Google One Pass Undercuts Apple Subscription Plan

Publishers’ eyes may have lit up when Google unveiled its One Pass subscription service for tablets, smartphones and websites, as the service provides a more price-friendly alternative and more control over consumer data than Apple’s own subscription service.

However, analysts agree that it is too early to tell which billing platform publishers will prefer. Moreover, Google’s arrival in the market may help Apple counter arguments that its plan violates the spirit of antitrust law in the US and Europe.

Apple subscription service

Apple on 15 February unveiled its subscription service to allow publishers to sell customers digital magazines, newspapers and other content for Apple’s iPad, iPhone and iPod Touch devices.

To be clear, Apple’s terms for the new service do not prohibit companies from selling digital subscriptions on Apple devices on their own. Publishers who bring an existing subscriber or lure a new one to an application keep 100 percent of subscription sales. When customers subscribe to an application via Apple’s iTunes App Store, Apple collects 30 percent of the fee.

While some publishers balked at the prospect of kicking 30 percent of sales to Apple for the pleasure of soliciting consumers on an iPad or iPhone, Apple hedged the process further. Publishers who do opt to use Apple’s platform must also make content available for sale through applications at the App Store for the same price.

Because subscribing to content through Apple’s App Store is much simpler – requiring just a few clicks – publishers are upset because they claim Apple is attempting to funnel users toward buying content through its App Store.

Apple seems to be steering consumers away from making transactions where Apple doesn’t get a cut, so regulators in the US and Europe have taken notice. In the US, the Justice Department and Federal Trade Commission are studying Apple’s terms of service, while the European Commission is monitoring the situation.

Enter Google, as potential savior and/or beneficiary of the discontent Apple created. The company on 16 February unveiled One Pass to allow readers to purchase content from publishers using a single sign-on with an email account and password. Publishers can offer subscriptions, metered access, and other custom content from their websites or mobile applications.

One Pass vs. Apple

While Apple takes a 30 percent cut from publishers, Google collects 10 percent of sales One Pass publishers collect, leaving publishers with a much more palatable 90 percent of sales on every transaction.

Perhaps most importantly, Google doesn’t appear to be placing restrictions that shuttle consumers to use One Pass. This is clearly a deliberate attempt to undercut Apple’s bid.

Forrester Research analyst James McQuivey applauded Google for stepping up to challenge Apple. However, McQuivey argued in a blog post that the publishers’ fees are still too high, compared with, say, single-digit percentage payment processing fees incurred by credit card companies such as American Express or Visa.

“The market desperately needs some competition to emerge to guide Apple away from such autocratic decisions,” McQuivey told eWEEK. “It will be to everyone’s long-term benefit to see some real competition emerge here, and Android is the only shot we have at that competition in 2011.”

He ultimately expects more players to emerge, driving down subscription fees.

Gartner analyst Michael Gartenberg said it was too early to say whether Apple’s subscription model or Google One Pass will rule the day.

For one, there are still too many unanswered questions surrounding One Pass, such as whether a subscriber can redirect consumers to their own billing system without having to go through Google.

Lucrative demographic

Moreover, Gartenberg said Apple’s 30 percent fee might seem cheap to publishers, relative to the cost of acquisition of new customers today.

“Over time, the question is going to be how many publishers are going to be able to afford not to want to deal with Apple’s customers,” he told eWEEK. “Apple’s customers are a pretty lucrative demographic.”

In any case, it’s too early to predict a winning platform yet without seeing both rev up in action.

As for the antitrust issues, One Pass may have helped Apple in that regard because it offers a viable alternative to a system some publishers find untenable, according to Eric Goldman, associate professor, Santa Clara University School of Law.

“Google’s entree into the publisher aggregation business is good evidence of competition in that niche,” Goldman told eWEEK.

However, without the benefit of understanding Apple’s situation fully, he noted that even if Google poses a serious threat in the publisher aggregation business, it’s possible that Apple may still be crossing antitrust lines.