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John Gruber on Apple’s 30% cut: To the victor goes the pricing power

John Gruber at Daring Fireball has an extended take on the justice or injustice of Apple’s 30-percent cut of all iPhone/iPad subscriptions. (He comes down on the side of justice. Or at least a kind of it’s-fair-because-we-can justice.) If you, like many publishers, are still cranky about Apple’s decision, give it a read to get a reasoned argument for the other side. (One that’ll probably still leave you cranky — but reasoned nonetheless.)

Here are a few thoughts on some of Gruber’s arguments:

Apple doesn’t give a damn about companies with business models that can’t afford a 70/30 split. Apple’s running a competitive business; competition is cold and hard. And who exactly can’t afford a 70/30 split? Middlemen. It’s not that Apple is opposed to middlemen — it’s that Apple wants to be the middleman. It’s difficult to expect them to be sympathetic to the plights of other middlemen.

To the broad category of “middlemen” I’d add “companies whose economics are built for other platforms.”

For all the developers who’ve built native apps for the iPhone or iPad from scratch — say, game developers or productivity app developers — they’ve been able to build their business strategy from a known cost base and a known revenue scheme. If you know that you’re going to be selling 99-cent apps, you can build a business around the expectation of revenue coming in 99-cent chunks. (Or, more accurately, 70-cent chunks, after Apple’s cut.)

But if you’re a business that already exists, with its own native pre-iOS economic basis, you’re laden with a bunch of preset economic variables. If you’re a newspaper, you’ve already got a newsroom with X number of reporters and Y number of photographers and Z number of editors. (Which were probably around 2X, 2Y, and 2Z ten years ago.) You’re coming to a new platform, but it’s not an entirely new product you’re creating — you were already paying those reporters. And when you’re calculating something like pricing, you’re doing that with an understanding that you’re also navigating the economic space between what you’re already charging for your website (likely $0 now, although you’re planning on changing that later this year) and what you’re already charging for a print subscription (whether that’s $12, $20, or $30 a month). You’re already scared to death about trying to convince people they should pay for your website — and then all of a sudden, the monthly number you’d been planning to charge for your iPhone app needs to go up 30 percent to make the math work.

Now, that’s not Apple’s problem. Gruber’s right: Apple doesn’t give a damn about newspapers. The financial difficulties of American newspapers are not Apple’s fault and they’re not Apple’s to solve. And unlike Google — which has put a lot of energy into making newspaper-friendly noises to try to repair a relationship that bottomed out a couple of years ago — Apple doesn’t throw the industry any bone bigger than showing off nytimes.com in product demos.

But regardless of whether you think newspapers deserve any sympathy for their plight (good arguments on both sides!), it’s not just middlemen who are disadvantaged by Apple’s large take.

Kindle, and e-book platforms in general, are a different case. For one thing, Kindle doesn’t use subscriptions. Kindle offers purchases.

The Kindle does actually offer subscriptions, both to newspapers and blogs, like Daring Fireball itself. (Given where DF ranks in the Kindle Store, he probably has about 5-8 people paying $1.99 a month to read the site on their Kindles. We have 16! That’s likely to be the only traffic-related number where we edge Gruber.)

I don’t think any publisher would consider Amazon’s Kindle subscription model an improvement over Apple’s, though, for a host of reasons — not least that it’s Amazon who controls pricing, not the publisher, not to mention Amazon takes an even steeper cut than Apple does.

Second, the problem facing traditional publishers today is that circulation is falling. Newsstand sales and subscriptions are falling, under pressure from free-of-charge websites and other forms of digital content. The idea with Apple’s 70-30 revenue split is that developers and publishers can make it up in volume — that people aren’t just somewhat more willing to pay for content through iTunes than other online content stores, they are far more willing. The idea is that that Apple has cracked a nut no one else has — they’ve created an ecosystem where hundreds of millions of people are willing to pay for digital content. Thus, potentially, publishers won’t just make more money keeping only 70 percent of subscription fees generated through iOS apps than they are now with 96 percent (or whatever they’re left with after payment processing fees) of subscription fees they’re selling on their own — they stand to make a lot more money.

There’s no doubt that Apple’s built a great payment system. Although I’d also point out that it benefits from the natural market segmentation that comes whenever you sell expensive devices. Does the iPad make people more likely to buy digital goods? Or does the fact that someone has paid $499 or $829 for an iPad serve as a pretty good marker that they’re already the kind of person more likely to pay for digital goods? I think there’s truth in both.

To look at it from another angle, any developer will tell you that there are many more Mac users who buy shareware apps than Windows users. (I’m speaking in terms of percentage; obviously there are many more Windows users than Mac users. But a larger percentage of Mac users will download and pay for a $15 app than will Windows users.) Now, pre-Mac App Store, Apple didn’t make paying for software any easier than Microsoft did. But Mac users are, by their self-selected nature, people who were willing to spend a little more to get a better computing experience — in other words, people who are predisposed toward paying.

