Why you should fight Apple's Subscription Extortion

Apple just dropped a nuclear bomb on all of us with their new App Store subscriptions announcement. Here’s the summary: “We’re going to take 30% of your web app revenue. Just because we can.”

This is nothing more than extortion by the second most valuable company in the world (only Exxon Mobil is worth more). They’re leveraging their power to dramatically increase their own profit.

Let me pull out a couple key points and then I’ll explain why this is such a raw deal.

“Subscriptions purchased from within the App Store will be sold using the same App Store billing system that has been used to buy billions of apps and In-App Purchases. Publishers set the price and length of subscription (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly). Then with one-click, customers pick the length of subscription and are automatically charged based on their chosen length of commitment (weekly, monthly, etc.). Customers can review and manage all of their subscriptions from their personal account page, including canceling the automatic renewal of a subscription. Apple processes all payments, keeping the same 30 percent share that it does today for other In-App Purchases.”

“Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app.”

And finally, the cherry on top …

“… publishers may no longer provide links in their apps (to a web site, for example) which allow the customer to purchase content or subscriptions outside of the app.”

Please read that one more time.

Apple will not allow you to encourage your iOS customers to pay for your subscription service outside the App Store fence.

If you design a great iOS app that complements your SaaS app, you are not allowed to link to your own signup page. The only way for someone to sign up to pay for your web app, once they’re inside the iOS app, is by giving Apple 30%.

[UPDATE]

I’d like to clarify something, as it’s come up in the comments. More and more web designers and developers are building recurring revenue web apps and Apple hasn’t been able to tap that revenue stream (besides Mobile Me).

Many of these web apps also build iOS apps to complement their free plans, aiming to wow their customers into upgrading to a paid subscription. Now Apple is going to tax those companies 30% for any users who upgrade in-app.

Here’s a theoretical example: A startup launches an invoicing web app called Super-Duper Invoices, which has a free plan which allows you to send five free invoices a month. They build a great iOS app to compliment this free plan, which allows you to see some useful stats on those invoices (like average days to collect payment, outstanding invoices, average monthly billing, etc). Inside the iOS app, they encourage you to upgrade to the paid plan, and when you click on the link, it takes you to your account page on the web, where you click ‘Upgrade’.

Now Apple won’t allow this. If you want your customers to upgrade in-app, Apple is going to tax you 30%.

This is a game-changer, and I am strongly opposed to it.

[end UPDATE]

But wait, isn’t the App Store and one-click buying a good thing?

The power of the App Store is in two things:

  1. Reaching the mass market. That’s awesome for people who are building games or non-niche products. They benefit hugely from this powerful distribution channel (Angry Birds anyone?).
  2. One-click buying. No more credit card forms or “Your card was declined” messages. Click-and-forget. This is definitely powerful, and I’d happily pay a slight premium to Apple for this, but NOT 30% of all my revenue going forward.

All of us folks who have built up a following in a small niche market (web design and development, for us) don’t need the mass-market distribution channel that the App Store provides. We’re not going to put up with Apple demanding we fork over 30% of our revenue just so our customers can have an iOS experience.

Does Apple deserve a large cut for the massive audience they bring to mass-market apps? You bet.

Do they deserve the same cut from companies who are simply augmenting their offering with iOS apps. Definitely not.

[UPDATE]

Let’s examine the massive negative financial impact of Apple’s new policy, using Think Vitamin Membership as an example.

Our average plan value is $31/mo and we currently have a churn rate of about 10%, so our average customer lifetime value is $310.

We budget $25 to acquire a new customer, plus 4% processing fees for each transaction. Over the lifetime of a customer, that would be a total of $25 + $12.40 = $37.40.

Now Apple is going to take 30% of all future revenue, not just a one-time fee of 30%. That’s $93.00 if someone signs up in-app.

You could argue that Apple would increase your revenue because of the powerful distribution network of the App Store, but this is only true if they feature your app. Otherwise it’s still down to us to market the app effectively.

A great example of this is Sparrow and Remember the Milk – two iOS apps that I discovered because of Twitter, not App Store promotion.

A lot of apps aimed at the web community will fall into this camp – not big enough to be featured by the App Store because the niche is too small. Therefore there is no extra marketing value from being in the App Store and forking over the extra 30% to Apple.

[end UPDATE]

Forget iOS and bring on the HTML5 mobile apps

This is the push we all need to go HTML5, CSS3, jQuery for our next ‘iOS’ app instead of native iOS apps. This is exactly what 37signals recently did with the mobile version of Basecamp.

Another advantage to going HTML5 instead of iOS native is that you have one code base. No need to launch a different version for every mobile platform.

I’m a huge Apple fan. I’ve spent $50,000+ over the years buying Apple products for our Team.

This is something different though. This is bullshit and I don’t think we should stand for it. Do your part by speaking out and letting Apple know this isn’t OK.

Would love to hear your thoughts.

Other reading …

  1. Hacker News
  2. Ars Technica
  3. TechCrunch

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Comments

207 comments on “Why you should fight Apple's Subscription Extortion

  1. amen… I just bought your monthly sub for training. I have spend crazy amounts of dough on apple over the years but I disagree on this one and I even mostly agree with them onthe Flash issue eventhough I know where thats coming from….

  2. Apple have been pissing me of with more and more stuff like this over the past year. they seem to be leaving behind the core values that have made them a great company. Its kinda sad to be honest/

    • Apple have been becoming more and more like microsoft and microsoft have been becoming more and more like apple.

  3. I believe you are misreading this.

    It clearly states that you are not allowed to provide a link to an external web app but you are free to make your app implement its own purchasing scheme. This could use JSON/REST whatever under the hood so its still using your web app but the point is it doesn’t kick them out to a website to get past the in-app purchases “tax”.

    From a user experience point of view this makes a lot of sense.

    • No. “Subscriptions purchased from within the App Store will be sold using the same App Store billing system that has been used to buy billions of apps and In-App Purchases…Apple processes all payments, keeping the same 30 percent share that it does today for other In-App Purchases.”

  4. The convenience and security of what there doing is understandable and welcomed, but to Ryan’s point 30% is a bit much and no alternative root too boot… just sucks.

    Just seems like apples trying to profit off there rivals, but in the end the small guys getting the shit-end-of-the-stick.

  5. The key phrase is “which allow the customer to purchase content or subscriptions ***outside of the app****.”

    Calm down :)

    • RTFpressrelease! That’s followed immediately by
      “However, Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app”

    • Exactly… because it says you cannot link OUTSIDE of the app doesn’t mean you can’t make a payment form INSIDE the app.

      It’s just making the experience more seamless if you want subscription in your app. Which is great for the consumer and the novice end user switching from app to safari to mail to app or whatever. Those developers who don’t have the know-how and resources can take advantage of Apple’s API. Those with the know-how can have both options and have their option at the top or wherever the A/B testing suggests.

  6. The key phrase is “which allow the customer to purchase content or subscriptions ***outside of the app****.”

    Calm down :)

  7. I am stoked on the proposition of iPhone web apps, and we will be launching EightBit.me iPhone web app soon. Hoping to change people’s perspective on what’s possible in a mobile browser.

