We knew it would be coming when News Corp’s The Daily debuted with it’s in-app subscription model, but this week Apple officially detailed their new subscription service for all iOS app publishers. The new policies allow users to sign up for weekly, monthly, or yearly subscriptions and they can easily pay via the same App Store billing system they used to grab Angry Birds. Apple will handle all the payments and management of the subscriptions and users can go to a single place to cancel any subscriptions they have purchased.
Wow. This is great news… isn’t it?
Turns out it may not be that simple.
Yes, Apple is making it easy to get your subscription content into the App Store and in front of those millions of potential customers, but they’re going to take the same 30% cut they do from any other App Store transaction. And there are also some huge caveats that are making many developers very upset. Check out these two excerpts from Apple’s announcement:
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.
…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.
Essentially, that means you can no longer link to your subscription options online and if you offer a subscription service elsewhere you must also offer it from within the app. And give 30% to Apple every time a payment is processed.
30% on the initial sale of an app is fair. Apple has built the store, provided the marketplace, and given developers access to millions of consumers. With subscriptions, they are acting as little more than a payment gateway. It is up to the developer of the app to create the subscription features, develop the extra content, communicate to the user that they exist, and then finally convince them to sign up. Apple has no role in converting an app user into a premium subscriber. Even PayPal’s high transaction fees are less than 3% on most transactions. Apple wants 27% more than that just to process your payments.
They’re also not going to let you tell users subscriptions are available elsewhere. The press release stated that if you do offer subscriptions on your website you are required to also offer them from within the app so Apple can get their share. For many SaaS companies, it may not be a sustainable business model if you’re having to give away that much of each sale. Especially when your service is primarily web-based and the iOS app is just a tool for existing customers.
Think about companies such as 37signals who have been thriving for years selling subscription services online. Is there anyone out there looking at the App Store first when evaluating large, full featured project management tools? An iPhone app doesn’t help them sell more subscriptions. It’s just a viewer and a way to do simple tasks in a service you already pay for.
Even more confusing, 37signals and many other companies offer APIs which allow third party companies to develop sites and programs that access their data. There are at least 11 iPhone apps currently available for 37signals’ Basecamp, none of which are actually from 37signals and therefore have no right or ability to sell subscriptions to the service. But Apple’s new rules say that these apps must include a way for Apple to sell an in-app subscription in order to be approved. The new rules are just too broad to be fairly applied in every single case.
Will these changes force some developers to decide against offering iOS versions of their apps? If a service already has a large customer base and doesn’t need Apple’s marketing help, does it make more sense for them to develop their mobile apps in HTML5? Developing with HTML5 would save money on cross-platform development while they also maintain complete control over their subscription revenue. That’s exactly the direction 37signals went earlier this month when they launched a non-native, brand new mobile web app for Basecamp even before these new rules were public.
Overall, the whole thing is clear as mud. And according to the Wall Street Journal, the new rules may raise possible antitrust issues. Apple needs to quickly clarify and possibly amend the new policies and explain when they apply, or they will soon be facing a backlash from the very developers whose work has made the iPhone and iPad a monumental success.