The other factor here is the idea of who “deserves” credit for bringing a customer to a purchase. As Apple said in its announcement, “when Apple brings a new subscriber to the app, Apple earns a 30 percent share.” And if someone discovers Tiny Wings (great game!) in the App Store rankings and downloads it, I think Apple’s certainly earned its 30 percent.

But if someone searches for and downloads The New York Times app — after the Times has spent more than a century building up its brand, at the cost of billions of dollars — can it really be said that Apple has “brought” that subscriber to the app, and that they deserve 30 percent of the revenue the app generates, forever? (Gruber doesn’t address the eternal nature of Apple’s cut; it’s like paying a New York apartment broker his finder’s fee, every year for the rest of your Manhattan-dwelling life.) It certainly seems like a transaction different in kind from, say, a game that exists only on (and only because) the iPhone platform.

Again, it’s a case of being disadvantaged if you’re bringing over an economic model from outside the platform. There’s a reason Rupert Murdoch said he was fine giving Apple 30 percent of the revenues from The Daily — but why he’s no doubt less thrilled about having to give over 30 percent of the revenue generated by The Wall Street Journal’s app. The Daily’s economics are built around getting 70 cents a subscriber each week. The Wall Street Journal has a host of price points in other media it needs to fit an iPad price into. (Not to mention an annual cost 4x The Daily’s.)

Finally, also note that most App Store developers don’t have such a readily substitutable good available for free over in Safari, the web browser. If you don’t want to pay 99 cents for Angry Birds, you don’t have the option of going to Safari and playing it for free. Again, you can blame newspapers for that state of affairs, and you wouldn’t be wrong. But given the degree to which newspapers are having to balance free and paid in a variety of ways to make digital revenue work, it’s a tough moment to be pushed into a corner by Apple’s decision.

This is what galls some: Apple is doing this because they can, and no other company is in a position to do it. This is not a fear that in-app subscriptions will fail because Apple’s 30 percent slice is too high, but rather that in-app subscriptions will succeed despite Apple’s (in their minds) egregious profiteering. I.e. that charging what the market will bear is somehow unscrupulous. To the charge that Apple Inc. is a for-profit corporation run by staunch capitalists, I say, “Duh”.

Of course. Apple’s not a charity. It has no financial reason to help out any content industry. While those of us who wish the newspaper business well would love to see a different approach, in the end, it’s Apple’s choice and they can do what they please.

And iOS subscriptions won’t fail. I wager that most of the news publishers grumbling about the issue now will come around and give the cut to Apple. They might increase their investment in Android phone and tablet apps a little, but let’s be honest: Apple’s still the big dog here. (Android users have inherited Windows users’ disinterest in paying for software or digital content.)

It’s just galling that the incumbent players in the news business face so many economic disadvantages because of their background, and because of their investment in journalism, that it would have been nice for this to be different.

Yes, the financially sound thing for them to do would be to abandon the old cost structure and instead build a digital-native company that could happily turn over 30 percent of revenues to Apple and reap all the benefits (distribution, scale, payment platform) that Apple provides.

The only problem with that is that, with that model, you end up, well, with something like The Daily — something light and tabloidy, something in nugget form, something that looks for the oldest dog in America. (Actually, I suspect you end up with less than that, because I’m not optimistic that Murdoch will get the subscriber numbers he needs to be profitable. And I say that despite being a great admirer of many of the people working there.)

With all the great innovation that’s gone on in the news space, there are still no for-profit newsrooms with the scale and heft and journalistic weaponry of the nation’s biggest newspapers. They’re still important, and they’ve been looking to the app economy as a big part of their efforts to figure out a place in the digital economy. It would have been nice if Apple might have cut them some slack. Yeah, that’s not Steve Jobs’ problem — I get that. Apple’s earned their pricing power by being innovative and smart. But it still would have been nice.

                                   
What to read next
BenzingaLargeLogo
Joseph Lichterman    April 22, 2014
Four-year-old startup Benzinga is growing thanks to a free consumer site, a paid news wire, and online financial service marketplace.
  • http://twitter.com/sproketz sproketz

    If the article was too long for anyone to read allow me to summarize.

    Apple = Dumb and greedy and soon to be killed by another smarter company that has its head screwed on straight i.e.: Google.

  • http://www.niemanlab.org/ Joshua Benton

    Well, sproketz, while you’re certainly entitled to your opinion, that’s not an accurate summary of what I wrote.

  • Bob

    You represent your side so well !!

  • http://www.peterwknox.com peterwknox

    Nice post Joshua. I think you captured the feeling of “it would’ve been nice to catch a break here” inherent in this model.
    Also, I bought Tiny Wings just now. Hadn’t heard of it before.

