Are Subscriptions Against Apple’s Religion?

Does Steve Jobs have a religious aversion to subscription services?  This is as reasonable a theory as any to explain Apple’s behavior regarding subscription services for digital content over the past few years, flying in the face of market developments.

Apple announced on Tuesday that it will begin supporting subscription content services for iOS devices through the App Store.  This will include subscriptions to e-periodicals as well as music and video content.  For new subscribers, Apple will keep 30% of the revenue and own the subscriber information.  Furthermore, app developers will not be allowed to “cheat” by providing web links in their apps so that users can sign up for subscriptions on web pages outside of Apple’s domain.

Publishers who have seen the iPad as their salvation — as a way to get consumers to pay for content again — have been agitating for an Apple subscription model for some time.  Now they have it, and they are not happy with the arrangements.  Rumblings about antitrust litigation are beginning to be heard, and music subscription service providers like Rhapsody are asserting that this model makes their services financially untenable on Apple platforms.  Meanwhile, a music subscription service connected with iTunes is nowhere in sight.

All this is happening despite evidence of the steadily increasing popularity of subscription services for music.   A Mashable survey from a year ago says that a full 50% of respondents either prefer subscriptions services to file ownership or want both types of services (28% say they prefer subscriptions over ownership).  This is a major increase from just a few years ago: an Ipsos-Insight 2005 study found that those who preferred paid downloads outnumbered subscription fans by almost four to one.

A more recent NPD survey of Apple device owners suggests that up to 8 million US users would pay $10/month for a subscription version of iTunes; that’s more than ten times Rhapsody’s current subscribership.  Rhapsody has offered a major-label-licensed subscription service since 2002, predating the iTunes Store.

For periodical publishers, subscriptions are the core business model.  Until now, Apple has only supported a “newsstand” style model, in which users have to pay separately for each week’s or month’s issue.  Apple inaugurated its subscription model for publishers with the launch of News Corp’s The Daily for the iPad two weeks ago.

Meanwhile, Google is jumping in with further support for paid content models, with particular focus on the periodical market.  In an announcement timed to coincide with Apple’s, Google announced a model with more business model flexibility and a more favorable 10% revenue cut.

Google CEO Eric Schmidt claims that Google does not intend to profit from this model, that it is only charging enough to cover its costs.  In other words, Google sees an opportunity to distinguish Android from Apple platforms through availability of premium content — to hit Apple where it lives, so to speak.  But Google’s model will extract collateral damage in the market as it competes with vendors that have been offering flexible paid-content service tools for periodical publishers, including Journalism Online and Atypon.

Support for flexible paid content models is going to be essential for publishers who are realizing that the online ad market for their publications has declined and may not ever recover.  With Google in the game and Apple at least reluctantly dipping its toe in the water, Silicon Valley is beginning to see the significance of this shift in the market as well.

3 comments

  1. Personally I think the subscription model has been held back from Apple by the content owners on purpose. Its the whip to keep them in line.
    Apple has a reputation of taking advantage of that dominent position.. So content owners need something to as backup.

    I personally think this is all Bull*&#T.
    What we are talking about is basically like Microsoft or Apple charging us for logging onto our Internet backing and taking a cut every time we use it. OR, simply calling some one on a phone, and the handset maker getting a cut. (Which kinda does happen in some ways with the AT&T deal, but not any place else.) This is of course absurd. But on a tablet its all game.

    I am waiting for the day when a tablet is just that. a device I can use for what I want and don;t get changed for using my own device. Like a Car, or a Bike.. or my desk phone.

  2. James,

    Your theory about the record labels is interesting, but I happen to know it’s incorrect.

    Evidence of this exists in the deal the record companies made with Amazon. The bargaining chip they used (up) was not subscriptions but DRM.

    – bill.

  3. But Subscriptions services exist with other providers.

    Why would Apple not offer such subscripts? They say iTunes makes them no money. Subscriptions should be no issue to offer. The fact they are not is telling.
    One would say a high possibility is that. They simply are not being offered terms they can live with. (Most likely on purpose) While competitors are.

    The fact others offer it is the wedge used by the content owners to slap Apple around. You push us, we push you back..

    That is what I would be doing in their position.

    The content oweners need to help Apple compeators rise up so they have options and competiton.. So THEY keep the power and not the gatekeeper to the consumers talking power. They need more gates so they can ride them off between each other.

    And specifically, the content owners are very much use to the gatekeeper mentality and power it brings. (Its their history) Like a thief knows a thief when they meet each other.

    James

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