The battle for your digital subscription dollar is officially underway. This week Apple announced the launch of a new App Store subscription model to include newspapers, magazines, video and music. Not wanting to be left behind, Google revealed its own plans in the shape of One Pass – a means to subscribe to digital content across a range of different devices. But the focus has quickly shifted onto how much of a cut Apple and Google will take from each transaction (30 per cent and 10 per cent respectively). The content companies are up in arms. But should they be?
Articles such as this have been springing up that openly wonder what is a “fair” slice for Apple and Google to be taking from each subscription. The notion that Apple should keep 30 per cent – so the argument goes – is horrifying since it’s simply acting as a “payment processor” by facilitating the transaction. The under-fire newspapers, magazines and book publishers are once again being strong-armed into diluting the revenue from their content.
There are even murmurs of a possible antitrust investigation into accusations that Apple holds an unfair monopoly position in the market. But what does this really mean for the consumer? Here’s my take.
One of the things that I’m most excited about is my assumption that Apple won’t bombard me with hundreds of pieces of annoying 1970s style junk mail offers the second after I subscribe. I’m also guessing I won’t get renewal notices the first week into my subscription and also banking heavily that my email address and data won’t be sold or rented out to a host of “related” offer partners.
Since Apple has built what I consider to be one of the best-in-class mobile payment processing platforms I’m also going to bet that the transaction is going to be fairly smooth and straightforward. While I will initially miss a never ending array of pop-ups and overlays offering me deep discounts on other semi-related products or offers during the purchase path, I think I’ll eventually get used to the relative serenity of a frictionless one-click purchase.
But then there’s that 30 per cent – money which Apple is keeping and a cost that publishers may feel inclined to pass onto consumers. Since the physical cost of production (printing, paper etc) has been eliminated and distribution costs wiped-out I’m sure publishers will recognize this and price their products appropriately. After all, it would be insane to sell a digital product for the same price as a print product when people know that the costs of production have been dramatically lowered. I mean surely that could only be justified if publishers took their existing high-overhead business and simply shifted these same overheads across to their digital output. But they wouldn’t do that. Would they?
But wait a minute. Maybe we’re all missing the point. The 30 per cent cut shouldn’t be an issue because surely most publishers understand that simply replicating a page-flipping newspaper and/or magazine doesn’t really take advantage of the unique properties of the iPad or iPhone platform. And then whey they crack this nut people will download and subscribe and sign-up in huge numbers just like they have done for Flipboard and Pulse News and other iPad/iPhone tailored apps. They will, right? I mean, they do see that don’t they?
Apple and Google are essentially handing content companies a huge opportunity to make themselves relevant again. The harsh reality is this – consumers are not currently downloading paid-for magazine and newspaper apps in significant numbers. So rather than worrying about whether the revenue share is 70/30 or 90/10, perhaps that energy would be better spent on developing an iPad product that people are excited about paying for in large numbers. At the moment, that product simply doesn’t exist.
The success of the iPad and iPhone has had nothing to do with traditional publishers. While it just so happens the iPad makes a nice reading device, consumers are not buying it for that reason. If newspapers and/or magazines disappeared tomorrow the iPad’s success would hardly be affected. But if the iPad disappeared tomorrow the majority of publishers simply don’t have a credible Plan B to reach new customers with their product.
For the record, I think that while Apple has the right to charge whatever it wants that 30 per cent is steep. It clearly has costs to cover (such as data centers, staff etc) but even when these are taken into consideration the number is high. But ultimately Apple isn’t the only player in town. With Google, Motorola, Samsung, Amazon and RIM all producing credible tablet devices and/or software the market will ultimately determine what people will be willing to pay and how low publishers can go to make it worth their while. The content companies don’t have an awful lot of leverage with Apple right now because – as noted above – their products aren’t selling particularly well. Popularity generates negotiating power and if a newspaper or magazine could figure out a product that could attract hundreds of thousands of subscribers, they suddenly have a much better leg to stand on. Selling 8,000 or so app downloads a month just doesn’t give you the right to start dictating terms.
So rather than simply complaining about the breakdown of the revenue shre, my advice is this. Go back to the drawing board and develop a killer, ultra-unique content-driven product that’s specifically tailored for a tablet. Bring it to market, build a growing, engaged audience and offer real value to consumers. The reality is that iPad apps from traditional publishers are not selling well because they’ve launched a succession of uninteresting products with unrealistic pricing. Changing this should be priority number one for all publishers. Because unless you get the product right, the outrage that you only keep 70 per cent of revenue is pointless – because 70% of zero is still zero.