May 13, 2011
The fallout over Apple’s new subscription model is being felt across the digital landscape. Unfortunately, the new rules, which sought to bring order to the App Store, have had the opposite effect, according to The Wall Street Journal. In February, Apple announced a new subscription model, which gives publishers a way to offer monthly or yearly subscriptions to its customers via in-app purchases. In doing so, developers must agree to give Apple a 30 percent cut of each sale, and accept the terms before June 30, 2011. As an added incentive, Apple will allow publishers to sell content through their own websites, as long as the same content is made available via an in-app purchase at the same or lower price. Good For Some Some publishers, such as The New York Times and Popular Science were quick to sign up for the new service, and happily paid Apple its 30 percent. The Daily also accepted Apple’s terms. …Not for Others Other publishers, however, have determined that they can’t afford Apple’s terms. For example, Educational services company Follett Corp. said it has decided against signing onto the plan. As such, it won’t try again to convince Apple to approve its Café Scribe digital textbook app. In February, Apple rejected the app. According to Gary Shapiro, Follet’s senior vice president of intellectual properties, adding Apple’s 30 percent cut would force it to operate at a loss. Instead, Follet is offering its content through a web browser and Android-based app. Meanwhile, the new rules have caused at least one company to close its doors for good. As we told you recently, iFlowReader will cease to exist after May 31. Its developer, BeamItDown Software, have determined it cannot compete and therefore will leave the marketplace all together. Private Negotiations Still other companies have gone down another route: a private negotiation with Apple. Recently, both Condé Nast and Hearst Corp. have completed unique deals. For example, Condé Nast negotiated the ability to bundle print and digital subscriptions. What’s At Stake Investment bank Sterne Agee estimates Apple’s App Store generates as much as $2 billion a year in sales. Because of this, publishers are trying their best to figure out what is best for them. While some have signed on the dotted line with few reservations, others have decided to leave the App Store altogether. Finally, still others are negotiating private contracts. Moving forward, it will be interesting to see what larger publishers will do. For example, with the June 30 deadline approaching, we have yet to hear from Netflix and Amazon. Will Amazon’s Kindle app go dark in June? What about the ability to view movies via the Netflix app? Time will tell. What do you think? Leave your comments below.