    (Although it’s NOT built on jQuery, not sure why a specific library had to be brought in as an alternative suggestion when recommending the open web., HTML5, CSS3 and Javascript would’ve been sufficient :) )

  8. This is false – “We’re going to take 30% of your web app revenue. Just because we can.” You make the distinction between a web app and an App Store application one in your post. They take nothing from your web app whatsoever.

    All Apple is doing is continuing their policy of taking 30% of in-app revenue (which this technically is), and not allowing users to be redirected out of an app to make purchases (which, I’m thankful of for security reasons).
    Nothing is stopping you providing an iOS app to existing users, and nothing is stopping users paying in Mobile Safari and then downloading the app.

      • Oh come on Ryan. Don’t you see how you’re misrepresented this. A literal reading of this text shows you are perfectly entitled to:

        (a) charge whatever you like
        (b) take payment however you like – provided the UI for it is inside the app
        (c) take payment via Apple’s well established high convenience payment method
        (d) take payment externally on a website and then enable that content in the app by e.g. entering a code (or sending a URL to the user by mail, make your app respond to that custom url…)
        (e) take no payment at all

        Its a massive market out there on iOS. It doesn’t take much effort to carry on.

        I do think the 30% is a little steep – especially so if they are not hosting the content (as they do with apps). However they currently have an economics problem – any difference between content and app pricing could lead to a nasty skew in the marketplace and the quality of iOS apps as people try to exploit a cheaper revenue method.

        • What?
          You can’t charge what you’d like — you must charge the same or less than you charge on the web
          You can’t take payment as you’d like – you must use iTunes billing and Apple as processing the payment
          You can’t take payment elsewhere and allow in-app access unless you also allow in-app purchasing (“if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app,”)
          You certainly can take no payment at all

        • What?
          You can’t charge what you’d like — you must charge the same or less than you charge on the web
          You can’t take payment as you’d like – you must use iTunes billing and Apple as processing the payment
          You can’t take payment elsewhere and allow in-app access unless you also allow in-app purchasing (“if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app,”)
          You certainly can take no payment at all

      • Nope – on the contrary, I’m completely Windows based, developing web apps for my projects and am also a registered Android developer.

        But I use the App Store as an end-user on my iPod Touch. The amount I’ve spent on native apps because of their one-click mechanism is incredible, and I’ll probably subscribe to some publications using this system because it’s friction-less. We’ll have to wait and see what their definitions of subscription/publisher are with regard to SaaS – noone knows that yet.

        Also, as an aside; a lot of people I know are iOS users who you wouldn’t term “tech savvy” and the majority think that a web app is a native one they get from the App Store that requires a network connection to use – the mindshare that native applications capitalise is huge.

      • I agree that forcing you to offer it in-app if you offer it out of app is harsh, and it will be interesting to see how Apple moderates it, but a lot of applications use web authentication systems so instead of tying the app to a subscription you tie it to a user account (whereby different levels of user account allow access to different types of content) would be the obvious way around it.

        My first point still stands though – this has no bearing on your “web app” revenue as per the first paragraph of the post.

    • I think you’re missing the point here – it’s not the 30% cut of content provided through their stores, its the enforcement of that stream in apps.

      Let’s say I created a content providing service that I’ve made and spent time developing, perhaps like Carsonified have with TV. I also want to make an iOS app that allows people to use that content.

      I could chose to sell that app in the App store for £3 and give Apple 30%, fair enough – their store.

      What if I then looked at the cost of the content itself and the costs involved in making it distributed via my own services AND iTunes plus managing support for 2 streams now, and came to the conclusion that 30% cut is too much.

      Ideally I would then say, I wont offer to sell content through my iOS app meaning people can still view their content and go and buy new content from my store as before. Sure I may make less sales, but it’s a decision I make as the 30% is too much for it to be worthwhile.

      But I now can’t – that I offer it elsewhere means I now MUST also sell it via iTunes too – that choice is taken a way from me. And everytime someone goes to buy something, sure they have the choice to go to my website and buy it, but most people wont when you consider that I wouldn’t be allowed to promote that route, plus thers a nice convenient, buy now from iTunes button in my app.

  9. Didnt apple want to encourage mobile web apps when the iPhone first launched, before they decided to open the app store? I guess the mobile tech / data connection wasn’t quite up to scratch back then. Hopefully we’ll see more web apps in the future!

    • mm – I suspect back then, the mobile browsers couldn’t have done a lot they can now.

      The native app was good for creating awareness and massively increasing mobile net usage, but I think (or at least hope) that with all the new stuff that the HTML5 umbrella brings they will be able to compete with native apps.

      We now have stuff like geolocation, offline storage, web databases, webkit, workers, SVG all baked into browsers – this massively improves what a web app is capable of.

      How this is supported by the platform makers, Apple in this case, remains to be seen as it would be a direct threat to their increasingly lucrative revenue stream, so I don’t expect it to be a smooth ride, but hey – we’ve finally got over the flashiness of Flash and realised we can do most it can do and a lt it cant with CSS, JS and HTML now… lets hope this is the end of the closed native apps too.

  10. Wow this is nothing more than a shake down.

    What’s preventing publishers from creating web app magazines and keeping 100% of their subscriptions revenues?

    @nathan Would love to see a majority of apps go web based, but the funny thing is the average user is so obsessed with having an icon on their home screen. To end users icon = app. Even though Safari allows you to “install” web apps by bookmarking them to your home screen.

    • too right. possibly a webkit only javascript function that would automatically bookmark a web page to the home screen would help the public move over to web apps

      • I’ve been wondering that. I’m an Android user and been thinking what would make me find a web app as attractive as a native app, and I think it’s the home screen icons – if I had one that looked like a native app icon with teh logo / branding on it, I’d probably perceive it as a native app far more readily, and hence use it more so… as it is I just press teh Chrome icon and look up a book mark / let it find it with search autocomplete.

        But you’re right – it’s the little things that are needed to push HTML5 based webapps forward as being a viable alternative to native apps.

  11. I’m not sure it’s such a big deal, I’m a native App Developer so I do like this….. but even so, it was always going to be a 30/70% split, just as it is on In App Purchases and also on the selling of Apps in general. Like @Marc Palmer says, why not just use a payment system inside the App which hooks up to a web payment system?

    Apple is always a winner on deals like this of course, but it’s left to the consumer to choose how they pay – Apple are only insisting that the developer gives them a choice.

    • Gareth, the new rules disallow custom in-app payment systems. So, if your customer upgrades their service via the in-app button, you just lost 30%. Remember, Apple only hosts the app code, they don’t host all your backend services, or pay the bandwidth for the delivery of in-app media. This is a 30% payment processing fee, which is hugely out of line in the larger market.

      • You could say the prices of Apple machines are hugely out of line with the larger market but I know why I buy Apple.

        I pay a premium when I buy Apple products because I know in the long run, I know I won’t have a problem if things go wrong hardware wise and I know I won’t have to re-install the OS every other month.

        I see this 30% in a similar way. They make consistent devices which is a dream for developers. Deal with any tax and transactional costs and a channel to get your app in new peoples hands.

        • The 30% rate for app purchases is one thing. In that case, Apple is creating an actual market place, they are hosting the actual app and delivering it to the customer.

