Apple’s controversial new subscription policy

A little history, then talk about a current controversy swirling around Apple:

If you want to accuse journalists of having a bias, you might start with how they portray Apple and its successful line of computer and media player products.  A lot of journalists love Apple products, and by extension Apple itself, while a vocal minority actively dislikes the company and it’s cult-like following.

(Full disclosure – I’m a hard-core Mac and iPod user.  I also tend to be very suspicious of new Apple products.  That’s why I’m eagerly awaiting the iPad 2, having passed on the first version.)

There can be no doubt that Apple, under the leadership of Steve Jobs, has been very successful, coming to dominate the high-end computer market, the personal media device market, and tablet computing.  Oh, and it also makes a popular smartphone….

In addition to selling a lot of electronic boxes, Apple is also a leading supplier (or at least reseller) of content to go on those boxes.  Apple is the leading music retailer in the US, and it also sells a substantial portion of the legally downloaded movies and TV shows. (Oh, and Apple also sells a box that will stream pay-per-view movies and TV shows to your set.)

As I mentioned before, Apple is headed up by Steve Jobs, who was also the owner of the  CEO and chief stockholder in Pixar Animation before he sold it to Disney.  Upon selling the company, he became Disney’s largest single stockholder and an influential member of the media giant’s board of directors.

So…. All this leads up to this week’s controversy  surrounding Apple.

Apple’s popular iPad tablet has so far sold more than 15 million units.  There are several other significant tablets waiting in the wings, most notably from HP and the Blackberry folks, but none have really made an impact yet.  There are also a range of tablets running Google’s Android software, but none yet that run the version of Android known as “Honeycomb” that is specifically designed for tablet computing.

When the iPad was initially announced last year at about this time, the iPad was seen by some as the salvation of printed content such as newspapers and magazines, with some going so far as to call it the “Jesus Tablet.”

Since that time, the iPad has unquestionably been a success for Apple.  As for app-based publications that people can subscribe to the same way they do a newspaper or magazine?

Not so much.

For example, the initial tablet issue of Wired magazine sold more than 100,000 copies, more recent issues have been selling in the 30,000 copy range.  It is being argued by some that the fall-off is because the electronic editions don’t provide a compelling advantage over the print version.  Others say that the problem is that readers have to buy a full-price single copy at a time rather than being able to subscribe at a lower, annual rate.

This week, Apple finally announced its plan to sell subscriptions either through its iTunes app store or through in-app sales.  The policy allows publishes to sell subscriptions through their website with no kickback going to Apple.  But if they do so, they must also offer an in-app purchase option at the same price or lower, and that Apple will take 30 percent of the revenue from the in-app purchase.  Of even greater worry to publishers is that Apple will only share demographic data about the buyers to the publishers if the buyers check off a box saying that it is ok.

Apple, and some in the tech press, argues that there is nothing wrong with Apple’s policy.  Companies are still free to sell their content through their own web sites.  Apple is providing a service that many companies could not come close to providing for the amount that they will be paying Apple.

But many others, including folks who are generally positive about Apple, have been highly critical of the new policy, calling it a power grab, money grab, or act of hubris.  Some even suggest it could be the downfall of the company.  There are reports from the Wall Street Journal that the 30 percent charge could lead to an anti-trust investigation.

(Wired editor Chris Anderson would like to give the iPad edition of the magazine for free to print subscribers.)

I think the best overall analysis I’ve seen of the Apple subscription gambit comes from TechCrunch, under the headline Apple’s Big Subscription Bet: Brilliant, Brazen, Or Batsh*t Crazy? Rather than trying to score points, TC tries to get at what Apple was trying for and whether they’ll achieve it.

Apple competitor (and another new media giant) Google responded by offering publishers the opportunity to sell subscriptions through its Google One Pass service for just a 10 percent surcharge.

There is no question that Apple is a highly controlling company that is negotiating from a position of strength right now.  Are publishers going to go along with Apple, or will they rebel? I see critics comparing Apple’s rates with those charged by a credit card company or check cashing service.  What I would like so see is how much revenue magazines get from the companies that sell discounted subscriptions.  That’s the real question in my book.

Updates:

What do you think?  Leave your thoughts about Apple’s new subscription model in the comments.

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One Response to Apple’s controversial new subscription policy

  1. Pingback: Thinking about media change (and iPads) | Living in a Media World

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