  • Joseph Futral

    I don’t know why writers (blogs or otherwise) are so caught up in this 70/30 issue, at least regarding subscriptions of publications. While my experience with publishers is small, it is not non-existant. While subscription income for major publications like the NYT or WSJ is not chump change, neither is it the main source of income compared to ad revenue, likely even pales in comparison. In this regard, subscriptions are purely market research for ad pricing.

    This should come as no surprise since there are a number of print publications that do quite well without charging anything to the reader (such as Creative Loafing, Skirt, etc.) or how many subscription services offer subscriptions at hugely reduced pricing (and what cut do THEY get?).

    This griping about a 30% cut is a red herring. I am not surprised that most professional journalists have neglected to point this out (with the one exception I have found in a NYT article). But I am a bit surprised bloggers haven’t really picked this up. I bet if Apple surrendered all the customer data (as the subscription services probably have to do), then not one publisher would complain about a 30% cut.

    But the thought of a radio advertising like model is probably quite daunting for companies that have been able to rely on data necessarily supplied by the customer when subscribing.

    Joe

  • Joseph Futral

    I don’t know why writers (blogs or otherwise) are so caught up in this 70/30 issue, at least regarding subscriptions of publications. While my experience with publishers is small, it is not non-existant. While subscription income for major publications like the NYT or WSJ is not chump change, neither is it the main source of income compared to ad revenue, likely even pales in comparison. In this regard, subscriptions are purely market research for ad pricing.

    This should come as no surprise since there are a number of print publications that do quite well without charging anything to the reader (such as Creative Loafing, Skirt, etc.) or how many subscription services offer subscriptions at hugely reduced pricing (and what cut do THEY get?).

    This griping about a 30% cut is a red herring. I am not surprised that most professional journalists have neglected to point this out (with the one exception I have found in a NYT article). But I am a bit surprised bloggers haven’t really picked this up. I bet if Apple surrendered all the customer data (as the subscription services probably have to do), then not one publisher would complain about a 30% cut.

    But the thought of a radio advertising like model is probably quite daunting for companies that have been able to rely on data necessarily supplied by the customer when subscribing.

    Joe

  • http://www.niemanlab.org/ Joshua Benton

    Joe, you’re right that, traditionally, ad revenue has been much more important than circulation revenue for American newspapers. The traditional split has been roughly 80/20 ads/circ.

    But declines in the advertising market (plus increased circ prices) have balanced that out so that it’s a lot closer to 50/50. The NYT Co. announced numbers last year that, for the first time, had circ revenue higher than ad revenue.

    Of course, that’s in print — online, ad revenue far outstrips any circ revenue, because so few news sites charge readers anything. The paywall experiments we’ll see this year are an attempt to change that. We’ll see if they work.

  • Anonymous

    John Grubber should stick to analyzing tech, not economics. His argument is totally overlooking the companies that is paying 30% to Apple is not actually 30%. The savings that Apple App store provides will cut that to way less than that. The appstore exposure could even make you back more than the 30% it charges. App store provides app exposure, user traffic, ease of access(payment), e-commerce transaction platform. You free a lot of over head when you use the app store properly.

  • Joseph Futral

    I would imagine the paywall experiment is also an attempt to induce value to a subscription model, in much the same way as the newstand price vs subscription price, thus enticing the subscriber data they are losing when content is freely distributed.

    I also believe the the additional loss of classified ads revenues has hit at least local newspapers. I don’t know how much that affected the NYT. So, in that regard, I still contend it is less about subscription income, except in its affect on ad revenue (loss of subscribers means less compelling reason to advertise).

    That’s interesting about the NYT income split, no doubt due to when they started pushing hard for national subscriptions earlier this century. NYT, WSJ, LAT are probably some of the few newspapers who can allocate any clout to subscriber income. That is the brand they have developed, which is what you point out.

    But I would still contend that their subscriber base is more important to their ad revenue than as income. If Apple could show them that they could make up that 30% cut in ad revenue or is otherwise not a loss at all (such as subscribers they would not have gotten otherwise), I doubt they would blink. And I seriously doubt any publisher wants to think in terms of _depending_ on subscription revenue.

    ANY general publishing business model (i.e., no Apple specific content) depending on Apple for income is already sunk, anyway. The Apps store should only be viewed as one part of a larger strategy. If Apple’s App store and their 30% cut is that significant, I think they have lost already.