          The 30% for in-app subscriptions and content purchases is completely another matter. That’s Apple acting only as a payment processor and it makes serving those customers unprofitable. I don’t mind Apple taking a reasonable cut for handling the processing, but 30% is unreasonable. If you’ve actually worked in the content space, maybe you’d appreciate the numbers better.

          • Hey farra,

            Can you qualify what “working in the content space” means?

            As I see it BuySellAds sell advertisements and take a 25% cut. As a content producer I think that’s acceptable. 5% is hear nor there.

            Can any one show me the numbers? Before App Store and after? Cheers.

          • Record labels and Hollywood Studios typically take at least a 50% cut for any catalog content. For new release VOD rental, that’s as much as 70% to the studio. 70% to content owner + 30% to Apple = 0% for the content provide (someone like Amazon, Vudu, etc.) It doesn’t add up and that’s why you either won’t see those services on iOS or see them pulled.

      • Payment processing? I think it’s a little more than that. Your talking about the App Store infrastructure; charts, features, people with credit cards ready to spend money with a click (in particular shouldn’t be undervalued). It’s not PayPal, they are very different things. Maybe if Apple weren’t so big and good at this thing, they might not charge as much as 30% but they are, so that’s kind of that.

        I think custom payments are still allowed, as long as you offer In App Subscriptions too?

        But anyway, I think this is designed for content not SaaS or web apps! Content being the keyword – electronic magazines, periodicals, newspapers etc.

  12. It seems quite clear from Apple’s press release that In-App Subscriptions are aimed squarely at content providers, hence the consistent use of the world ‘publisher’ and references to ‘content’, and absolutely no references at all to software or services, SaaS or otherwise. Apple want a cut of people taking up subscriptions to The Times – I doubt they care about shonky web apps. Even if they did, there’s nothing forcing you to use In-App Subscriptions, or developing for iOS in the first place.

  13. Not sure I get where your shock on the 30% is coming from. Selling on Apple provides you access to millions of people. Its the same as selling a product in Walmart, Home Depot, etc. They are going to dictate the price, the packaging, and anything else they want and either you take it or you don’t sell your product.

    I do agree with you that they are trying to control the customer and not being able to link to your website is pretty bad.

    • So bones, would you say that Wal-Mart dictating rather than working with the company is a good thing? I think that’s more the issue here.

      Imagine if your lawn mower company who was distributing exclusively with Wal-Mart was just told that now you must lower your price by 20%. You’re making 15% margin, so you were just told that you’ve either got to stop making as good a product or go out of business. Would you, with a straight face, be able to say that was reasonable? Would you complain to your buddy? Would you mention Wal-Mart when you laid off your employees?

      In general I think a lot of this has to do with something we’re big on at Carsonified – making business be about people. It doesn’t feel like Apple’s taking the interests of all of the people involved into account here, and that kind of stinks.

  14. I’d agree with some of the posters here… I think this is an over-reaction. Apple is a business, and asking for payment for using their services, as well as exclusivity is nothing new or “bull shit”. You decide as a business whether losing 30% of your revenue is worthwhile for the outreach of millions is viable, and if so (which incidentally I believe for many will be a really great service – big and small content companies) great. If not – don’t use it. But I feel using your influence to call for a “movement” or “campaign” with what to me seems relatively little “bull shit” on show is just a bit much.

    You can sell your product as usual outside of the app store, you can sell your product with the usual conditions inside the app store. You can’t cost cut by selling your online product outside of the app store from the app store. This is a model used by businesses everywhere (exclusivity deals in e-commerce market places for example) and shouldn’t be seen as unethical – its a clear condition and you decide if it works for you or not.

    Because of these terms, Apple may fail with this new subscription model, but I doubt it. I think it just means some people like your company, won’t go for it as its not right for you. Isn’t that demonstration enough? Do you really have to dislike Apple because of this choice?

    • The point is that its 30% of revenue, not 30% of profit. If the profit margins are lower, (which tend to be in this increasingly competitive environment) then the provided is screwed.

  15. If you don’t need iOS to attract your subscribers and simply want to compliment your existing service, why not make the app free and simply require a login from within the app.
    App description can refer to the fact that this compliments your service and a link to the home page instead of a sign-up process.
    Am I missing something?

    • Andrew, unfortunately, you are missing something. The updates rules state you cannot do what you just suggested. You must offer a way for new subscribers to subscribe via the app and hand over 30% to Apple in the process. The same is true of in-app content purchases such as purchasing music, ebooks and movies. If you offer these items for sale on your site, you must also offer them for sale in the app.

  16. Hey Ryan

    Think you may have misinterpreted that release.

    This section sums it up pretty well.

    “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,”

    So Apple only take a cut if they have referred the new subscriber – kinda like an affiliate (albeit an expensive one)

    • The problem, though, is that affiliate schemes are usually designed by the content provider and not by the affiliate. If your business model doesn’t work with the 30% price then you’ve got to change pricing for everyone to make sure that your price for non-iOS customers is the same or higher than for iOS customers.

  17. I don’t see what the big deal is… Apple is taking a 30% cut if you choose to go their route. They built the road that millions of people want to travel on, why shouldn’t they charge a toll?

    I agree that web apps are the future though, but I agreed with that when the iPhone first came out.

  18. - Not sure why this comment disappeared the first time?

    I think I’ll be waiting for clarification of “subscription publisher” first.

    For a start many of the “subscription publisher/content” apps at present release their new content *through Apple’s store*. That’s possible either via the app releasing a new version, or through a paid-for in-app purchase which also gets pushed through Apple’s channels (many of which are tens if not hundreds of MBs at the moment). I don’t have any issue with this, in my mind 30% is fair game for providing the whole messy subscription payments side of things (with vastly decreased barrier to entry for the consumer), the distribution network and the increased visibility.

    Secondly, at no point so far has Apple made any reference to “subscription services” whereby you pay a fee to use a web service which then provides additional access through an app – if they did, how would they handle things such as 3rd-party Basecamp apps which use Basecamp’s open API? It wouldn’t be do-able and I don’t think this is where Apple is heading here, as in my first point I think this is more about the subscription content distribution through Apple’s channels.

    In summary, I think people are jumping to conclusions way too quickly here, I’ll be holding judgement until I’ve been demonstrably proved wrong on the “subscription services” front.

    • This is all at least a lesson in clear communication. The release is ridiculously ambiguous as to who all it affects.

    • The apps that work off the API wouldn’t have to pay the 30% fee, because they don’t sell the subscription.

      There’s your workaround to the 30% cut. Hire a third party to develop/distribute your service via an API.

  19. Its pretty simple.

    * Due to parallel pricing restriction, take the 30% hit across the board (you have no choice)
    or
    * Increase your prices by 30% across the board – and benefit from extra 30% revenue from direct sales from your site

    As you are not in a unique position here, affecting all content providers, that’s about the sum of it.

  20. Most digital subscription services don’t have huge profit margins. Does Apple really expect the major video providers like Netflix and Hulu to give 30% for new subscribers? That’s insane!

