Apple Subscriptions: Has Apple Crossed A Line?

Apple’s new technology for subscriptions for iOS apps, and their new policy that all in-app subscriptions use it exclusively, has me worried that Apple has gone a bit too far. I’m not going to try to explain the policy. It is best if you go to the Apple site and read it for yourself. Suffice to say, Apple wants apps that use subscribed content to use Apple technologies to manage those subscriptions.

The price for using the Apple API for in-app purchases is that the app vendor has to give Apple 30% of the subscription price. Apple, naturally, is viewing this as another potential source of revenue. But what this requirement might do is become a potential barrier to some apps. If a company like Amazon decides they don’t want to give Apple 30% of book purchases via the Kindle app, I can see one of two things happening. The first, and most likely, is that Amazon removes the button on the home screen that takes the user to the kindle.com web site via Safari. A less likely, although more dramatic, response would be to pull Kindle from the App Store. I seriously doubt Amazon, Hulu, Netflix and others will want to remove apps that provide them with a fairly large mobile audience. These companies are about content, not the software itself. But I can see them deciding that 30% is far too big a mark-up to pay for what Apple is offering.

Does Apple add value through the in-app purchase and subscription API (and attendant infrastructure)? Sure, they do. By dealing with security, billing, taxes and collections, Apple removes that burden from small publishers. But for companies (like Amazon) that already have that infrastructure in place, Apple’s value here is actually quite small. I don’t see a problem paying Apple 30% for  using the iTunes App Store for app purchases. Apple takes care, again, of billing, collections, taxes, installation and upgrade management. 30% for Apple is actually a fairly good deal, in the larger picture. But for subscriptions, it is a different story, and I don’t believe that Apple’s services here are worth 30%. The app developer still has to figure out how to deploy the content, manage it on the device and keep it updated. Taking a single-digit percentage would make some sense, but having to give Apple nearly 1/3rd the price seems a bit steep.

The line being crossed, though, isn’t one about the percentage. The real concern I have is having Apple “reach behind” the app and try to take a cut for content they had no part in developing, and didn’t really facilitate beyond the app store. Of course, I can see Apple’s side of this equation: a lot of these subscription-based apps are given away for free. Apple sees an annual payment from these companies in the form of an Apple iOS Developer Program subscription, but nothing else. Apple has to maintain the infrastructure to provide for sale, install and upgrades for the apps, as well as the time and cost associated with maintaining XCode and supporting tools. In some ways, the subscription-based apps are getting something of a “free ride” in terms of infrastructure support for app deployment. Apple probably feels they deserve a piece of the action.

Fair enough, I can see the merit in that argument. But 30% seems a bit much. Some number under 10% would make more sense in my mind. It would seem more reasonable and little less grasping. Taking 5 or 10 cents on the dollar for helping with billing, collection, taxes and subscription management might be worth it. But taking almost 1/3rd seems a bit rich in my opinion.

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