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Apple backs down on in-app subscription pricing

updated 09:30 am EDT, Thu June 9, 2011

Drops subscription pricing rules entirely

Apple has suddenly and without fanfare thrown out its App Store guidelines on in-app subscription pricing, reports note. Later this month Apple was set to begin enforcing a recent policy on subscriptions, requiring that any outside app subscription options be matched by in-app ones. Of special worry to publishers, though, was an insistence that in-app options cost the "same price or less," even though Apple claims a 30 percent cut of App Store revenue. The policy drew the scrutiny of the FTC.

Newly-modified App Store rules not only omit any rules on pricing, but also the demand to have an in-app option. "Apps can read or play approved content (specifically magazines, newspapers, books, audio, music, and video) that is subscribed to or purchased outside of the app, as long as there is no button or external link in the app to purchase the approved content," the replacement guidelines read. "Apple will not receive any portion of the revenues for approved content that is subscribed to or purchased outside of the app."

The company may have decided to back down for a number of reasons, such as immediately quashing any motivation for an FTC investigation. It was also encountering heavy resistance from publishers, entities it needs as a halo for the iPad and the upcoming Newsstand feature in iOS 5. Another question was enforcement, since the previous rules might have potentially kicked out major apps like Netflix or Hulu.






by MacNN Staff

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Comments

  1. doctor9

    Joined: Dec 1969

    +14

    Hear, hear...

    A limited newsstand and bookstore because of this previous policy was going to be in no one's best interests.

    /

  1. prl99

    Joined: Dec 1969

    +1

    operating costs

    Apple has operating costs. Allowing publishers to bill customers outside the App Store means Apple gets nothing to host these applications. If the publishers get to charge more on the App Store, most people will pay through the publisher's website. Apple, like other companies, isn't in the business of giving anything away so why should publishers feel they shouldn't have to pay Apple something to host their applications and distribute their software?

  1. ebeyer

    Joined: Dec 1969

    +7

    News stand

    Dare I hope for a day when I can buy a subscription and not be locked into a single proprietary application stack and hardware platform to get to that content? My iPad is great, but there are times when it would be really handy to read on my Nook Color, which is designed specifically for reading.

    Alas, I dare not hold my breath.

  1. chippie

    Joined: Dec 1969

    -1

    It Was Arrogant To Even Attempt To Implement!

    Good on the world's publishing community!!!!!

  1. cmoney

    Joined: Dec 1969

    +7

    See?

    Complaining works.

  1. chippie

    Joined: Dec 1969

    -3

    @prl99 A Big Slice Of Apple's Marketing For The

    ios devices is the # of apps available, so I would expect apple to foot the bill for hosting. Further
    many media apps like CNN advertise the availability of their apps on their channel, which is free advertising for ios devices. Apple has it's head up it's backside and will look back in the future when things are not so rosey and see how arrogant they have been.

  1. testudo

    Joined: Dec 1969

    0

    Re: operating costs

    Apple has operating costs. Allowing publishers to bill customers outside the App Store means Apple gets nothing to host these applications.

    That's how it is with any other free application. And if the publishers just removed their 'buy' buttons from the apps, and just do purchases through the web site, they'd get nothing from that either.

    If the publishers get to charge more on the App Store, most people will pay through the publisher's website.

    According to whom? People still go to Apple stores and buy macs, even though you can get them cheaper through Amazon. Some people might pay more just so they don't have to have yet another place with their cc info.

    Apple, like other companies, isn't in the business of giving anything away

    Well, they are in the business of giving things away, since they give away apps for free all the time.

    so why should publishers feel they shouldn't have to pay Apple something to host their applications and distribute their software?

    I don't know. Why should the publishers have to host their apps on the app store, serve them to the customer, or even serve content to the customer? Oh, right, because Apple demands it.

  1. testudo

    Joined: Dec 1969

    0

    Re: operating costs

    Oh, and complaining that Apple has operating costs on the app store for hosting all their apps and serving the content really isn't going to fly with many of these folks. Apple mandates use of their store to get apps on the device, pushes for a standard system of how to get content to these apps, then tells the providers that "Now, all the stuff you have to do to get it on our device, yeah, that's costing us money. We need you to pay us to cover all this you 'want' us to do for you."

  1. testudo

    Joined: Dec 1969

    +5

    Easy solution

    BTW, an easy solution to Apple's hosting problem is that they should just mirror their podcast setup. Require the publishers to post their content on a secure site for iOS devices to retrieve from directly. Then Apple only has to control the access to the content based on the subscription information (which they are doing anyway).

  1. Inkling

    Joined: Dec 1969

    0

    Operating costs coming down fast

    I wouldn't sweat Apple's operating costs. First, as others have noted, Apple requires developers and users to install apps through their system. That obliges Apple to cover the cost of free apps. What you require, you have to provide.

    Second and more important, the costs of running these huge server farms is plummeting. Tuesday I heard someone in cost management for Amazon's own huge server farms explain why. An intense competition among hardware and chip manufacturers along with an economy of scale is driving prices down very fast. New capacity is so cheap to add that for each day in a five-day work week Amazon adding enough new capacity, he said, to equal the total server capacity Amazon had in 2000 when it was already a multi-billion dollar corporation. I do not exaggerate. He said he was surprised to discover that himself.

    In 2003 Steve Jobs was quoted as saying that the costs of providing music for 30% of retail was such that Apple was only making a modest profit on the iTunes Store. If that were true in 2003, then, with the costs of large server farms now a fraction of the costs then, Apple must be making a killing off their on-line sales. That's perhaps why they were so eager to push online sales. And if Apple could make a profit on 30% in 2003, they could be making a nice profit on 10-15% of retail today.

    The real issue isn't the nasty schemes Apple was using to force developers and publishers to sign up. That was only what we could see. It's why Apple is charging still developers, distributors and publisher 30% when it should be charging closer to 15%.

    That is perhaps why Apple backed down. They feared what else an FTC investigation might turn up. There's no better indication of restraint of trade than getting away with charging a 30% markup when you could be making a fat profit with a 15% markup.

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