    The app store has had its fare share of controversies, but if Apple doesn’t budge on this decision, this could be the beginning of the end for iOS. If too many content providers jump ship, consumers will follow.

  21. Most digital subscription services don’t have huge profit margins. Does Apple really expect the major video providers like Netflix and Hulu to give 30% for new subscribers? That’s insane!

    The app store has had its fare share of controversies, but if Apple doesn’t budge on this decision, this could be the beginning of the end for iOS. If too many content providers jump ship, consumers will follow.

    • Methinks there may be some clarification coming. If everything is worst case scenario or bit of everything – there’s one thing for sure the market will decide!

    • I honestly hope it is the end – it’s about time people stopped being attracted by the flashiness of native apps and put their efforts into pushing HTML5 forwards and continuing to do amazing things with it, an argument not disimilar to the HTML5 / CSS3 / progressive enhancement – why spend time and money making things for isolated, smaller markets when you can put the time into a forward thinking write once, publish everywhere approach.

  22. What the… I’m working on a web-app at the moment and we were thinking of having an iOS app in the future too. If what you’re saying is right Ryan, we won’t be able to do this because iOS won’t be the main platform which means this is utter bullshit. I hope you’re wrong though!

  23. What the… I’m working on a web-app at the moment and we were thinking of having an iOS app in the future too. If what you’re saying is right Ryan, we won’t be able to do this because iOS won’t be the main platform which means this is utter bullshit. I hope you’re wrong though!

  24. Agree with Shane Pinnell. If you don’t like it cancel you Apple Dev Subscription, download the Android SDK and get over it. See how you get on, that 30% will soon seem like the best deal in town.

    • The problem isn’t getting on. Plenty of folks out there are already doing great without the app store. The problem is that companies like ours are trying to give users the best experience we possibly can, and Apple’s telling us we can’t do that because the price/benefit balance don’t work out.

      Even beyond that, though, some of these terms are just really far reaching. Will Netflix be able to link to their website for other functionality when it might be possible that a user subscribes through that site rather than in the app store? Will companies have to reimplement their entire web app (or at least large portions) in the iOS app just to avoid linking?

      What about companies that have developed 3rd party apps for services, like the numerous Netflix queue management apps out there? Will they just have to stop doing business?

      Regardless of good or bad, this press release is pretty ambiguous as to what it actually means, and that’s frustrating for a lot of people.

      • Good points.

        Speaking personally when I look at my monthly revenue the 30% I’ll pay Apple in relation to a subscription purchased and whose content is delivered within an iOS app, (taking the press release in literal terms), still makes the App store a compelling platform.

        What platform provider isn’t going to squeeze publishers? Do I like my company having to pay facebook their less than small cut for virtual goods, or on the flip side working to the margins of big retails chains, no.

        Does it matter how ambiguous the terms of engagement of a company offering Apple’s volumes are, or if they change them with 24 hours notice, no. They offer my company a revenue stream and its up to us to take it or leave it.

        • I guess I look at it as being really important because people make a living off of this stuff. They feed their families with that 30%. They’ll have to deal with the stress of Apple deciding that they want more money. To me that matters.

          • I agree with your sentiments, though I’ve a nagging feeling that the folks in Cupertino aren’t reaching for the kleenex.

      • Good points.

        Speaking personally when I look at my monthly revenue the 30% I’ll pay Apple in relation to a subscription purchased and whose content is delivered within an iOS app, (taking the press release in literal terms), still makes the App store a compelling platform.

        What platform provider isn’t going to squeeze publishers? Do I like my company having to pay facebook their less than small cut for virtual goods, or on the flip side working to the margins of big retails chains, no.

        Does it matter how ambiguous the terms of engagement of a company offering Apple’s volumes are, or if they change them with 24 hours notice, no. They offer my company a revenue stream and its up to us to take it or leave it.

  25. Here’s the deal. I’m an indie dev & I think it should come down to this. If Apple hosts & distributes in-app purchases or subscriptions for your app they deserve a cut the same way they deserve a cut now. This is a great way for developers to not have to deal with that part of the app, but take advantage of the feature. But where Apple is getting ‘ambitious’ is saying that a company like, Amazon, which hosts and distributes all of it’s own content should pay 30%.

    Apple has always & will always play the ‘user experience’ card and developers(big and small) should know that when they play directly in Apple’s world. All these people griping could be making web apps that do what native apps do, but they don’t because they too are ‘greedy’ by the ease and profit of the App Store… so we should be careful when pointing fingers. Apple has said many times there are to ways to make apps for iOS: The SDK which is controlled & HTML5 which is wide open.

    I suppose a lot of content based companies that want an app to distribute their content will start to develop Web Apps anyways. With so many OS’s and Tablets being released it doesn’t seem logical to keep making/maintaining native apps for all of them.

  26. 100% agreed.
    Why are we going back to the “desktop” on mobile? Native APIs should be exposed to the browser.
    Lets not corner ourselves.

  27. Thinking about this some more, I don’t think Apple are making any kind of reference to SaaS or Web Apps – it’s purely about ‘content’. The Daily App being the prime example of this – that’s what they are targeting, not web apps at all!

    Like @eric said, Apple state there are many ways to create for the iOS, so just use HTML5 and sell your service direct. But obviously by doing so pass up the App Store and it’s ease, promise of millions of potential customers and potentially very lucrative marketing through being featured or being in the charts.

    Fall of the iOS platform? Really? I seriously doubt it. They do their homework….

  28. i have to disagree on that point.
    They provide a unique plateform in term of quality.
    no company was abble to built such an amazing ecosystem.
    they take 30% of sales you would have never achieved via an other plateform….

    i’d rather earn 70% of something than 100% of nothing

  29. Regarding you’re update – This still isn’t a “known fact” yet. The press release only talked about content publishers and content subscriptions, we still haven’t had any word on SaaS directly.

    Also, with the example you cited in your update you are intentionally piggy-backing off of Apple’s products and market reach whilst taking advantage of the incredibly low barrier of entry for payment – why shouldn’t they get some of that payment?

    If you have such low profit margins on your SaaS app that it’ll kill business to take advantage of all the extra customers you are targeting by building the iOs app and platform I’d suggest that there is something more fundamentally wrong there.

      • Are we missing something, still don’t see the clear terms that this applies to SaaS? Not that this isn’t still a raw deal for content providers…

          • Stated simply, of course. But all bits are not equal. There is content that underlies a service and content that is a product. The differentiation is the unique IP or what has value to the consumer? If I sign up for TripIt Pro (annual subscription), that’s different than me buying a subscription to GQ, personally.

            As you have stated, Apple’s stance on this has been poorly communicated and needs to be clarified.

    • “If you have such low profit margins on your SaaS app that it’ll kill business to take advantage of all the extra customers you are targeting by building the iOs app and platform I’d suggest that there is something more fundamentally wrong there.”

      Well that’s a smart comment if you’re talking about an app that is looking to be a broad-based market play. What if you’re doing niche work where the margins are much lower. If you’re doing an app that is just used by people who ship pickles in trucks then your audience is pretty small and your margins may well be much narrower. The vast expanse of the app store doesn’t really open your market because the market is inherently small. It’s great for the New Yorker or Angry Birds, yes, but not for smaller players in corners of the market.

