Apple Blinks on Subscriptions

by Tien Tzuo

As was widely reported late last week, Apple quietly changed some of its draconian Subscription Service policies right on the eve of their going into effect. Previously, publishers were forced to point all of their sales to Apple's App Store, even if they had their own commerce infrastructure. But now, publishers are allowed to forego Apple's system and avoid paying 30% of their royalties to Apple.

Since day one, we have been outspoken critics of the Apple Subscription Service policies, and we are thrilled to see Apple responding to the plight of publishers. We even protested their iPad 2 launch, with which "ASS" is bundled.

But Publishers, while this is a big step forward, now is not the time to let down your guard.

To put things into context: the media industry is in big trouble. There is plenty of blame to go around, but the reality is that for media companies to survive and thrive, they must own their customers -- the reader -- and they must have the flexibility to bundle, package, and price for their content in ways that allow them to reach different customer segments.

Apple still doesn't get this. Despite caving to publisher's initial demands, Apple's subscription service is still based on the premise that they own the customer, not the publisher. And in an industry whose revenues are in decline, Apple continues to try to squeeze every last cent from an already impoverished industry.

And for what? As the New York Times reported, “the iTunes store accounts for just a sliver of its own revenue, and the company has said in the past that it generates virtually no profit from the store. In the most recent quarter, Apple said the sale of apps, music and content combined brought in just $1.6 billion of the company’s $24.6 billion in revenue.” In other words, Apple has bigger fish to fry than the very publishers that make iPads and iPhones so full of rich experiences.

We all know that a functioning democracy needs a strong, independent, free press corps, and the ad supported model is clearly not enough to make the math pencil out.

If a group of committed citizens can topple a decades old repressive Egyptian regime in just a few short months, surely a group of smart, experienced publishers can get Apple to play fair.