Confirming many recent reports, Apple (NSDQ: AAPL) finally announced it wants to take a 30 percent cut of in-app content subscriptions. It boils down to this…
—Content owners can bring to their apps existing consumers who subscribe on their websites.
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—But, for new subs taken out in apps, iTunes Store payments must be used.
Right now, many publishers let readers take out new subscriptions inside their apps using their own billing mechanisms. Apple’s announcement does not explicitly state that this will be disallowed, but that’s the clear implication.
If publishers baulk at coughing to Apple 30 percent of app-generated subscription income, the net result could become a more fragmented landscape for consumers - either publishers could promote their own billing mechanism especially hard, meaning billing does not occur on the same device on which content is read, or publishers could quit iTunes Store and iOS devices altogether.
The move has been a tactic waiting to happen - Apple, ever the greedy gobbler of consumer spend, is making massive money from apps, but now new kinds of apps can be downloaded for free, with big business transacting inside as subscriptions.
Apple’s announcement below:
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CUPERTINO, California—February 15, 2011—Apple® today announced a new subscription service available to all publishers of content-based apps on the App Store℠, including magazines, newspapers, video, music, etc. This is the same innovative digital subscription billing service that Apple recently launched with News Corp.’s “The Daily” app.
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. Publishers set the price and length of subscription (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly). Then with one-click, customers pick the length of subscription and are automatically charged based on their chosen length of commitment (weekly, monthly, etc.). Customers can review and manage all of their subscriptions from their personal account page, including canceling the automatic renewal of a subscription. Apple processes all payments, keeping the same 30 percent share that it does today for other In-App Purchases.
“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,” said Steve Jobs, Apple’s CEO. “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. 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.”
Publishers who use Apple’s subscription service in their app can also leverage other methods for acquiring digital subscribers outside of the app. For example, publishers can sell digital subscriptions on their web sites, or can choose to provide free access to existing subscribers. Since Apple is not involved in these transactions, there is no revenue sharing or exchange of customer information with Apple. Publishers must provide their own authentication process inside the app for subscribers that have signed up outside of the app. However, Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app. In addition, 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.
Protecting customer privacy is a key feature of all App Store transactions. Customers purchasing a subscription through the App Store will be given the option of providing the publisher with their name, email address and zip code when they subscribe. The use of such information will be governed by the publisher’s privacy policy rather than Apple’s. Publishers may seek additional information from App Store customers provided those customers are given a clear choice, and are informed that any additional information will be handled under the publisher’s privacy policy rather than Apple’s.
We'll be addressing some of these themes during our next conference, paidContent 2011, March 3 in New York City. You can find out more about the agenda and register here.
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The new co-presidents of Walt Disney Co.'s digital media group used the platform of the company's investor conference in Anaheim on Thursday to say what Wall Street has been longing to hear: that the money-losing division will achieve profitability in 2013.
John Pleasants, co-president of Disney Interactive Media Group, said the division made significant layoffs in January and plans an additional 25% cut in operational overhead "in our march to profitability." No details on timing were offered.
"In the last 90 days, we've focused on getting the right team and scaling the team to where the business is today," Pleasants said, adding that the earlier wave of job reductions had already "taken millions of overhead out of the Interactive media group."
Pleasants and Co-President Jimmy Pitaro talked about refocusing the business to take advantage of new opportunities online and on mobile devices -- a theme Disney Chief Executive Robert A. Iger has underscored in earnings calls with investors.
The interactive group will begin shifting resources away from developing games for the mature console market, reducing spending by 50% over the next four years, Pleasants said. "That does not mean we won't be making boxed product," he hastened to add, noting the popularity of the Epic Mickey title released late last year.
Pleasants, who oversees games and social media within the division, talked about better capitalizing on opportunities -- not only on emerging technological platforms, but in burgeoning international markets. He said the division will narrow its focus to "four to six major franchises," creating content to take advantage of growth areas, while experimenting with business models -- from free to subscription to micro-transactions, in which players pay modest sums to enhance their online experience.
The group aspires to create its own world-class character franchises that can flow to other parts of the entertainment giant's businesses, much as Pixar Animation's "Toy Story" characters or Marvel Entertainment's superheroes fuel merchandise sales.
One such home-grown franchise Pleasants highlighted is Club Penguin, an online world for children that has grown by 400% in the last three years.
Pitaro, who has oversight of the Disney.com portal and a collection of websites for mothers and families,talked about creating a more personal experience that's shaped by a user's interests.
"When we deliver the right content to the right user at the right time," Pitaro said, "we'll grow reach and engagement and have a more powerful platform to surface the fantastic content we have across our company,"
-- Dawn C. Chmielewski
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