  30. I’m pretty sure the whole world is against this kind of extortion. There’s just no excuse.

    But I’ll wait for Apple’s clarification on the matter before feeding the Android trolls (wtf)

    Half the world was wrong about the “Objective-C only” thing a few months ago, there were discussions, until Apple chimed and clarified everything. Let’s just wait.

  31. If you don’t need the mass-market distribution channel that the App Store provides, then why would you make an iOS app in the first place? Just so that you can lose a load of money so that you can say that you’re on iOS? Apple isn’t forcing you to deliver an iOS app, and because they poured millions (billions?) of dollars into it they, understandably, want a cut.

    A 100% share of a small revenue stream is worse than 70% of a large revenue stream, let’s not forget.

    • This is true, but that’s only looking at it from one direction. How many millions and or billions have app developers poured into the platform. What would iOS be if no apps had ever been written for it? It’s a very chicken or the egg kind of problem.

      I think you’re very much speaking from Apple’s point of view, and many of us are saying that we think we had a part in the platform as well by writing apps. Many developers were told today that the businesses that they built and operated that included iOS are now going to have to change drastically to account for a large percentage of their revenue growth now going to Apple. Whether Apple deserves it or not is only part of the equation. The other part is that those developers acted in good faith with Apple and Apple betrayed that faith. Those devs won’t forget it.

      • I believe you’re confusing *app sales* with *subscriptions*. I’m more than okay with Apple getting 30% of every sale on its platform. But subscriptions don’t normally rely on Apple’s platform. They run on backends that are not hosted, delivered or managed by Apple. I get Apple trying to fight free apps that charge elsewhere but that’s not what they’re doing with this. They are actively seeking to extend their reach OUTSIDE of the AppStore.

        I love Apple just as much as every fanboy, but I still keep my brain and think for myself. Apple has provided a great platform for SELLING APPS. They should stop there.

        That and blocking jailbreakers from accessing their paid books in iBooks are two very bad moves for Apple. They’re making all SaS players/jailbreakers pay for a few that circumvent Apple’s system. That is not the Apple I’ve known. #sadpanda

      • Remember when the iPhone was first launched? Steve Jobs got on stage and announced that he had a sweet solution for developers, who collectively had their hopes dashed when he said that they could build web-apps using technologies that they already knew.

        Developers didn’t want to build web-apps, they wanted native because it’s faster, secure and more convenient. There’s no denying that apps are a massive success and that iOS would be nothing without them, but if they didn’t exist then people wouldn’t be happy about building web apps to fill the void.

        What Apple wants is a cut of the subscription sale if the subscription is processed on the iOS device. When you take into consideration the large distribution channel having new subscribers that you wouldn’t have had otherwise, you will make the money back. Volume is key.

        I know from my experience that I’ve purchased content through the App Store that I might not have found in another location, such is the ease of use, price and availability there. I think the same will be true of subscriptions.

        • As someone who has published an app on the app store I can tell you that the distribution channel doesn’t guarantee success. A 30% cost to distribute that app won’t help that situation. Apple’s rolling out this policy based on the stories of the app store winners, not the stories of the app store niche players.

          • Well, with a lot of web services your business scales as your number of users do because of how the cost structures work.

            At 0% almost any positive profit margin is safe. As it increases things become less and less possible. With Apple’s latest decision a lot of businesses just won’t even hop into the app store because their margins won’t work with it. I think that kind of stinks for iOS users that want nice native experiences for accessing their services.

          • It would be a shame if these businesses didn’t get on board, agreed.

            I guess time will tell what publishers will decide to do—absorb the cost or raise their prices by 30%, or bow out entirely.

          • It would be a shame if these businesses didn’t get on board, agreed.

            I guess time will tell what publishers will decide to do—absorb the cost or raise their prices by 30%, or bow out entirely.

    • This is true, but that’s only looking at it from one direction. How many millions and or billions have app developers poured into the platform. What would iOS be if no apps had ever been written for it? It’s a very chicken or the egg kind of problem.

      I think you’re very much speaking from Apple’s point of view, and many of us are saying that we think we had a part in the platform as well by writing apps. Many developers were told today that the businesses that they built and operated that included iOS are now going to have to change drastically to account for a large percentage of their revenue growth now going to Apple. Whether Apple deserves it or not is only part of the equation. The other part is that those developers acted in good faith with Apple and Apple betrayed that faith. Those devs won’t forget it.

    • Why would we make an iOS app? Simple: because the UX on the device is superior.

      However, this doesn’t mean they should be able to levy a 30% tax on all transactions on the device.

      • Ryan, I was referring to your article:

        “All of us folks who have built up a following in a small niche market (web design and development, for us) don’t need the mass-market distribution channel that the App Store provides.”

        I’m going to reiterate my point: If you don’t need the distribution channel then why would you build (or pay someone else to build) an iOS app? Surely that is the whole point, that there are millions of iOS devices and device owners that are used to purchasing apps regularly.

    • When you’re profit margin is small, which is true for content providers like Amazon, Netflix, Hulu, Rdio and others, then 30% makes iOS unprofitable. They provided iOS clients to add value to their existing services, not to create a new service. If iOS proves unprofitable now, they’ll leave.

      • I would argue that it is profitable, at least when compared to the other platforms out there. WP7 has almost no content available for it at the moment and adoption hasn’t been all that great, and Android devices are mostly owned by open source advocates/nerds who think that paying for software is inherently evil.

  32. Get over it. 30% is a no-brainer and I’m happy to pay it considering the ecosystem they’ve created. Were any of you around when we were paying 50% to carriers for app sales?

    • This isn’t app sales, this is in-app content or subscriptions, very different.

      Moreover, you think that 50% carrier control had anything to do with lack of innovation and apps on the phones? Amazon, Netflix, Hulu, Rdio and others weren’t there because it wasn’t profitable. They’ll leave iOS for the same reasons.

  33. Amen. Keep up the good fight. All forms of Apps are closed systems that are not in the best interest of developers and consumers. I hope HTML5 is adopted by the masses.

  34. Amen. Keep up the good fight. All forms of Apps are closed systems that are not in the best interest of developers and consumers. I hope HTML5 is adopted by the masses.

      • That’s entirely your opinion, however, the comment you just left me over there misses one key point, which I address in my reply to you there. Seems silly we should be commenting to one another in two places, so why don’t we keep it there? :)

        • I’d be happy to, once you get your 404 fixed. I’m very curious to see what your key point is, and whether it allows for the continued existence of something like the Kindle App on iOS.

        • … and now you’ve wiped out comments completely. Sometimes I wonder why people bother creating and promoting their private blogs.

          • I completely rewrote the code behind the blog, and just haven’t got around to throwing disqus back on yet. The comments still are there, just the code interfacing it isn’t. Chill.

  35. Surely the only issue is it’s 30%. Every payment processor takes a cut – it’s just it should be 5% or less.

  36. If indeed an iPhone/iPad app that touches a SaaS site must sell subscriptions through iTunes, that instantly makes such apps less useful. You develop an app to serve your customers, you don’t make an investment so you can cut 30% from your top line.

