Why Apple's Subscription Switch Isn't Enough
At first, I was supportive of Apple's original rules for in-app subscription pricing. Now Apple's rules for publishers have softened, and my perspective has changed. By lifting the pricing rules, Apple is on the right track and clearly made a good move. At the same time, I can't help but believe that Apple is still missing the boat with publishers.
06/16/11 5:00 AM PT
I was previously quite supportive of Apple's new-subscription offering mechanism and the policies it designed for media publishers back in February. But a few months later, and after Apple has lowered its big threatening stick an inch or two, I have an evolved perspective, and it turns out that now I see a fundamental flaw in Apple's position with publishers, despite a policy that, on the surface, seems quite fair. Let me explain.
First, Apple's initial rule that publishers offer the same prices outside of an app as they do inside of an app was simply unmanageable in the real world. When you think about newspaper or basic magazine publishers, sure, this sort of makes sense. It's not fair to offer a $15 subscription online but offer a $20 subscription through an iOS app, because this price difference would let a publisher leverage Apple's massive customer base to bypass the App Store. Not cool.
The reality, though, isn't so much about trying to get around Apple as it is about the fear of breaking Apple's rules and getting kicked out of the App Store with little recourse or ability to fix things quickly and amicably. Almost everyone interested in app development has heard the horror stories of developers stuck in limbo while waiting on Apple to make a decision. If a publisher throws its eggs into the Apple basket, it can be a scary proposition to lose access to them.
Here's where that fears comes from: Say a publisher wants to offer a special spring sale or package deal and comes up with a great website promotion and email marketing campaign. To get that same offer rolled out into an iOS app might be a time-consuming process, and even if it's not, the people responsible for such a marketing campaign probably don't have access to an iOS app in such a way anyway. So what do you do? Not run the brilliant campaign at all? Turn it into summer sale instead while you figure out how to update the iOS app too, in order keep the offers in one-to-one parity? That's a nightmare challenge.
In a perfect world, you would design your apps to be flexible, but it's not so easy in here on Earth. At least now, with the change, Apple has removed this fear. But it doesn't fix the new challenge it actually helped create.
Just a Delivery Mechanism
What I'm seeing out there when it comes to publishers is that all apps are just delivery mechanisms for content. Sure, some apps or platforms can leverage cool new features, but they aren't really the product. Let me say this again: A publisher's iPad app is not the product. The content is the product, and the content needs to be portable all over the place. So the iPad, for example, is just a window that provides access to content. Sure, it's a high-quality window, but really, the content is king for publishers. So the idea of selling an app is inherently weird to publishers.
Meanwhile, for many publishers, a magazine isn't really their only product. They also provide content, the same or enhanced, on their websites and via email newsletters. In these situations, a magazine isn't really their product at all -- their product is access to information. The magazine is just the delivery medium.
To make it all more confusing, for many publishers, particularly of specialized business or trade publications, the content they sell is comes in many forms. If they sell e-books, print books, or special subscriptions to newsletters, they can't necessarily sell these things as apps for a single app store (the Apple App Store) and make money. They have to sell them through all their channels to all the possible customers they can find in order to make a profit. An iOS app is just another channel. Granted, if Apple is providing all the infrastructure to deliver and process an app-based sale, 30 percent isn't such a terrible cut to give Apple. In fact, using Apple's payment processing system can likely save some publishers money overall because it works so well and requires no human interaction for them. Plus, because it's so easy to use, consumers might actually spend more because they don't have to type out their credit card numbers.
Still, what if a specialized content publisher wants to sell something bigger, like subscribing to online education for a year for US$500? Suddenly a 30 percent cut from Apple is a money-losing proposition.
What's the Point Again?
Confused yet? I hope you are because the reality is that all of these scenarios are far more complicated in the real world of publishing than Apple seems to understand. Heck, to even get at the official rules for creating an app, you have to have a developer's agreement with Apple, and the business leaders who are publishing content are just trying to find models that will enable them to deliver valuable content to customers.
As Apple CEO Steve Jobs explained back in February, "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." This still sounds amazingly reasonable. And it is. But what happens when a publisher promotes its content, and points out that it has apps that allow access to its content, and then that reader goes to the Apple store to find the app? Does Apple suddenly believe that Apple delivered that customer and should earn 30 percent?
I saw an ad for a type of shoe in Men's Journal the other day, and one way to learn about the shoe was to download an iOS app. In no way did Apple actually get me to download that app. They just provided the infrastructure, and while that infrastructure and delightful devices have been the fruit of incredible investment, the amazing thing here is that a shoe company used a print magazine to promote an iOS app to promote a shoe. This is really cool. Now imagine if Apple wanted to take 30 percent of the shoe company's revenue for the sale of shoes through an app. Say what? I can't imagine that these sorts of cool things would happen very often.
So what we have is ambiguity that leads to publishers who will sell their content on their own sites and then provide free apps that simply provide access to content that customers already purchased. Not particularly innovative or exciting.
Instead of generating massive loyalty and the innate desire in publishers to promote a kick-ass experience through an Apple iOS-based app, these rules turn the focus away from innovation into a position where a publisher hunkers down. Why promote an iPad app in the pages of your magazine or in your email newsletters when your ability to use that app to delight your customers is hard to manage and possibly a money-losing proposition?
Worse yet, many publishers don't know if an iPad app will deliver more readers or simply cannibalize their existing subscriber base for a 30 percent reduction in revenue through a new delivery mechanism that required significant investment to create and maintain.
On the Right Track But Missing the Boat?
It all boils down to this: By lifting the pricing rules, Apple is on the right track and clearly made a good move. At the same time, I can't help but believe that Apple is missing the boat with publishers.
Sure, ignoring Apple's millions of loyal customers is just plain stupid, and successful publishers aren't dumb. What Apple needs to do is radically turn this entire message, this entire plan for publishers, upside-down and make publishing with an iOS app incredibly profitable and exciting again. Apple is approaching publishers while holding a big stick while peddling a message of fear. That's entirely the wrong way to approach publishers. Publishers are incredibly optimistic people who believe they are creating valuable content, and not just content -- they believe they are delivering insight, ideas, answers, and sometimes joy.
With publishers, I'm afraid that Apple has done something exceedingly un-Apple like: Instead of creating excitement and passion for iOS-based publishing, I think Apple has done the opposite by creating fear, uncertainty and doubt. By changing its pricing parity rules, Apple is taking a step in the right direction -- but there's plenty of ground to be made up.
If Apple can stoke these publishing fires, show the value and offer incentives for innovation, then and only then will we see truly deep and broad publishing action with iOS.