    Joe

  • Software Industry Observer

    The opinion in your article that Windows users are less likely to buy shareware seems … odd. Do you have data or is this an anecdote. Is there a source? Why shareware and not software in general? That would seem to be more of an equivilent comparison.
    I think that you’re falling into a fallacy because the data aren’t as easily available – Microsoft doesn’t/can’t publish a figure that says “this is the amount of software sold last year that runs on Windows” in the way the Apple can make the same claim on their application purchasing platform.
    In general, it seems that journalists have to come to terms with their favorite tech supplier, Apple, being a cold hard capitalist and apply their withering insights to Apple’s behavior rather than say Microsoft or Google. As a thought experiment, what would the reaction be if you substitute Microsoft for Apple. Gruber _doesn’t_ do this: he pins it to Windows, rather than saying if Microsoft owned iPhones/iPads.

  • Software Industry Observer

    The opinion in your article that Windows users are less likely to buy shareware seems … odd. Do you have data or is this an anecdote. Is there a source? Why shareware and not software in general? That would seem to be more of an equivilent comparison.
    I think that you’re falling into a fallacy because the data aren’t as easily available – Microsoft doesn’t/can’t publish a figure that says “this is the amount of software sold last year that runs on Windows” in the way the Apple can make the same claim on their application purchasing platform.
    In general, it seems that journalists have to come to terms with their favorite tech supplier, Apple, being a cold hard capitalist and apply their withering insights to Apple’s behavior rather than say Microsoft or Google. As a thought experiment, what would the reaction be if you substitute Microsoft for Apple. Gruber _doesn’t_ do this: he pins it to Windows, rather than saying if Microsoft owned iPhones/iPads.

  • Guest

    Interesting post. Recently came across this data-rich overview of the app economy, using data from iTunes. http://www.youtube.com/watch?v=7vNnUBbea-U

  • Guest

    Interesting post. Recently came across this data-rich overview of the app economy, using data from iTunes. http://www.youtube.com/watch?v=7vNnUBbea-U

  • Kitmenkin

    Before Netscape, to acquire an email address cost $10 per month,
    on the average, from internet suppliers. It was what the market
    could bare. We now know it costs nothing at all and
    Google also gives you a gig of space, too. Plus.

    Netscape not only made it easier to search, but gave email
    hookup. At the time, there were many email programs that
    cost over $100 and more. AOL was the number one player
    as you got an email address and a dial-up for a nominal
    dial-up fee. They also had chat rooms and blogs, a long
    time before others brought them forward on the internet. Later they
    added three free emails for the family at the same price.

    Microsoft came along and left the rest in the dust.

    The point being Apple controls the marketplace now and can
    charge whatever it wants. As the market matures, competitors
    will bring down the price, but right now, Apple rides in the
    cat bird seat—and that’s just plain good business.

    Users should be lucky Apple isn’t charging 40%.

  • Kitmenkin

    Before Netscape, to acquire an email address cost $10 per month,
    on the average, from internet suppliers. It was what the market
    could bare. We now know it costs nothing at all and
    Google also gives you a gig of space, too. Plus.

    Netscape not only made it easier to search, but gave email
    hookup. At the time, there were many email programs that
    cost over $100 and more. AOL was the number one player
    as you got an email address and a dial-up for a nominal
    dial-up fee. They also had chat rooms and blogs, a long
    time before others brought them forward on the internet. Later they
    added three free emails for the family at the same price.

    Microsoft came along and left the rest in the dust.

    The point being Apple controls the marketplace now and can
    charge whatever it wants. As the market matures, competitors
    will bring down the price, but right now, Apple rides in the
    cat bird seat—and that’s just plain good business.

    Users should be lucky Apple isn’t charging 40%.

  • Kitmenkin

    Before Netscape, to acquire an email address cost $10 per month,
    on the average, from internet suppliers. It was what the market
    could bare. We now know it costs nothing at all and
    Google also gives you a gig of space, too. Plus.

    Netscape not only made it easier to search, but gave email
    hookup. At the time, there were many email programs that
    cost over $100 and more. AOL was the number one player
    as you got an email address and a dial-up for a nominal
    dial-up fee. They also had chat rooms and blogs, a long
    time before others brought them forward on the internet. Later they
    added three free emails for the family at the same price.

    Microsoft came along and left the rest in the dust.

    The point being Apple controls the marketplace now and can
    charge whatever it wants. As the market matures, competitors
    will bring down the price, but right now, Apple rides in the
    cat bird seat—and that’s just plain good business.

    Users should be lucky Apple isn’t charging 40%.

  • Kitmenkin

    Before Netscape, to acquire an email address cost $10 per month,
    on the average, from internet suppliers. It was what the market
    could bare. We now know it costs nothing at all and
    Google also gives you a gig of space, too. Plus.

    Netscape not only made it easier to search, but gave email
    hookup. At the time, there were many email programs that
    cost over $100 and more. AOL was the number one player
    as you got an email address and a dial-up for a nominal
    dial-up fee. They also had chat rooms and blogs, a long
    time before others brought them forward on the internet. Later they
    added three free emails for the family at the same price.