    If this is indeed FUD has some seem to claim here, Apple is allowing it to be pretty effective FUD because it’s not at all a clear policy.

    • You don’t have to sell subscriptions through iTunes, that’s only the case if you push subscriptions through the app.

      You are perfectly free to create an app that compliments your SaaS and just have users sign-up for the service as usual on your own site without paying anything to apple, although in this case you will be limited with your marketing as you can’t use the app-store directly to push sales.

      • Thanks for the reply. Even if you’re right, it’s still kind of a curious policy. A bit fuzzy. Does that mean you can’t link to the user’s account page if that page has options for changing subscription options?

        • That is definitely where it’s a bit fuzzy at the moment and is one of the questions I’d like to see answered more clearly.

          If you already have the customers card details on file and clicking a link in-app can change the subscription level and charge the user, does that then also count as a subscription under apples rules? How would they police that?

  37. It’s almost like Apple took a page from the cell phone providers up here and thought “Let’s do that too!”

  38. It’s almost like Apple took a page from the cell phone providers up here and thought “Let’s do that too!”

  39. Well just think what they could do using the “brand new” mac app store.
    Would be I exaggerating by thinking they could take a percentage over your mac app and prohibiting you for downloading the app anywhere else (like, if you have your app on app store, you can’t make it available for download on the web)? could you imagine how this would end? (I’d better stop sharing thoughts over here…)
    They are trying to make osx and ios more seamlessly, so that would give us a hint on what is about to come, sadly.

      • It’s the ‘tech people’ who care. For the normal consumer, IE: My mom, the AppStore is the best thing since sliced bread. Don’t have to go anywhere, the store is always open, they are never out of stock, they tell you when there’s an update, give it to you and install it for you. THIS is what normal users want. The ‘tech users’ are in a world all their own where they want everything to always be free and complicated. That’s a closed view on what people and the average consumer really want. The average consumer wants things to be EASY and Apple is giving that.

    • They aren’t stopping anyone from offering it anywhere else. They’re only stopping publishers from charging a premium for a service that Apple manages and pays for (service being the payment subscription processing).

  40. Is it correct to assume that that I could create a mobile access add-on for my multi modal service, and then Apple will charge only for the mobile access service but not for my base membership service?

  41. Technically speaking your app could simply have a message stating that users must sign up using the web interface first, without providing a link. Furthermore this model does not apply to people who already have a subscription. This is a loop-hole that I can see being used by people, as for whether or not Apple would accept such a thing is another matter. But aside from that I totally agree, Apple is attempting to gain control over every aspect of a developer’s business and this isn’t acceptable.

    There is no doubt that native apps are better for the end-user, but if Apple doesn’t listen to the community on this I think they are going to loose a lot of business.

    • “your app could simply have a message stating that users must sign up using the web interface first, without providing a link”.

      Not exactly great UX though, eh? :(

  42. I don’t get the strong negative reaction.

    Isn’t a user subscribing to your service from inside the app a case of Apple bringing a new customer to you? And in that case, isn’t your acquisition cost for that customer *significantly* lower than your acquisition cost from outside the App Store environment?

    I feel like your numbers change a lot when the App Store ecosystem comes into play… enough that Apple skimming 30% could actually be a wash when compared to the cost of acquiring customers on your own.

    And given that Carsonified / ThinkVitamin are operating existing brands with existing audiences, wouldn’t that *advantage* you when it comes to letting your followers know to subscribe *outside* the App Store? And if customers still insist on subscribing from within the App Store, wouldn’t that be indicative of the customer’s preference, and shed some light on the facility of your outside offering?

    Just observations. Feel free to correct me where I’m wrong.

    • The whole problem with this model is not someone signing up with the App Store. That should be classed as a sale and Apple get a one time 30% fee for this.

      But this is not what Apple is doing. They want to take 30% of your money every single month forever.
      Also companies that offer niche subscriptions like Think Vitamin may decide to create an iOS app to add more features and ease of use for their customers. Imagine they created an app which allowed you 1 ree video a week. They don’t want to sell anything on the App Store but will be forced to since they cannot link to an outside site for people to sign up to their paid for services.

      The app is just a part of the eco system for some companies. It is an extra promotional tool that is now being taxed. Apple were very sneaky waiting for every company and his brother to have an app for their customer then introduce this.

      I am disgusted with this way of robbing people. Things like this show that closed systems like the App Store create ease of use for customers but also makes the customer pay more if people need to cover the App Tax. This should also teach a lot of companies to not give so much control over to others. I think this may be the shot in the arm Android needed to boost it. I am considering an Android as I am sick of this iPhone unlocking, App from certain country, App Tax and all the other restrictive rubbish.

  43. Everything was always going to go HTML4/5 / open web.

    Apps are a passing fad, as Ive said in several blog posts – most recently:
    Why Android & iPhone Apps Will Die:
    http://blog.justwhatson.com/post/2346970689/iphone-apps-will-die

    Apple have stated their commitment to HTML5 – so this is their special way of showing it ;)

    If they really wanted to screw developers, they could even somehow lock down HTML based apps, or try and take a 30% cut.

  44. +1 in favour of Ryan here. Read and re-read, the press release is clear. 30% cut, no loop-holes.

    I’m assuming most people commenting in favour of Apple simply aren’t in a position to grasp the gravity of a 30% revenue tax for distribution. Build a SaaS app and then let us know how that 30% cut pierces your bottom-line.

    You’d think a company like News Corp. would have some influence over this margin considering their close work together with Apple on the terrible “The Daily” app, which will relies on subscriptions also.

    On the bright side, it’s another reason to go HTML5.

  45. I have always contended that they have nice hardware and some damn slick software (especially iOS) to boot.

    But it has been a LONG time since they dropped pretenses to anything but pure avarice. I find it hard to believe that THIS is the straw that broke the camel’s back, when to me it’s just another example (no greater or lesser than many other recent examples) of a company that’s not what people wish it still was. The writing has been on the wall for at least a couple of years now.

    But, if this is what it takes to push more people to develop web apps instead of native iOS apps, great! As you say, there are definitely publishers who don’t NEED the app store. And those that think they do are either right (they’ve done their market research, analysis, and the 30% fits in just fine) or in my opinion welcome to the gouging they have exposed themselves to.

  46. I work for a large publisher (besides the running of my own business simultaneously) and that is the very reason why they do not want to develop iPhone or iPad apps! We have though been given the go ahead to develop for Android and this together with your post above make me believe now more than ever that Apple have started to loose the game all over again! This time round though the competition is not proprietory software but open source and this may lead to the breaking of Apple.

  47. 30% is reidiculous! I persoanlly have spend 5k+ on apple stuff over the last 3 years and I ususally can’t find any fault with the company, but this is just stupid. They obvusly have not thought this through.

    I will be very suprised if they don’t suddenly reduce the % they take as the complaints mount and the lack of publishers/companies sign up to this.

  48. A direct question to you Ryan / Carsonified, which you may of course chose not to answer ;)

    Were you seriously considering or already in the process of making an iOS app for Think Vitamin that you are now questioning the viability of?

  49. As far I understand, this only affects apps that go for the in-app subscription, right? So you could still offer an app for the iOS that does not offer in-app subscription and you would not be affected. Right?

