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Apple Demanding 30% cut of In-App subscriptions

February 21st, 2011 Leave a comment Go to comments

Is Apple Getting to Greedy?

This question in regards to Apple’s possible greediness is referring to their demanding 30% cut of In-App subscriptions. To break it down, this is what Apple is stating in regards to in-app subscriptions for newspapers, videos, music, and magazines.

• The publishers can continue to sell digital subscriptions on their own websites.
• They can continue to give free access to existing subscribers.
• These transactions will not have to worry about Apple taking a cut from them.
• The publishers who offer out-of-app subscriptions will also have to offer in-app subscriptions.
• The price has to be lower than or the same for subscriptions that are processed outside of the app.
• These in-app transactions are what Apple will take 30% cut from.

There will be a hefty fee for processing these transactions. Most credit card processors charge around 2.5% and a small transaction fee around twenty-five cents. Although it is not one hundred percent clear, Apple may take this same cut whenever a subscriber renews a subscription. Starting June 30, the new subscription plan will become mandatory.

To prevent developers from trying to provide a link to their regular web-based subscription service in their apps and find a way around Apple’s system, the rule states explicitly that “publishers may no longer provide links in their apps which allows the customer to purchase content or subscriptions outside of the app.”

In plain English, when Apple brings a new subscriber to the app, they earn a thirty percent share. When the publisher brings a new or existing subscriber to the app, Apple earns nothing and the publisher keeps 100%.

Although this may sound fair on paper, chances are a majority of the new subscription services will come from apps, and since developers are not allowed to route around the system, this cut for Apple can become a major issue for some of the publishers.

What concerns publishers is if they have to give Apple 30% off each subscription price, can they still make a profit? On the other hand, will they have to raise the cost of subscriptions in order to make a profit or make what they were before the bite of the Apple?

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