    Microsoft came along and left the rest in the dust.

    The point being Apple controls the marketplace now and can
    charge whatever it wants. As the market matures, competitors
    will bring down the price, but right now, Apple rides in the
    cat bird seat—and that’s just plain good business.

    Users should be lucky Apple isn’t charging 40%.

  • Kitmenkin

    Before Netscape, to acquire an email address cost $10 per month,
    on the average, from internet suppliers. It was what the market
    could bare. We now know it costs nothing at all and
    Google also gives you a gig of space, too. Plus.

    Netscape not only made it easier to search, but gave email
    hookup. At the time, there were many email programs that
    cost over $100 and more. AOL was the number one player
    as you got an email address and a dial-up for a nominal
    dial-up fee. They also had chat rooms and blogs, a long
    time before others brought them forward on the internet. Later they
    added three free emails for the family at the same price.

    Microsoft came along and left the rest in the dust.

    The point being Apple controls the marketplace now and can
    charge whatever it wants. As the market matures, competitors
    will bring down the price, but right now, Apple rides in the
    cat bird seat—and that’s just plain good business.

    Users should be lucky Apple isn’t charging 40%.

  • Kitmenkin

    Before Netscape, to acquire an email address cost $10 per month,
    on the average, from internet suppliers. It was what the market
    could bare. We now know it costs nothing at all and
    Google also gives you a gig of space, too. Plus.

    Netscape not only made it easier to search, but gave email
    hookup. At the time, there were many email programs that
    cost over $100 and more. AOL was the number one player
    as you got an email address and a dial-up for a nominal
    dial-up fee. They also had chat rooms and blogs, a long
    time before others brought them forward on the internet. Later they
    added three free emails for the family at the same price.

    Microsoft came along and left the rest in the dust.

    The point being Apple controls the marketplace now and can
    charge whatever it wants. As the market matures, competitors
    will bring down the price, but right now, Apple rides in the
    cat bird seat—and that’s just plain good business.

    Users should be lucky Apple isn’t charging 40%.

  • El Aura

    The information comes, as explicitly said in the article, from developers themselves. There are enough developers that develop for both Mac and Windows. They have numbers of downloads (or even installations) vs. payments made.

  • http://twitter.com/jranft Joe Ranft

    I don’t think anybody begrudges Apple’s right to take 30 percent for subscriptions and purchases directly from publishers.

    The issue is middlemen (as Gruber puts it) and resellers like Amazon, and to some extent, Netflix, who have already negotiated prices and splits with publishers. Apple is now coming in on top of those negotiations and taking another 30 percent, essentially most of the profit from Amazon, Netflix, Barnes and Noble, etc.

    The solution would be to charge more inside the Apple App store, but Apple’s agreement forbids this.

    My question is, can Amazon and others still have e-reader apps in Apple’s App Store if they don’t link out to their online stores? So as a user I would buy my books from Amazon’s mobile Web site, and just use my iPhone Kindle App to access my library. This seems fine to me. Apple gets zero percent of the cut in this use, so something tells me they wouldn’t stand for it.

  • http://twitter.com/jranft Joe Ranft

    I don’t think anybody begrudges Apple’s right to take 30 percent for subscriptions and purchases directly from publishers.

    The issue is middlemen (as Gruber puts it) and resellers like Amazon, and to some extent, Netflix, who have already negotiated prices and splits with publishers. Apple is now coming in on top of those negotiations and taking another 30 percent, essentially most of the profit from Amazon, Netflix, Barnes and Noble, etc.

    The solution would be to charge more inside the Apple App store, but Apple’s agreement forbids this.

    My question is, can Amazon and others still have e-reader apps in Apple’s App Store if they don’t link out to their online stores? So as a user I would buy my books from Amazon’s mobile Web site, and just use my iPhone Kindle App to access my library. This seems fine to me. Apple gets zero percent of the cut in this use, so something tells me they wouldn’t stand for it.

  • Anonymous

    What nobody seems to get in these discussions is that Apple has to have the same split across the board. What makes a subscription different from any other in-app purchase? If Apple had a different rate for subscription content then even game makers would suddenly be chasing a 90-10 split by making their content subscription based as opposed to an in-app purchase. This would be another hoop to jump through for users.

    Apple isn’t going to do something that would harm users in that way or harm themselves. It is going to be 70-30 across the board. If the split ever changes, it will change for everything.

  • Anonymous

    What nobody seems to get in these discussions is that Apple has to have the same split across the board. What makes a subscription different from any other in-app purchase? If Apple had a different rate for subscription content then even game makers would suddenly be chasing a 90-10 split by making their content subscription based as opposed to an in-app purchase. This would be another hoop to jump through for users.

