Apple added support for subscription-based content to the App Store today, which is great news for consumers since it means you can download a free or paid app and sign up for subscription music, news, video, or other content without leaving the app or using a different payment system. Everything goes through iTunes. Unfortunately the new service isn’t such a great deal for content publishers.
Plenty of iPhone apps already work with subscription services, letting you download the app for free and sign up for an account from a web browser to add Pro features to your account. Typically a credit card company charges a 2.5% transaction fee. Apple wants to take a 30% cut of all subscription revenue, and while the company will allow companies to continue offering subscription payments outside the App Store, they can only do that if they remove all links to external sites from the app and make App Store payments the default. In other words, they’re doing everything they can to make publishers give up another 27.5% of the money they get from subscribers. If content publishers are already operating on thin margins, that’s just not going to fly.
Music subscription service Rhapsody is the one of the first companies to publicly respond to Apple’s new rules. Currently the company has 750,000 subscribers who stream music on PCs, mobile devices, or other supported hardware. And they all sign up from the Rhapsody web site. Under Apple’s new rules, Rhapsody would have to start collecting payments through the App Store by June 30th.
Rhapsody, like other streaming music services, distributes a fair amount of subscription revenue to music labels, publishers, and artists. With Apple’s new fees, the math just wouldn’t work. In a statement released today, the company says it will “be collaborating with our market peers in determining an appropriate legal and business response” to Apple’s new rules.
It sounds to me like Rhapsody, and perhaps other streaming music services could pull out of the App Store in protest… or file suit against Apple. Another alternative would be to raise rates — but since Apple insists that publishers can’t offer better subscription prices on their web sites than in the App Store, and Rhapsody has a lot of customers on non-iOS platforms, it doesn’t seem likely that the company will raise rates for everybody based solely on Apple’s pressure.
via Business Insider