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June 8, 2016, 3:10 p.m.
Business Models
Mobile & Apps

Selling subscriptions through Apple is getting better for publishers — but also for everyone else

Publishers can get a 21 percent jump in the revenue they get to keep from long-term customers — but is the subscription space on iPhones and iPads about to get too crowded?

Monday is Apple’s big day for software announcements at its annual WWDC conference, but we got an early peek at one of them at The Verge and Daring Fireball today — and it’s one that’ll be of interest to publishers. The Verge’s Lauren Goode:

In a rare pre-WWDC sit-down interview with the The Verge, Phil Schiller, Apple’s senior vice president of worldwide marketing, said that Apple would soon alter its revenue-sharing model for apps. While the well-known 70/30 split will remain, developers who are able to maintain a subscription with a customer longer than a year will see Apple’s cut drop down to 15 percent. The option to sell subscriptions will also be available to all developers instead of just a few kinds of apps. “Now we’re going to open up to all categories,” Schiller says, “and that includes games, which is a huge category.”

The first part of that is the important one for news publishers. When Apple announced it would bring paid subscriptions to iOS in 2011, it was viewed with much excitement by some in the news business, who saw it as a way to transfer the regular circulation revenue they had in the print business to digital. Combined with the release of the iPad a year earlier, it prompted a flowering of efforts, from big media company bets (The Daily, R.I.P.) to one-person startups (The Magazine, R.I.P.). But over time — as those R.I.P.s might suggest — publishers mostly soured on the idea, for a variety of reasons. (Among them: Incomplete data on users; difficulty organically attracting new subscribers or reaching existing ones; being locked inside that awful Newsstand folder on your homescreen.)

Newsstand is gone, but until today, one other complaint was still true: Apple took a 30 percent cut of all subscription revenue — too high a cut for some app publishers to swallow.

Schiller’s announcement means that that cut will only apply for the first year of a subscription; after that, it’ll drop to 15 percent. So if you’re charging $9.99 a month for an iOS subscription, your second-year revenue from a customer will jump 21 percent (from $83.92 to $101.90). And, John Gruber notes, this change is retroactive in one sense: Existing apps with subscribers who’ve been on board a year already will start getting the 85/15 split next week, rather than a year from now.

A couple other interesting details:

  • Different price points in different countries are now possible. (So, for instance, The New York Times could charge readers in India less — or more! — than its U.S. readers.)
  • You’ll be “able to keep active subscribers at their existing price while increasing the price for new users.”
  • Renewal periods can now be every two, three, or six months, in addition to monthly or annually.
  • It’s now easier to offer multi-tiered subscriptions within a single app. (Though it’s been possible before; the Times for instance offers both its basic $15/month digital subscription and its upsell Times Insider $25/month subscription in its current app.) Switching from one level to another will be seamless for customers.

One other cautionary point worth noting: You can choose to increase the price of a subscription for an existing customer…but that customer will get a notification of the change and the option to affirmatively accept the increase. If they don’t, their existing subscription ends. So you’ll want to use that option with caution.

Ironically, the part of the new rules least directly tied to publishers might end up as a net negative for them. Subscriptions were previously open only to certain kinds of apps (news, cloud services, dating apps, and audio/video streaming apps like Spotify or Netflix). Now they’ll be available to all apps. The intention is to enable app developers to build more sustainable revenue models for complex apps without having to charge a large price up front. (Think about how your Adobe Creative Suite or Microsoft Office apps are probably paid for on an annual subscription basis today; five years ago, they would have probably been one-time retail-box purchases.)

But that new availability means that many, many more apps will likely start charging for subscriptions — including productivity apps for devices like the iPad Pro, for instance, and lots and lots of games. In that environment, I wonder if consumers will see a news app as “just one more monthly bill” and think of it as more directly in competition with Candy Crush PRO 3.11 for Workgroups or Two Dots Elite: Two More Dots or what have you.

But that’s mostly just supposition on my part. Apple has itself tried to shift its revenue story from near-complete reliance on big one-time purchases (a new iPhone!) toward repeated regular payments (Apple Music! iCloud storage!), so it makes sense that it’s leading developers on the same path. News apps have always been a natural match for subscription models (since publishers have to keep making new news every day; a game developer can keep profiting off a mostly unchanging app for a long time). But the subscription party’s about to get a lot more crowded.

Photo of a new iPad Pro by Brett Jordan used under a Creative Commons license.

POSTED     June 8, 2016, 3:10 p.m.
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