    Apple isn’t going to do something that would harm users in that way or harm themselves. It is going to be 70-30 across the board. If the split ever changes, it will change for everything.

  • http://twitter.com/polarscribe Travis Mason-Bushman

    If they don’t link to the online stores, they’ll be fine.

    There are two separate access portals for iOS content: apps and the Web. Apple fully intends to exert control over the apps ecosystem, but they’re not going to code Safari to block Amazon purchases or anything.

  • http://twitter.com/polarscribe Travis Mason-Bushman

    If they don’t link to the online stores, they’ll be fine.

    There are two separate access portals for iOS content: apps and the Web. Apple fully intends to exert control over the apps ecosystem, but they’re not going to code Safari to block Amazon purchases or anything.

  • http://twitter.com/nonprofit_tech Nonprofit Tech

    Good counterpoints, but here’s one I don’t fully agree with, mostly because I don’t believe the implications have been fully explored.

    …can it really be said that Apple has “brought” that subscriber to the app, and that they deserve 30 percent of the revenue the app generates, forever? (Gruber doesn’t address the eternal nature of Apple’s cut; it’s like paying a New York apartment broker his finder’s fee, every year for the rest of your Manhattan-dwelling life.)

    I don’t have any newspaper subscriptions, so they very well maybe astonishingly different from magazine subscriptions, but for every magazine subscription I have, I’m paying once every 3, 5, or 10 years not yearly. The yearly price point is pretty much the trial period. After that you know you like the magazine and go for the 80% off option of subscribing for 3 or 5 years. Because really, who cares if the magazine is just fire starter after the first year of the subscription, because really you’ve paid for 1 year at below market value but slightly above a one year subscription.

    So if people aren’t renewing their subscription daily, monthly, or annually, then the 30% is coming once a year at most or possibly once every 3-5 years.

    I allow for that I could be a statistical anomaly, and most people in the world pay once a year, possibly because they failed math and haven’t figured out that $1.50 per issue which is 1/2 off the newstand price, becomes $1 per issue at 3yrs or $0.75 per issue at 5 years. So you can get 5yrs for the cost of ~2 years.

    But assuming everyone who subscribes via Apple diligently waits for a year to roll around to get their renew notice, and renew at possibly higher price points each year, because cost of production isn’t necessarily going done (and that everyone who subscribed via Apple opted to NOT send personal data). Then I can see the perpetuity argument.

    But Apple taking a 30% cut once every 3-5 years, possibly even 10 years for some magazines. Then the argument is much less about perpetuity. It’s subscription, but its not eMusic, Rhapsody, or even your ISP subscription. It’s like software that gets updated once a year to a new version, so people have to purchase again.

    Again, that’s if publishers stick to a more traditional cycle, instead of getting greedy and saying the digital version of our magazine is $10/mo verses the $5 on the newstand, and there’s no discount for paying a year in advance.

  • Tim King

    It seems that a lot of people take issue with the fact that Apple requires that the In App Purchase price is the same or less than the price elsewhere, and say that publishers should be allowed to set separate pricing to allow for the Apple’s cut. Apple would never allow that for the simple reason that if they did allow the IAP price to be higher, then no one would ever use that method; I would imagine that most people would use a more inconvenient method for the sake of saving 30%.

  • Anonymous

    I am currently without a car. Have to rent one from Zipcar if driving a distance is a must. It would be nice if Joshua Benton would give me his car. He can email me about where to ship it to.

  • Anonymous

    I’m curious. Doesn’t it strike you as interesting that Apple allows Amazon and other competitors to sell content on its platform, but they don’t allow Apple to sell content on theirs?

  • El Aura

    In Germany and Switzerland it is quite rare being offered subscriptions for more than one year, at least I have not come across it. So everybody’s perspective will be somewhat different.

    But I am curious if publications could offer only shorter subscriptions through the app store and longer ones exclusively via their websites.

  • Total

    “it’s a tough moment to be pushed into a corner by Apple’s decision.”

    I’m not sure that–with newspapers giving away content for free on the web and losing ad revenue left, right, and center–that it’s Apple that’s pushing them into a corner.

  • http://wideeyed.myopenid.com/ Pfff

    If code content isn’t changed just plain-readable text, images and 3D objects, then that’s just the work of writers and illustrators, be it a magazine, medical encyclopaedia app or whatever else.

    How Apple can stake a rightful claim to such content I don’t really understand. If it’s executable code, sure they’re providing the dev tools, the technical approval process, etc etc.

    It’s just like the banks saying we’ll charge you 100B$ of fees per annum. Economic analysis has shown it’s preditory and hurts the economy. What happened to “it’s the right thing to do” now we’re all down with “Apple are Capitalists, Duh”.

