Apple Faces Subscription Competition From Google

The day after its announcement, one thing seems very clear: Apple’s new subscription policy has the potential to complicate life for the company’s partners, competitors and maybe itself.

Apple’s policy for content-based applications such as magazines, videos, music and newspapers already applies in some form to News Corp’s The Daily, a publication tailored specifically for the iPad. Publishers have the ability to set a subscription’s price and duration, while customers can select the length of their subscription.

“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,” Apple CEO Steve Jobs wrote in a February 15 statement. “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.”

Economically untenable?

Some companies seem less than enthused about Apple’s policy.

“Our philosophy is simple too – an Apple-imposed arrangement that requires us to pay 30 percent of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable,” Jon Irwin, president of Rhapsody, wrote in a February 15 statement circulated widely around the web. “The bottom line is we would not be able to offer our service through the iTunes store if subjected to Apple’s 30 percent monthly fee vs. a typical 2.5 percent credit card fee.”

In place of an application, Rhapsody will continue offering access to its services via a smartphone browser. To make things a little more interesting, Irwin also promised that Rhapsody, in conjunction with unnamed “market peers,” would determine “an appropriate legal and business response to this latest development.”

Rhapsody’s stance follows that of Sony, whose disagreement over in-app purchasing led to the deletion of Sony’s e-reader application from the App Store. Earlier in February, Apple began ratcheting up its policy enforcement for e-book applications, stating their creators needed to offer in-app purchasing through Apple’s online storefront if they wanted to make e-books purchased on other devices available through the iPhone, iPad and other Apple products.

“Unfortunately, with little notice, Apple changed the way it enforces its rules, and this will prevent the current version of the Reader for iPhone from being available in the app store,” read a note posted on Sony’s online Reader Store. “We opened a dialogue with Apple to see if we can come up with an equitable resolution but reached an impasse at this time.”

Google undercuts Apple

One of Apple’s chief rivals seems ready to exploit those companies’ irritation. On February 16, Google announced Google One Pass, a service the search-engine giant described as letting “publishers set their own prices and terms for their digital content.” For its trouble, Google will apparently take 10 percent of the publisher’s revenue generated by One Pass.

Google likely hopes publishers will view its platform as an alternative to Apple’s, and certainly the duelling plans have the potential to open yet another front in the two companies’ rivalry.

Some analysts see Apple’s subscription plan as a shotgun pressed against its own foot.

“What Apple has done already is sufficient to make providers of content aggressively invest in alternative means to reach the market,” James McQuivey, an analyst with Forrester, wrote in a February 16 blog posting. “You can fault the company for choosing not to anticipate that seeking a 30 percent toll would bring any subscription model of any type to its knees.”

Google, McQuivey feels, could ultimately benefit in that scenario. “Now Apple has given every publisher, producer and distributor in the business a reason to actively pursue alternatives to the elegant apps that Apple had hitherto taught us to depend on,” he added. “I don’t really have to encourage my clients to add urgency to their already-furious Android app-development efforts. But it will also lead to non-app content experiences as well, most of them developed in HTML5.”

And you thought Apple and Google’s brutal competition would be limited to smartphones.