Apple moves on App store subscriptions

USA: Apple Inc. has updated its App Store developer guidelines and will offer in-app, auto-renewable subscription billing for content-based applications. Previously, payment for App Store apps had been limited to paid downloads and in-app purchases where additional content or access could be purchased from within an app.

Offering subscription billing via the iTunes/App Store ecosystem likely will provide a significant boost to the number of users willing to pay for subscription content compared with those that use external payment options. IHS Screen Digest Mobile Media research indicates that prior to the launch of Apple's App Store, the proportion of consumers in Western markets like the United Kingdom willing to pay for mobile content such as games struggled to rise beyond 5 percent. With the iPhone and App Store, consumers have proved far more willing to pay for content.

App publishers can choose the price and subscription duration: weekly, monthly, bi-monthly, quarterly, bi-annually or annually. Customers have the ability to subscribe with one click, review and manage subscriptions from a personal account page, and cancel automatic renewal of subscriptions. Apple will process all the payments and take the same 30 percent share that it does for all transactions made via its App Store.

Apple's developer guidelines dictate that apps using a separate billing platform must also offer subscriptions at the same price—or cheaper—within the app via iTunes. Apple also has prohibited direct linking from within the app to external paid subscription services.

Subscription billing has been one of the most requested features by iOS app publishers and developers. However, Apple's insistence that publishers also allow consumers to pay via its subscription service—if they are to offer any subscriptions—and part with the same 30 percent of revenues has led to a mixed response from developers.

Apple's reasoning behind its decision to take a 30 percent cut is that it merits the fee for introducing customers to content. Furthermore, Apple says it processes the payments in a simple and trusted fashion, and in some cases, is responsible for delivering content, within the app, to the consumer. If Apple were to take anything less than the same 30 percent cut it takes for other forms of payment, it could lead to developers choosing to abandon those payment options and opt for the service that offers the best revenue share.

Google also has launched its own content subscription service. Google's One Pass service enables users to pay for online content via a variety of options, including subscription. All payments are processed via Google Checkout and Google takes a 10 per cent revenue share. One Pass, initially aimed at news publishers, is not directly focused on mobile content or payments, but it does allow for payments for mobile apps and content.

There has been some indication from Apple that the enforcement of new subscription rules could apply only to certain categories of applications—most likely “publisher” apps that provide newspaper and magazine-type content, rather than “services” such as utilities and some music services.

It remains possible that Apple is testing the market with its initial insistence on the 30 percent share and that it will eventually come down to a revenue share more amenable to developers. It is also possible that Apple could enforce these guidelines only for a small section of applications, allowing a number of popular services to part with a lower revenue share or keep 100 percent of subscription revenues.

Source: IHS iSuppli, USA.