    • Sure… if you don’t offer a subscription anywhere then you’re free to continue not offering any subscription from your iOS app. LOL.

      But if you offer subscriptions on the web, then you MUST also offer subscription sign-up in-app.

      • You MUST? I need to read that announcement, I find it hard to believe that Apple will ask for example LinkedIn (to avoid examples of magazines) to either give them 30% of all their premium subscription revenue or just pull their app. It must be that they have the choice not to give the option to subscribe through the iOS app and keep things as they were. So that Apple would only be charging apps that use their platform to attract subscribers, which would make more sense. Otherwise it’s grim…

    • The wording of the announcement makes it seem like this, if your app is related to a subscription model (think Netflix, Rhapsody, Hulu+, and web apps with subscription models, maybe) you now _must_ include an in-app option, of which apple will take it’s 30%. Further, you can’t provide a link to your direct subscription process from the app, and you can’t charge a premium in-app to cover the 30% cut.

      So basically as a developer, it costs you in that you have to develop the in-app subscription code, as well as cover the cut apple will take. This most likely means raising all subscription prices to compensate.

      Or you can pack your bags and get out, and I think a lot of big names are considering it.

  50. what do you expect if you choose to develop for a closed ecosystem controlled by 1 company ??
    develop apps for open systems or develop webapps (html5 etc)

  51. Just developing in mobile HTML5 is not a good solution. Performance and responsiveness suffer greatly in mobile Webkit. Apple has zero motivation to improve the user experience in web apps.

    This is the same situation that gave us Internet Explorer. Microsoft saw a threat to their operating system monopoly so they created a browser that was just good enough to kill Netscape and halted development so that platform-neutral web apps couldn’t threaten Windows. Safari is going to become the new IE 6.

  52. Apple isn’t out there to please everybody and they would be where they are today if that was the case. This change is a huge win for consumers and for apple. If publishers have such a huge problem with it, then move to HTML5 like you said. 37Signals has definetly done a stellar job making web apps with their many services.

    Apple thought this through and they aren’t going to cave in to publishers. No matter how many rants they’ve seen on this subject. (I’ve seen many personally)

  53. I have a question: do you develop for iOS?

    If you do, maybe you then see that everyone is winning. The customers, the developers, and Apple.
    Apple is taking 30%, but at the same time they’re paying the credit card fees. As a customer when I buy a 99cents app, I just pay totally 99cents, and I’m happy with that. As a developer, I have much more people buying my apps, thanks to the Apple awesome ecosystem, and I’m happy with that too.

    For the in-app purchases, where’s the deal? People that believe that it’s a scam but still want to use Apple’s stuff can go to the website from safari or whatever. For other customers that don’t care, it’s easier for them and it stops sending them in and there, going through several useless steps and so on. Good also.

    Looks like an other ‘music industry’ period. Instead of grabbing the chance that the technology and the creativity of some people are bringing, some are gonna complain that their money is being stolen here and there and that it’s unacceptable. Those companies are just shameful.

  54. From what I see here, since developers are using Apple’s platform as a payment service, it’s just fair for them to charge a fee (although I agree that 30% is too high) since you won’t have to deal with processing fees from credit card companies and all those nasty paperwork. It’s no different when you use PayPal or some other payment service who takes a cut off your selling price.

    The only thing I don’t like about the policy is not allowing links to an external website.

  55. Ryan, I totally understand your post and I respect you, man. But you’re losing objectivity here when it comes to money – Apple will not take 100% of your revenue from ThinkVitamin membership – they will only take 30% off the new revenue they’d bring you – they are your new affiliate partner – and if you’re looking for new customers IN THEIR HOUSE then you must be prepared to pay them. Sad but true. But if they bring you additional thousands of new customers, I’m sure you’d not complain all that much. I wrote about it today:

    http://michaelnozbe.com/your-new-affiliate-partner-is-apple-thanks-to

    Please have a read and think again. It’s not Apple who is coming to take money from you – it’s you who wants to use Apple’s platform to get new customers… but doesn’t want to pay for that.

    • But you can walk into an Apple brick & mortar store, pick up a box of third-party software, look at the back of the box, and get a URL you can likely use to buy the software directly from the manufacturer. Apple doesn’t take a big cut for that even though I suspect they take a nice chunk of change when they sell you the box in their store. Nor do they take a cut when you upgrade that same software by clicking a link within the application, whether you originally bought it from their store or not. Isn’t the iOS policy analogous to this?

    • I understand what you mean and agree to a degree. The problem is that you are forced to use only their system. You are unable to use your own webpage for your subscribers, you must use theirs.

      It means you have no choice.

      Just think about it: A streaming service that is currently making 20% profit on their subscriptions will make a 10% loss (not exactly but it illustrates the point). How is that fair? Since Apple will not be paying zilch for supporting said service?

      This is a simple case of gutting a goose that lays golden eggs. It just dies.

      • Not true. You can still use your own web page for subscriptions, and market outside the app store. If someone subscribes through your website, and you handle the recurring payment processing, credit card fees, etc. Then apple gets nothing. If they are handling all of that stuff, in-app, you pay 30%

  56. i personally think it’s a good thing – making recurring revenue easily available for everyone. the fact of one click billing alone is worth mega bucks – to not have to even take your wallet out to pay, that makes a purchase painless and almost as if it didnt even happen, in my experience that takes out any second guessing etc. and increases revenue. i understand your point though, for non featured apps it’s a little different since the creators are doing the heavy lifting, but it’s still access to a wide marketplace and does bring extra revenue. i’m just about to enter the world of iOS bucks so who knows, maybe my opinions on this will change soon.

    • I agree recurring billing is worth something. But monopolizing recurring billing on the platform is a bad thing for everyone. Hurts the apps, consumers and developers.

  57. 30% does seem harsh in terms of percentage. Perhaps a sliding scale or tiered system or percentage on price would be better suited to this?

  58. My biggest problem with the scheme is the fact that you are not allowed to pass the 30% charge to your customers, that Apple somehow reserves the right to dictate to you how you price your app outside the app store. They have no right to do that.

    • That’s not quite correct. Apple is only dictating how you price your apps within the app store. Meaning, they’re stopping publishers from gouging in-app subscribers. Publishers are free to charge whatever they want to subscribers, they just don’t want there to be an in-app markup. Let’s face it, the vast majority of apps based off of SaaS apps/subscription models are free in the AppStore, so, the developers are already getting access to that huge market share for only the $99/year fee. And the 30% on subscriptions only applies to new customers. I think the 30% is probably too much, but Apple does provide a huge benefit to developers, and to consumers through the subscription platform.

  59. I think you’re right on about focusing on HTML5 web apps. Even though closed mobile apps are newer and sexier it’s not an open universal standard. I’d rather bet on the web. The App store is likely short-lived and ironically Jobs has put the first nail in the coffin. Essay ‘Benefits of Open Mobile apps vs Closed’ (AppStore) http://www.jasonpaul.net/2010/12/open-vs-close/

  60. You mean Apple, the company that is footing 100% of the bill for your apps storage, distribution, advertising, bandwidth, customer support on purchases and sending you a check every month for a $99 a year fee is the evil devil?

