Apple 2.0

Covering the business that Steve Jobs built

Steve Jobs to pubs: Our way or highway

February 15, 2011: 10:28 AM ET

The subscription model Apple announced today is unlikely to please anyone

Image: News Corp.

There was a rumor in the Time Life building last week that Apple (AAPL) -- which had been in a stand-off with the publishing industry for nearly a year -- had "blinked" and was about to cut a deal favorable to the publishers.

It was not to be. When Apple announced its new App Store subscription service Tuesday morning, it was as draconian as the publishers feared. Among the terms:

  • Any subscription offered outside an app must also be offered for the same or lower price inside the app. No passing on extra costs to the user.
  • Apple takes 30% of the revenue from in-app purchases -- be they Amazon books, Time Inc. magazines or Hulu Plus TV shows. As Joshua Benton writes in Nieman Journalism Lab: "Giving up 30 percent of tablet revenue is one thing; giving up 30 percent of print subscription revenue is suicide."
  • The publisher gets to learn the name, e-mail address and zip code of in-app subscribers only if the user clicks a button agreeing to share that information -- something most are unlikely to do.
  • Publishers may no longer provide links in their apps (to a website, for example) that allow the customer to buy content or subscriptions outside the app, which pretty much shuts down the business model of, say, Amazon's Kindle app.

In the press release, Steve Jobs makes all this sound like the most reasonable thing in the world:

"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," Jobs writes. "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."

"Delighted" is not likely how the publishers feel today. We note that no developer or publication except News Corp.'s (NWS) The Daily is mentioned in the press release. We suspect the rest are still studying it.  You can read it for yourself here.

NOTE: Time Inc. (TWX) publishes Fortune magazine and hosts this blog, but I don't speak for Fortune or its publisher.

Also on Fortune.com:

[Follow Philip Elmer-DeWitt on Twitter @philiped]

Join the Conversation
About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

Email | @philiped | RSS
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.