Before the iPad launched in January 2010 it was billed as the device that was going to revolutionise the publishing industry. The conventional wisdom went something like this: Apple was going to release a tablet and some form of publishing product that would let any publisher easily take content, package it up and deploy it to this ‘magical’ new device.
But when Apple released the iPad the truth was dramatically different. In fact, Apple didn’t really provide publishers with any solution at all. Its sell was this: Build a great app with your great content and consumers will buy it.
At the time, however, the only mechanism available to developers to actually monetise the content was a feature called In-App Purchasing that lets users buy content from within an app. The iTunes billing service would bill the customer and remit 70 percent of the fee back to the publisher.
The solution worked OK but was lacking one critical component; the ability for publishers to sell recurring subscriptions in-app.
So the publishing industry let out a sigh in February when Apple improved its in-app purchasing solution to include proper support for subscriptions.
The solution is perfect from a consumer perspective, but couldn’t be much worse for publishers.
First, Apple requires that any subscription sold via the in-app mechanism is subject to the same 70/30 percent revenue split as app sales – and, if publishers sell the same subscription via their website or another medium, the iTunes price needs to be the same or lower.
Second, the requirement for users to opt-in to provide publishers with
their details means that many won’t. This makes it harder for publishers to target and sell advertising to their subscriber base, which results in lower revenue from advertising.
Investigations against Apple’s practice are reportedly still ‘preliminary’ in the US, but in Europe the International Newspaper Marketing Association has called for an official investigation into the matter, cautioning that ‘publishers simply can’t afford to invest in new technology, products and services when the platform charges them 30 percent of total revenue’.
To that, industry observer John Gruber argues that ‘Apple doesn’t give a damn about companies with business models that can’t afford a 70/30 split. Apple’s running a competitive business; competition is cold and hard. And who exactly can’t afford a 70/30 split? Middlemen.
It’s not that Apple is opposed to middlemen – it’s that Apple wants to be the middleman. It’s difficult to expect them to be sympathetic to the plights of other middlemen.’
So what will happen? Well, in March, the New York Times announced its paywall and pricing. And guess what? Users will be able to subscribe via in-app subscriptions. A number of other publishers have also signalled their intention to conform to the new rules.