Apple's app subscription model outlined

The Daily is an iPad-exclusive publication that requires subscription.Apple recently announced a new subscription service available to all publishers of content-based apps on the App Store, including magazines, newspapers, video, music, etc. This is the same innovative digital subscription billing service that Apple recently launched with News Corp.’s “The Daily” app. 

The Daily app is a newsmagazine that is tailored to the iPad's screen size and designed around the multi-touch, multi-media aspect of the device. We took an early look at the Daily and while impressive, it seems to fall short in a number of areas. Most notably that on a 24-hour news cycle, a "daily" news feed seems very old media when hourly updates are now the norm.

For services and publications that are gathered through the App Store ecosystem, Apple demands 30% of the revenue (since Apple provides the service, promotion, advertising and payment pipeline) but Apple will also stop out-of-app linkages which may be problematic for some service. Sony's Reader app, for example, was denied acceptance into the Apple App Store because users had to open a browser page to search and buy eBooks (at least that is the way the app works in the Android variant). Companies who sell content, like Amazon with it's Kindle App, need to make sure the buying process takes place inside the app (where Apple will take 30% of revenue) or risk being taken out of the App Store altogether.

For consumers, all of this is transparent. They still spend the same amount on the content and the only convenience of shopping this was is that they don't have too open another browser window and enter their credit card information all over again since everything is coursed through the Apple Store.

Apple's subscription model seems beneficial to consumers as it gives them freedom of choice and freedom to discontinue subscriptions at will. For developers and content producers, however, it tightens the control and increases the percentage of sales that Apple gets. The release from Apple goes to explain the system.

'Subscriptions purchased from within the App Store will be sold using the same App Store billing system that has been used to buy billions of apps and In-App Purchases. Publishers set the price and length of subscription (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly). Then with one-click, customers pick the length of subscription and are automatically charged based on their chosen length of commitment (weekly, monthly, etc.).

Customers can review and manage all of their subscriptions from their personal account page, including canceling the automatic renewal of a subscription. Apple processes all payments, keeping the same 30 percent share that it does today for other In-App Purchases. 

“Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing,” said Steve Jobs, Apple’s CEO. “All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app. We believe that this innovative subscription service will provide publishers with a brand new opportunity to expand digital access to their content onto the iPad, iPod touch and iPhone, delighting both new and existing subscribers.”

Publishers who use Apple’s subscription service in their app can also leverage other methods for acquiring digital subscribers outside of the app. For example, publishers can sell digital subscriptions on their web sites, or can choose to provide free access to existing subscribers. Since Apple is not involved in these transactions, there is no revenue sharing or exchange of customer information with Apple.

Publishers must provide their own authentication process inside the app for subscribers that have signed up outside of the app. However, Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app. In addition, publishers may no longer provide links in their apps (to a web site, for example) which allow the customer to purchase content or subscriptions outside of the app.