointed by: 30 percent. That's the cut Apple plans to take for itself. In the words of Apple CEO Steve Jobs, who took a break from his medical leave (at least in press release form) for this special announcement: "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."
Sort of sounds good. But there are a couple of problems here. Developers are explicitly prohibited from routing customers around the system from within the application and publishers are unable to offer better deals outside of the App Store. "All we require," said Jobs, "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."
Apple wants to make this as easy as possible for the consumer -- or that's how they're trying to sell these restrictions anyway. But they don't need to sell them; the consumer is going to make the subscription process as easy for him or herself as possible, which means purchasing through the App Store, a place where they already have their credit card information stored and can buy with, yep, one click. That counts as Apple bringing on "a new subscriber to the app," even if said subscriber is pushed to pay by advertising and other means paid for by the publisher.