News and commentary about the Great Frontiers

ISS007-E-10807 (21 July 2003) --- This view of Earth's horizon as the sunsets over the Pacific Ocean was taken by an Expedition 7 crewmember onboard the International Space Station (ISS). Anvil tops of thunderclouds are also visible. Credit: Earth Science and Remote Sensing Unit, NASA Johnson Space Center

Image Credit: ISS007-E-10807 (21 July 2003) – Earth Science and Remote Sensing Unit, NASA Johnson Space Center

Apple’s Subscription Gamble


Apple announced their digital media subscription service for the iOS App Store today and reaction has been all over the place, though for certain classes of people it has been overwhelmingly negative. Developers and publishers especially are not happy with the service requirements.

For digital media like streaming video from Netflix, Hulu Plus; streaming music from Pandora; and ebooks from Amazon’s Kindle Store, customers currently purchase subscriptions and digital media on the providers’ websites. Then they are able to view the digital media using the providers’ free iOS apps. With this announcement, digital media providers can continue to offer media in this manner, but in addition they are now required to add an in-app subscription feature to their apps, one that will make use of iTunes own payment service. The customer has a choice: pay for the digital media inside the app or pay for it on the provider’s website. The digital media provider has a choice: pay Apple 30% if the customer pays for the digital media inside the app, or pay Apple 0% if the customer pays for it on the provider’s website.

Apple positioned their take as payment for bringing new customers to the digital media provider. “We have the platform,” Apple seems to be saying, “and we have the customers. How about 30% for bringing you a new paying customer?” It would have been strange if Apple had not wanted a cut of in-app subscriptions, because they have always taken a cut of in-app purchases. What Apple is really saying, a bit deviously perhaps, is go ahead and set your platform against our platform. Let’s see who brings in new paying customers.

Apple has taking a calculated risk, one which they cannot lose. If their assumptions about platforms, digital media, and customers are wrong, then a quick policy change will put the entire ugly affair behind them. If their assumptions are correct then Apple stands to gain both a financial windfall and a new level of customer satisfaction and loyalty.

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