Apple's new policy on subscription apps hit s hard

Apple's new subscription service for apps - which gives it a 30 percent cut on sales - met with resistance Tuesday, as some content providers for the iPhone and iPad said they would push back against the new policy.
Rhapsody, a subscription-based music service based in Seattle, issued a statement saying it was working with other service providers to craft a "legal and business response" to the changes.
"An Apple-imposed arrangement that requires us to pay 30 percent of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable," Rhapsody President Jon Irwin said.
"The bottom line is we would not be able to offer our service through the iTunes store if subjected to Apple's 30 percent monthly fee vs. a typical 2.5 percent credit card fee," he added.
Apple's move affects a range of media companies, from music services to newspaper and magazine publishers to other companies that provide content using a subscription model, including Netflix and Hulu.
"I wouldn't be surprised to see some publisher push-back and further negotiation around it," said Ned May, director and lead analyst for Outsell Inc., a Burlingame research and consulting firm that focuses on publishing. "Whether they're successful or not is another story. But there are some competitive winds in the air that should help strengthen the publishers' position."
Market forces
The competition is likely to come from Google, whose Android platform will be available on dozens of tablets that are scheduled for release this year. Google has not revealed the financial terms it is seeking with publishers.
Apple's subscription service, which it launched this month with the introduction of The Daily app from News Corp., allows publishers to set a price and length for subscriptions and have customers buy them with a single click using their existing iTunes accounts. It will also provide them with some contact information for subscribers, which publishers say is essential for marketing purposes, if those subscribers opt in.
The Cupertino company's policies allow companies to sell subscriptions outside the app, as long as those subscriptions don't cost less than the in-app purchase. But companies are forbidden from linking within their apps to places where customers can buy subscriptions.
"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," said Steve Jobs, Apple's CEO, in a statement.
Publishers' dilemma
The new policies present content providers with a dilemma. On one hand, it gives them a large and growing distribution channel, along with prospective access to the more than 100 million credit cards that Apple has on file.
But in exchange, they must give up a significant amount of revenue. And if subscribers decide not to share their e-mail addresses and ZIP codes, publishers may have difficulty making up the lost revenue with targeted ads.
Publishers have until the end of June to update their apps to comply with the new guidelines.
Representatives of big publishers, including Conde Nast and Time Inc., did not respond to requests for comment.
Since the iPad was introduced last year, publishers have sought a way to sell subscriptions to digital versions of newspapers and magazines. Without a subscription option in place, individual issues of magazines were often selling for $5 or more, and the latest figures from the Audit Bureau of Circulation showed that many popular titles were selling increasingly fewer digital copies.