Apple’s App Store Subscriptions: A Bad Start

Try as I might, giving Apple as much benefit of the doubt as I can, I can’t see the terms of Apple’s App Store subscriptions working out well. This is especially so for publishers. But even Apple is going to have some problems with it.

The “personal data” rule. Apple’s press release states:

Customers purchasing a subscription through the App Store will be given the option of providing the publisher with their name, email address and zip code when they subscribe…Publishers may seek additional information from App Store customers provided those customers are given a clear choice, and are informed that any additional information will be handled under the publisher’s privacy policy rather than Apple’s.

I routinely decline all such requests, figuring the less places that have my personal information the better. For me to change my mind, the publisher would have to make a good case for why giving them my data would benefit me, not how it would benefit them. I am not sure where, or how, they can effectively make this case. That’s why I assume that, like me, most people will decline the option here.

Let’s further assume that, because of the convenience of doing so, most subscribers wind up choosing to renew their subscriptions in-app. The end result is that publishers will eventually have no personal data on the vast majority of their subscribers. This is critical and valuable information. It’s hard to believe that publishers negotiated this away. At the very least, I can’t imagine they are pleased with this regulation.

The “30%” rule. Apple’s press release states:

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.

Publishers can sell digital subscriptions on their web sites, or can choose to provide free access to existing subscribers. 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.

In essence, the publisher must pay a 30% service fee for in-app subscriptions. In principle, this is not much different than the situation retail stores face when dealing with credit cards: If you pay cash, the store doesn’t have to pay the credit card fee and saves some money. Of course, retailers are free to offer a discount for paying cash. Apple will not be allowing the equivalent. Using the in-app system probably saves the publisher some processing costs, but no way is that anything close to 30%.

Problems here are compounded by uncertainties as to how the rules will be interpreted and enforced.

How does Apple intend to monitor if and when a publisher offers a deal on their website that is superior to what is offered in-app — especially when there may be hundreds of even thousands of apps that are using this system some day. A publisher could offer a deal at any moment — months after an app has been approved. Is Apple going to be constantly checking for possible violations?

What happens if Apple detects a violation? What is the penalty? I assume, at a minimum, the publisher would have to immediately terminate the deal or offer it in-app. Will they also have to compensate Apple for any discounted subscriptions they obtained? If the publisher does not immediately agree to Apple’s demands, what will Apple do? Would Apple actually remove an app from the App Store? Will it stop allowing new issues to be delivered — effectively canceling the subscription of everyone who has paid for one? Who would be responsible for refunding the subscriptions in such a scenario? Apple (because it removed the app) or the publisher (because it violated the rule)?

As for not allowing links to pages on the publisher’s website that offer subscriptions — how can this possibly work smoothly? Suppose a publisher offers some extended content (such as video) on their website that is not in their magazine app. The magazine includes a link to that video content. Now suppose that the webpage with this video contains an ad for subscribing to the magazine. Has the publisher now violated Apple’s rules? I think so. Again, how will Apple effectively monitor all of this? Will they check every link in each issue of a magazine to see where it goes?

What about time-limited discounts — such as a deal that is only good for one week. Will the in-app subscription model be able to address this “on-the-fly” or will the publisher need to update the app each time a discounted deal is briefly offered? I assume it’s the former, but I don’t know.

Here’s yet another fuzzy area: If a publisher wants to offer a free subscription to subscribers of their print edition, do they have to offer this in-app as well — even though there is no revenue for Apple?

Finally, established existing apps that support paid content will now presumably need to be revised to meet all of these new rules. Does this mean apps such as Netflix and Kindle will be required to support in-app purchasing — and will be prevented from linking to their websites from the app? Apparently so.

The bottom line. Publishers have an incentive for you not to subscribe in-app — so as to avoid paying Apple 30% and to make sure they obtain your personal data. Apple has the opposite preference. This sets up a potentially antagonistic relationship between Apple and publishers right out of the starting gate. Further, as I’ve described here, the rules of the game are too often fuzzy and difficult to enforce. This will likely lead to more problems down the road. That’s why I can’t imagine this model succeeding without some significant modifications. The only question is how long will it take before the modifications come.