    Substitute M$ of the 90′s for APPL of now into these discussions and it becomes a little more clear what’s going down. It’s anti-competitive which is what most corporate capitalism has become(in particular in the US as opposed elsewhere). So Gruber should be saying “Apple are monopolists, Duh” not capitalists. In the US ‘capitalist’ is a friendly sounding motherhood word which, juxtaposed with communist, takes on the work for infantile stereotyping that bears little resemblance to realities.

    Compare Apple to a socialist/communist oligarchy like China would make an interesting discussion!

  • http://wideeyed.myopenid.com/ Pfff

    If code content isn’t changed just plain-readable text, images and 3D objects, then that’s just the work of writers and illustrators, be it a magazine, medical encyclopaedia app or whatever else.

    How Apple can stake a rightful claim to such content I don’t really understand. If it’s executable code, sure they’re providing the dev tools, the technical approval process, etc etc.

    It’s just like the banks saying we’ll charge you 100B$ of fees per annum. Economic analysis has shown it’s preditory and hurts the economy. What happened to “it’s the right thing to do” now we’re all down with “Apple are Capitalists, Duh”.

    Substitute M$ of the 90′s for APPL of now into these discussions and it becomes a little more clear what’s going down. It’s anti-competitive which is what most corporate capitalism has become(in particular in the US as opposed elsewhere). So Gruber should be saying “Apple are monopolists, Duh” not capitalists. In the US ‘capitalist’ is a friendly sounding motherhood word which, juxtaposed with communist, takes on the work for infantile stereotyping that bears little resemblance to realities.

    Compare Apple to a socialist/communist oligarchy like China would make an interesting discussion!

  • http://wideeyed.myopenid.com/ Pfff

    If code content isn’t changed just plain-readable text, images and 3D objects, then that’s just the work of writers and illustrators, be it a magazine, medical encyclopaedia app or whatever else.

    How Apple can stake a rightful claim to such content I don’t really understand. If it’s executable code, sure they’re providing the dev tools, the technical approval process, etc etc.

    It’s just like the banks saying we’ll charge you 100B$ of fees per annum. Economic analysis has shown it’s preditory and hurts the economy. What happened to “it’s the right thing to do” now we’re all down with “Apple are Capitalists, Duh”.

    Substitute M$ of the 90′s for APPL of now into these discussions and it becomes a little more clear what’s going down. It’s anti-competitive which is what most corporate capitalism has become(in particular in the US as opposed elsewhere). So Gruber should be saying “Apple are monopolists, Duh” not capitalists. In the US ‘capitalist’ is a friendly sounding motherhood word which, juxtaposed with communist, takes on the work for infantile stereotyping that bears little resemblance to realities.

    Compare Apple to a socialist/communist oligarchy like China would make an interesting discussion!

  • http://twitter.com/shadowxaf David Jensen

    The Kindle has free 3G. Amazon has to pay for their users wireless data. Isn’t that the reason they take a high cut of the subscription price for blogs? (but there is also a free to use internet browser, so I don’t know how that factors in)

  • http://twitter.com/shadowxaf David Jensen

    The Kindle has free 3G. Amazon has to pay for their users wireless data. Isn’t that the reason they take a high cut of the subscription price for blogs? (but there is also a free to use internet browser, so I don’t know how that factors in)

  • Anonymous

    Pfff,

    Consider a game like Wolf3D. The levels are simply text files. There are all sorts of ways to work around what you seem to think are clear barriers. If they had a two-tier system everybody would rush to the other tier however they could. You can hate the split all you want, but it doesn’t change the rationale. If someone comes along with a better split and starts to beat Apple there will be pressure to change the split, until then we’re stuck with the only game in town with a track record.

  • GeorgeS

    There’s yet another problem with Amazon/Kindle. A “catalog” for in-app purchases can have a maximum of 3,500 items. Amazon has many times that in Kindle books.

  • Guest

    Wow. Big rants and raves about Apple taking a cut. Where were you back when Amazon started taking 35% from publishers AND insisting on a $9.99 price per book?

  • Anonymous

    Nice article. One point about the paying for software on Windows vs on OSX: Whilst I suspect there’s some truth in the idea that mac users are more disposed to pay for software for the reasons you mention as a user of both Windows and OSX I’m more liekly to pay for software on OSX because there it is less likely there will be an adequate free alternative.

  • Anonymous

    Nice to see somebody who actually understands Apple’s policy.

  • https://me.yahoo.com/a/qJDryvoEhIjGtA2dj4aHrLkq7FQfZ16q0g--#47896 The Cappy

    “… Does the iPad make people more likely to buy digital goods? Or does the fact that someone has paid $499 or $829 for an iPad serve as a pretty good marker that they’re already the kind of person more likely to pay for digital goods? I think there’s truth in both.”

