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Apple Launches Controversial App Store Subscriptions

In an expected (and controversial) move, Apple announced a new subscription service for publishers of content based apps on its App Store, including magazines, newspapers, video and music, on the lines of Newscorp’s ‘The Daily’ app. This development first surfaced when Apple rejected Sony’s iPhone app that lets users buy e-books from inside the application through the Sony Reader Store.

Under the new service publishers can offer subscriptions or content through Apple’s App store billing system. This will affect quite a few content apps including Amazon’s Kindle, which requires users to buy e-books on the Amazon website and later load them on the app. Apple has the following conditions for service providers:

–  Apple Will Take A Cut On Subscriptions: Users will be able to buy subscriptions through the App Store on the price and duration (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly) set by the publisher. However, the publisher will share a 30% cut from the subscription with Apple, just like in-app purchases.

– Apple Wants Pricing Parity, Despite Its Cut: Publishers using this service can also offer subscriptions outside the app on their website or through other means to acquire digital subscribers , provided that they offer the same or a better (lower priced) subscription offer through Apple’s App store and provide their own authentication process inside the app for subscribers that have signed up outside of the app. Also, Publishers should not provide a link to the website, where these subscriptions (or content) are sold, inside the app. Apple CEO Steve Jobs said in a statement that “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.”

Jobs has justified this move, saying that this is part of their philosophy, wherein Apple earns a 30 percent share when Apple brings a new subscriber to the app, and the publisher keeps 100 percent when the publisher brings an existing or new subscriber to the app (through means outside the App Store).

Customers will be able to buy apps through their App store account, review and manage all of their subscriptions from their personal account page, including canceling the automatic renewal of a subscription.

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Is It Fair?

Although, Apple had conceived and developed the App store eco-system as a developer friendly place to sell apps, we think that this is a monopolistic move from the company which will not go down well with developers and content publishers. Most big publishers will not be ready to pay the cut to Apple and sell subscriptions and content through their respective websites (till Apple decides to block them!), even if they are forced to remove links from apps. If Apple really wants its users to get seamless access to content on their devices, it should stop being greedy and not ask publishers for a revenue share.

Rhapsody Responds

In fact, Rhapsody, a US based music subscription service from Real Networks, issued a statement saying that the Apple imposed arrangement is economically untenable and it will not offer subscriptions through Apple’s App store. It will continue to offer subscriptions on its website from an internet browser including Safari on iPhone and iPad.

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