The Effects of Apple’s New Subscription Service Launch

If you have not heard, Apple has just recently launched a new subscription service for its App Store. This will allow for media subscriptions on popular devices like the iPad and iPhone. However, there is a “twist” that is making publishers and other suppliers of content very uneasy. The controversy centers around Apple’s demand to receive 30% of any subscription sale through an Apple App. Traditionally, customers who purchased subscriptions through an App would link out of the App, open a new browser window over the internet, and be billed by the publishing company. However, Apple is no longer allowing this and making sure that all purchases are billed through the App. Apple’s cut is 30% of the sale price.

There are some other complex issues in this system. It is my understanding that publishers are required to offer the same price through the App as they would in an “outside App” purchase. Publishers argue that most consumers will opt to purchase their services in the App due to ease of use.

Why does this matter? If publishers are going to be losing 30% of sales revenue there is little profit left for them. Therefore, one would assume publishers who are on board with Apple’s new service to increase prices on the App to help cover costs and make up for lost revenue. Yet, if publishers are also required to have the same price outside of an App, the regular cost of a subscription will also be inflated. These new costs are all passed onto the consumer thanks to Apple. In my opinion, these added costs bring less value. Consumers are paying a higher price just so Apple can add to its bottom line. The power Apple has to disrupt a market is truly amazing. There still remains a lot to be told about this story and I am anxious to see what will unfold in the future.

To read the Wall Street Journal Article visit: http://online.wsj.com/article/SB10001424052748704409004576146062283349464.html?mod=WSJ_Tech_LEADTop#articleTabs%3Darticle

Video Link:
http://online.wsj.com/article/SB10001424052748704409004576146062283349464.html?mod=WSJ_Tech_LEADTop#articleTabs%3Dvideo

Sources: Adams, Russel & Worden, Nat. “The Wall Street Journal Online”. http://online.wsj.com/article/SB10001424052748704409004576146062283349464.html?mod=WSJ_Tech_LEADTop#articleTabs%3Darticle