    Perhaps. It’ll be interesting to come back to this point after the Android tablets have been out for 6-12 months. They’re going to be expensive, too. Are those people going to be buying apps? So far the Android users have been running around demanding everything be free.

  • https://me.yahoo.com/a/qJDryvoEhIjGtA2dj4aHrLkq7FQfZ16q0g--#47896 The Cappy

    @Joshua:
    I suspect the article was simply too long for him to read.

    @sproketz:
    I vastly prefer Apple’s model to Google’s. I don’t mind paying for things I use. (If it’s worth my time, then it’s worth paying for.) Neither side is getting what they’re getting for free though. They both have a powerful monetization strategy going on. It’s just that with Google, the USER is what’s being turned into a commodity and sold. You may not object to that. I most certainly do.

  • Dan Thies

    If there were no in-app subscriptions available, publishers would still develop iOS apps for their subscribers, because they want to retain their subscribers.

    The math for publishers is simple. If (Number of iOS subscribers x 70%) is greater than (Number of Subscribers “lost” to iOS), it’s a win. That is, for publishers – those who own and control the rights to their own content.

    As a publisher of digital content, if I can add new subscribers with only a 30% marketing cost, I’ll sign up for that deal any time. The other 70% is pure gravy.

    For anyone who owns the content that’s being distributed through their app, this is a no-brainer. What’s the incremental cost of adding a new subscriber? Distribution through S3 costs 15 cents a gigabyte, or less. Round that off to nothing. You needed to do an app anyway to help retain existing subscribers, so that adds nothing. You were already paying to create the content, so that adds nothing.

    By the way, if I am not a complete idiot, I test and tweak the in-app subscription offers to maximize the conversion rate – most of the apps I’ve seen that offer subscriptions are horribly clumsy and careless about the offer. I might even offer a *better* deal via the app, than I offer elsewhere.

    This deal is bad for those who do not own and control the content they distribute. Middlemen. Gruber is spot on about that. Unless adding new subscribers = adding more royalty payments in excess of 70% of the selling price, you win in this game.

    Amazon takes a fat cut of Kindle subscriptions too. It’s the same scenario – they sell the hardware, they control the marketplace. The big difference is that I can’t develop an app for Kindles that makes my content look better, and I can’t sell subscriptions through that non-existent app, because the Kindle is a 100% closed platform.

    And if Apple didn’t allow apps at all on iOS, nobody would be complaining about the revenue split on the non-existent revenue from non-existent subscriptions. Newspapers would still be dinosaurs.

  • Dan Thies
  • John

    I would never subscribe to a paper NYT. Frankly, I’d probably never subscribe directly to the NYT, but if a reasonably priced subscription option showed up as an in-app purchase, I would be more likely to subscribe. I guess the question to NYT (and others) would be whether having me as a subscriber this way is worth whatever effort it takes to prepare content for the iPad. Does obtaining subscribers via this channel cover the costs of supporting this channel? I can’t answer this question, but I would suspect, at some not entirely unreasonable price, the answer has to be yes.

    The flip side of this is that for new businesses, ones that, as you say, are build on the pricepoints Apple has set up, they now have the ability to offer subscriptions with presumably little additional overhead other than generating content. This may be the more powerful part of this subscription model. Instead of paying a large organization like “The Daily” for content of questionable value, perhaps I can subscribe to a few great writers with apps. Or a small collective of great writers that have banded together with the idea of writing something that doesn’t suck.

  • El Aura

    The difference is that iOS is very much sold and advertised as an expandable platform, open to anyone who sticks to a limited set of mostly sensible and non-controversial rules to write apps for, including the option to give away apps for free.

    The Kindle (hardware) platform is not advertised to be open. Amazon does not sell the Kindle as a platform, Apple does sell iOS devices as a platform, they have more ads demonstrating third-party apps than any native functionality.

  • El Aura

    Really? Kindle, Kobo, dozens of newspaper apps already unlock content today (and have for a year or two) without Apple getting a cut via their own methods. If game developers wanted or could have circumvented Apple they would have. They did not not because they knew Apple would kick them out if they did.
    Apple can easily make two categories, if somebody tries to cheat on them, they can kick them out. What is so different between vetting every app whether it does what it promises to do and does not break any rules and vetting every app whether it belongs to the 30% or 10% category. Of course some people will haggle but so they now in regard to which f-words a dictionary can contain.

  • El Aura

    So if we pay 30% of our e-book price to Apple instead of to Amazon or Kobo (the ‘bad’ middlemen), who exactly gains from that? Customers or Apple? Apple is pushing out the middlemen and is absorbing their business.
    Same as Microsoft pushing out Netscape, and once they won, just raise the price of Windows.
    It is one thing to demand a cut or to use that cut to gain an advantage for you own competing business, ie, iBooks.