Publishers Slate Apple’s Subscription Service

Apple’s rules regarding its subscription service for its iPad tablet and iPhone smartphone have boomeranged across the tech publishing industry, with publishers alleging the company is being greedy, among other not-so-pleasant things.

Apple has launched its content subscription service to provide a way for publishers of digital magazines, newspapers, music and other applications to make money from their work. 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.

Complaints Flooding In

Here’s another kicker that has publishers gulping in angst: publishers who opt to use Apple’s platform must also make content available for sale through applications at the App Store for the same price. Subscribing to content through Apple’s App Store requires just a few clicks, so publishers are upset because, they claim, Apple is attempting to funnel users toward buying content through its App Store.

Complaints have flooded in from several publishing fronts. Music subscription providers who already must pay music content owners, labels and artists to licence music, find this additional fee untenable. Rhapsody, for example, told eWEEK in a statement:

“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. 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.”

Richard Jones, co-founder of the Last.fm, had a more colourful description for the impact of Apple’s subscription fee on the music-sharing service.

Then, there are those who also deplore the required in-app purchase rule Apple instituted to drive consumers to purchase content via iTunes. Readability CEO Richard Ziade, whose company makes an application that lets users read content without ads for $5 per month, said his application was rejected because it violated an App Store guideline prohibiting the use of a system other than Apple’s IAP (in-app purchase) API to purchase content.

Because Readability pays to writers and publishers 70 percent of its service fees, the 30 percent fee “drastically undermines a key premise of how Readability works”, Ziade wrote before adding this: “Before we cool down and come to our senses, we might as well share how we’re feeling right now: We believe that your new policy smacks of greed. Subscription apps like ours represent a tiny sliver of app sales that represent a tiny sliver of your revenue.”

Ziade goes on to explain that while Apple has the right to run its software program any way it chooses around its hardware, it makes most of its money from the iPad and iPhone, leaving little for the application publishers trying to make a go of it in Apple’s developer ecosystem.

Those are the chief complaints, which have received all manner of economic, political and polemical dissection from really wise thought leaders such as Ajaxian creator Dion Almaer and Instapaper CEO Marco Arment. Ament noted in a blog post: “Forcing all app publishers with purchase systems outside of IAP to suddenly and completely adopt it in parallel has no apparent practical or pragmatic justification. Instead, it just looks like greed.”

Almaer said in his blog post that the 30 percent fee could push publishers to other platforms, such as Google’s One Pass publishing service.

Will the public outcries and opposition to Apple’s subscription model trigger a change from Apple CEO Steve Jobs, who drives as hard a bargain as any man in the tech business? Gartner analyst Michael Gartenberg told eWEEK that a wait-and-see approach is called for.

“At the end of the day, the market and customers will decide this. If services begin pulling out of the iTunes marketplace, customers will be frustrated, and Apple will respond,” he said. “From Apple’s perspective, they can always move rates down, not raise them. Apple wants to make sure their customers are paying what they’d be paying elsewhere.”