Apple Starts App Store Subscription-Payment Service
Apple Starts Subscription Payment Service in App Store
Jason Alden/Bloomberg
A man checks the application menu (apps) displayed on the screen of Apple Inc.'s Apple iPhone.
A man checks the application menu (apps) displayed on the screen of Apple Inc.'s Apple iPhone. Photographer: Jason Alden/Bloomberg
Apple CEO Steve Jobs
David Paul Morris/Bloomberg
Steve Jobs, chief executive officer of Apple Inc.
Steve Jobs, chief executive officer of Apple Inc. Photographer: David Paul Morris/Bloomberg
Apple Inc. started a subscription service for publishers of newspapers, magazines and other content applications, letting them sell multiple issues through a single purchase in the company’s online App Store.
The subscriptions will be sold using the same App Store billing system that lets customers buy individual applications for the iPhone or iPad, the Cupertino, California-based company said today in a statement. Publishers that participate will have to offer their lowest subscription rates within Apple’s store.
“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,” Apple Chief Executive Officer Steve Jobs said in the statement. Jobs remains involved with strategic decisions while on medical leave.
Apple said it keeps 30 percent of the subscription fee for any customers whom it helps publishers draw. If a publisher brings an existing or new customer to the App Store by selling a subscription directly on its website, it keeps 100 percent of the revenue. Publishers must develop their own authentication technology to prove they routed customers to the App Store, according to the statement.
Companies with paid subscriptions for applications include movie-rental service Netflix Inc. and online-music provider Rhapsody International Inc., as well as a few magazine and newspaper publishers.
‘Economically Untenable’
Apple’s decision to take a 30 percent cut of any subscription purchased through its App Store is “economically untenable” for Rhapsody, President Jon Irwin said in an e- mailed statement. “We would not be able to offer our service through the iTunes store if subjected to Apple’s 30 percent monthly fee vs. a typical 2.5 percent credit card fee,” he said.
Rhapsody is “determining an appropriate legal and business response” to Apple’s announcement, Irwin said.
Netflix spokesman Steve Swasey declined to comment.
Apple is also not releasing consumer information to publishers for customers who buy subscriptions directly through the App Store, a sticking point in negotiations with companies including Time Warner Inc.’s magazine group, Time Inc.
“The announcement raises many questions around consumer data that we would need to work through and agree on,” Time Inc. said in an e-mailed statement.
Time, which is still negotiating with Apple, came to an agreement with Google Inc. last week to sell Sports Illustrated for Android-powered smartphones and tablets.
“Many publishers realize that there is life outside Apple’s garden wall,” said Grzegorz Piechota, president of the International Newsmedia Marketing Association Europe, a trade organization that represents European publishers.
350,000 Applications
The App Store offers more than 350,000 applications to users of iPhones, iPods and iPads, the company said today. Customers had downloaded 10 billion apps through the store as of Jan. 22. About $1.1 billion of applications were sold through the App Store in 2010, making Apple’s revenue share about $317 million, according to estimates from Brian Marshall, an analyst at Gleacher & Co. in San Francisco.
“Apple just wants to control everything through the App Store,” Marshall said. “Apple already has low pricing out there, so I don’t think this subscription-billing model is anything material.”
Apple rose 72 cents to $359.90 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares climbed 53 percent last year.
To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net.
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.
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