Is Apple's New iPad Subscription System Extortionate?

Cupertino lays out new terms for iPad app subscriptions. Is the model unsustainable or a boon to struggling publishers?

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On Tuesday, Apple announced new terms for publications that sell subscriptions on its iPad. The move was hotly anticipated as publishers scramble to find new revenue streams to prop up their struggling print products. Publishers, though, may not find Apple's terms very endearing.

The Cupertino-based company will take a 30 percent cut from every new subscription purchased in the App Store. If publications sign up new users outside the App Store (e.g. on a magazine or newspaper website) Apple will not take a cut. However, publishers must offer the subscription for the same cost, or lower, inside the App Store. Additionally, publishers will only retain the name and e-mail addresses of customers if the users explicitly agree to divulge that information (something many subscriber's aren't likely to do).

So is this good for iPad owners? Is it good for publishers? Here's where different tech and media pundits are coming down the issue.

It's Good for Consumers:

The upside of the new system is that it makes online purchases simpler for consumers. Previously, a number of apps linked to websites outside the app to purchase items such as books (like in the case of the Amazon Kindle app). Now, those purchases will go through Apple's payment system, which charges the credit card linked to the users iTunes account. The previous "browser-based approach," writes Technologizer's Harry McCracken, was "more than a tad clunky."

MG Siegler at TechCrunch goes even further:

This in-app subscription system will undoubtedly be one of the most user-friendly systems that subscription billing has ever seen. Actually, I don’t think it’s a stretch to say it will be the most user-friendly. Apple has created a centralized place to handle a wide variety of subscriptions spanning many different companies. All streamlined. All with one-click capabilities. No need to enter billing addresses. No need to enter credit card numbers. If you want to unsubscribe, it’s one-click. Change you subscription terms? One-click. What was once a nightmare of dozens, or hundreds, or thousands of different backend systems (or worse, phone calls) is now all taken care of thanks to the iTunes ecosystem.

It's Bad for Publishers:

First, Alan Mutter at Newsosaur points to the issue of publishers not knowing the personal details of subscribers. "While it is bad practice for any business not to know and have a direct relationship with its customers, this represents big-time heartburn for newspapers and magazines who want to count those subs in their audited circulation numbers," he writes. "If publishers cannot identify their iApp customers, it will be difficult, if not impossible, to prove their cross-media reach to advertisers." Jeff Bercovici at Forbes agrees. "Without that information they're far less valuable to advertisers."

Joshua Benton at Nieman Lab says Apple's thirty percent cut could be unsustainable for its partners, particularly "for publishers who had been counting on a new rush of tablet revenue to support a lagging print model." Ryan Carson at Think Vitamin calls Apple's offer "extortionate."

"Does Apple deserve a large cut for the massive audience they bring to mass-market apps? You bet," he writes. "Do they deserve the same cut from companies who are simply augmenting their offering with iOS apps. Definitely not."

Meanwhile, Lucia Moses at Media Week focuses on Apple's demand that subscription services cost the same outside the App Store as they do inside the App Store. "That's a tricky issue for publishers where print/digital bundles are concerned, as prices for print subscriptions can run the gamut due to publishers' tendency to experiment with multiple offers as they hunt for new customers," he writes.

It's a Great Opportunity for Publishers:

Representing the minority view, MG Siegler at TechCrunch notes that publishers will now get quick access to the large iTunes customer base:

Apple has built a new backend system that any of these apps can take advantage of. And when they do, it will give them within one-click access to some 100 million-plus credit cards. As Apple puts it, “Subscriptions purchased from within the App Store will be sold using the same App Store billing system that has been used to buy billions of apps and In-App Purchases.” Apple knows that a ton of users will use such a system when it’s in place. And so they want their cut for enabling that — but only when that system actually brings in new subscribers.
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