Apple Launches its Subscriptions Service with the iTunes App Store

Apple two days ago announced its content subscriptions service with a Press Release.

Subscriptions purchased from within the App Store will be sold using the same App Store billing system that has been used to buy billions of apps and In-App Purchases. Publishers set the price and length of subscription (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly). Then with one-click, customers pick the length of subscription and are automatically charged based on their chosen length of commitment (weekly, monthly, etc.). Customers can review and manage all of their subscriptions from their personal account page, including canceling the automatic renewal of a subscription. Apple processes all payments, keeping the same 30 percent share that it does today for other In-App Purchases.

“Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing,” said Steve Jobs, Apple’s CEO. “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. We believe that this innovative subscription service will provide publishers with a brand new opportunity to expand digital access to their content onto the iPad, iPod touch and iPhone, delighting both new and existing subscribers.”

Publishers who use Apple’s subscription service in their app can also leverage other methods for acquiring digital subscribers outside of the app. For example, publishers can sell digital subscriptions on their web sites, or can choose to provide free access to existing subscribers. Since Apple is not involved in these transactions, there is no revenue sharing or exchange of customer information with Apple. Publishers must provide their own authentication process inside the app for subscribers that have signed up outside of the app. However, Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app. In addition, 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.

At Exact Editions we think this is an important development which will help to grow the market for digital magazines. Especially on the iPad. It will also have effects on the market for other subscription and content services: newspapers, film, music, TV and perhaps books. Some publishers and distributors in those markets have been complaining. But magazines are different, they understand subscriptions and know how to sell them direct. There is one particularly simple and clear point in the memo that is crucial for magazine publishers. It bears repetition:

Publishers who use Apple’s subscription service in their app can also leverage other methods for acquiring digital subscribers outside of the app. For example, publishers can sell digital subscriptions on their web sites, or can choose to provide free access to existing subscribers. Since Apple is not involved in these transactions, there is no revenue sharing or exchange of customer information with Apple.

In Steve Jobs's exact words:

“Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing”

The invitation is very plain. Publishers are being encouraged to produce branded apps for individual magazine titles, to market them within iTunes and to provide free access to their existing print and digital subscribers. Publishers who do this must provided an "authentication process inside the app for subscribers that have signed up outside of the app." This is the precise service that Exact Editions has been providing for our partner publishers since August 2010. The fact is that publishers (through the fulfillment houses and distribution houses that work for them) already know their market. They know who their subscribers are, and magazine publishers have proved pretty competent over the years at recruiting new subscribers.

Should publishers be more concerned about the possibility that Apple may be taking too much through the 30% commission it will levy on purchases made through Apple's e-commerce system, or welcoming of the fact that Apple enjoins publishers to keep 100% of the revenues from services which are being partly executed and delivered on the Apple platform? Publishers may be worried by the gravitational pull of the iTunes system, but one should consider this: if the gravitational pull is so strong, perhaps the sales will be also?