Why Apple’s New Subscription Model for Apps Is Ridiculous

Newspaper and magazine publishers have been waiting for a viable way to offer subscriptions to customers reading the digital versions of their newspapers and magazines that can be found in the form of iPad and iPhone apps. Much in the same way that publishers offer discounted subscriptions for the print copies, publishers are trying to give customers the option of purchasing a subscription that is a fraction of the price of buying each digital issue individually at newsstand prices. Apple has finally unveiled a subscription model that iOS apps can use, and it is less than ideal.

It is now possible for apps to offer the option of recurring payments collected directly through the App Store, opening the App Store up to additional apps that rely on a subscription. For subscriptions collected through Apple’s method, Apple takes a 30% cut of the developer’s revenue. A huge problem with this is that it applies to any type of app that relies on a subscription. There have been apps that require a subscription for users to access prior to the App Store’s recurring payment introduction, such as the media-streaming service Netflix, but the iOS support of these services is just considered complementary to the main features of the subscription. Subscription apps nowhave to offer an option for users to register for the service using Apple’s subscription model for payments.

The new subscription model is a particularly huge problem for apps that rely on a subscription that gives users access to a library of third-party content, which are becoming increasingly popular. For these services, every cent of the subscription fee counts in order for the service to remain profitable and be able to offer the content that users want; if Apple takes a 30% cut from the subscription fee of these services, then it may not make sense for these services to keep their popular apps that allow the immense amount of customers that rely on subscription services for content to access the content they subscribe to in the App Store.

An app can not just offer a subscription fee that is 30% higher within an app to offset the 30% cut Apple requests. Apple requires the same offers available elsewhere to be available and easily obtained within an app. Subscription services use their own servers to bring customers content, so there is no reason for Apple to share the same 30% that they do with apps and in-app purchases that they host on their servers. The only justification Apple could have is that they help bring these services new subscribers while making no money on the services’ free apps that require you to pay the service’s company directly. Countless apps will only be hurt by the introduction of the official App Store subscription method, such as favorites Netflix, Hulu Plus, Rhapsody, Rdio, Pandora, and MOG.

Apple’s subscription model already has caught the attention of the Justice Department and Federal Trade Commission, and this could potentially lead to a full investigation. Music subscription service Rhapsody is among the first to speak out, not willing to go down without a fight or a lawsuit due to the model making it impossible for them to viably offer a Rhapsody app in the App Store.

Here’s to hoping that Apple revises their subscription model and policies before things get too crazy and we lose some of the most popular apps. The new model only hurts subscription services that do not offer all-original content, thus hurting the customers constantly using these apps by forcing the services to pull out of the App Store or operate without profit to customers who register through the app for the sake of keeping the service accessible on iOS devices.

[via Apple Press Release]