    How much do you think Target takes when you sell a game in Target? Believe me, it’s the majority of the sale between the store, the distributor, the marketing, etc.

    People are a bunch of whiners. NOTHING sells your app/game as good as the AppStore does. There is no distribution system, with maybe the exception of Steam, that does more for developers than the AppStore. The problem is, we live in a day and age where everyone wants everything for FREE and then they want to make money off of what they are getting for FREE. It doesn’t work that way.

    If your subscription is $10 a year, you are pocketing $7 and paying $3 per user to Apple for their bandwidth, storage and advertising of your app. You’re still making a killing and that $3 is way, way less than you would spend on a per user basis for what you get from the AppStore.

    If you don’t like it, pull your apps from the AppStore and teach that evil Apple a lesson! The same evil Apple who has made literally dozens of indy software companies millionaires in exchange for $99 and 30% with no need to find a developer, distributor, advertising agency, manufacture, accountant, nothing.

    Go open source man! Be cool like that. I’ll keep making money.

    • Listing != advertising, unless your app is featured (for what might represent 5% of your app’s lifetime).

      Do your math again: you pay a $99 year fee to be able to publish. Then you pay a 30% fee for selling an app. Then you pay 30% for every subscription content updates, forever. This is a lot of money for what essentially costs them nothing. Don’t forget they are already making huge profits from the hardware itself.

      Do you really think i’s fair to pay $3 a month *per user* to send out content updates? If you’re a magazine with 10.000 readers, you’re paying US$30.000,00 a month for sending out content to them. That would actually cost less than 5 bucks in bandwidth on the other side of the fence. It would probably be cheaper to send an USB key over the mail. This is not even close to reasonable.

    • In app purchases, such as subscriptions are not hosted by Apple, they are hosted by the vendor. So, for example, Netflix will have to pay $2.40 out of their $8 to Apple every month with Apple while still footing the bill for bandwidth, software development, etc.

      The whiners aren’t complaining about the exposure the App store gives developers, their complaining that Apple what’s 30% of your subscription rate while offering little else except credit card processing.

      Let’s take an example, Dropbox has their $10 a month plan for 50GB. They probably get pretty good rates from Amazon for S3 storage, let’s make it $.10 a GB. So a user is costing Dropbox $5 a month if they use all their storage. Now Dropbox also has a bunch of free loaders, using 2GB up to 8GB. I don’t know the ratio of paying customers to freebies, let’s say it’s 7 to 1. So the paying subscriber has to cover the freebies, around another $1.50. That means dropbox gets $3.50 for each paying user. Now if a user subscribes through the Dropbox app, Dropbox will only get $.50 a user.

      If Apple doesn’t change, say goodbye to Netflix, Kindle, Hulu+, RedBox, Evernote, etc. on iOS.

  61. This does not sound very equitable. Here are a couple workarounds, off the top of my head (so they are not entirely thought-through):

    1) Provide a subscription offer through the App & Apple’s scheme. Say, “Visit our website for more subscription options.” You could even provide a non-linked URL, as far as I understand the agreement. On the website, provide both the same subscription option available through the Apple channel as well as a slightly different subscription option on your website, at the cost and profit margin you see fit. Might not work for every case, and it would obviously require more effort on the part of the developers.

    2) Don’t allow in-app subscriptions, but quote Apple’s requirements, and tell the user to visit your website to purchase a subscription. Not great UX, I know. But it would send a message to iOS users and Apple.

    • Both of your workarounds aren’t allowed in the requirements.

      “Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app.”

  62. For those of you who don’t understand why this is a problem, put it in physical terms:

    Say an already thriving business decides they want another store on a piece of land that ABC Properties owns. This piece of land happens to be on a very convenient street corner, so it would be a good supplement to the business this store is already doing elsewhere. The business pays for all construction costs and all costs related to selling their product, and of course pays ABC Properties for use of the land.

    Later on, after the business has already been established and is doing well, ABC Properties drops by and tells the owners that they require all businesses on their property to use their own special registers, and that there’s a 30% fee for all transactions going through these new registers. They also can’t allow people to pay for items at their other stores and then pick them up at the ABC Properties location – either all merchandise in that store is purchased using their registers with an extra fee, or they close shop and stick to their other locations.

    The problem isn’t that “everyone wants something for free” and that Apple is just having people pay for their services to cover costs – the problem is that Apple sees a thriving market and people making money while using their “piece of land”, and they want in on it, so they forced everyone to use their transactional services, rather than giving them an option to develop their own if they wish. This gives Apple a guaranteed 30% cut of any and all sales made while on their property, even if all they did was provide the location.

    The scary part, is where does it stop? When an iMac can only run Safari, and it requires online stores to run Apple’s billing system in order to display?

    • If, blinded by the gold rush potential at that corner property, your business quickly signed a contract with ABC Properties that explicitly states that ABC Properties can change the terms at any time, then what’s the problem?

  63. We all hate it when someone rates our app based on its price. We say, “Hey, rate the *app*, not the price. If you don’t like the price, don’t buy it; go somewhere else. But don’t call the *app* bullshit because of its price.”

    If I understand your argument, you believe it’s reasonable that Apple doesn’t allow people to freeload on their platform, by releasing a free app to access their externally subscribed service.

    So what your argument really boils down to is that you don’t like the price. You don’t like the 30%. If that’s the answer, the obvious answer is to go somewhere else. Or, as you suggest, do an HTML5 app.

    But don’t call it bullshit. It’s Apple platform, and this is a free market. They can do whatever like. You have the choice to play or leave.

    (And, to be clear, Apple’s new policy spoils some plans we have, so I’m not personally happy about it.)

  64. I am currently thinking of dumping my iphone and ipad once the android 3.0 devices come out because of this. Unless the android market tries the same thing.

    Then it is all bullshit. But if that is the case, i guess we all need to prepare for vendors to raise prices for everyone to afford the apple tax.

    We took a bite of the apple. We’re screwed.

  65. Apple always was evil company, it has been fighting with developers, dwarf their work for no reason and they were doing that for years. You can easily find hundred of horror stories of companies going under because Apple decided their app is not allowed in App Store anymore. IMO it was just a matter of time when they try to expand their despotism and this is what they’re doing now.

    Obvious but not ideal workaround is to push Apple costs to consumers by simply creating two versions of subscriptions:
    1) My Super-Duper site without iPhone support (£10)
    2) My Super-Duper site with iPhone support (£14.30)
    only latter one will be available as “in app purchase”. Inside app you can include link “Please check out our website for other subscription types” which (based on my naive Apple rules interpretation) is still allowed. I think most Apple users already got used to overpay for products/services and they won’t mind. If they do they can always leave walled garden.

    I’m just waiting for next Apple step and it wouldn’t surprise me much if they start limiting what pages can or cannot be viewed on Mobile Safari!

      • They will never be able to enforce tax on services their devices have no access to, it would be shot to your own goal IMO. I think wording says “must offer the same thing” which – obviously – may be different level of service. Level, that “doesn’t support” iPhone but may include other, more open platforms.

  66. I’m confused and I mostly agree with “The Undertrader”. You use Apple’s distribution channels to reach millions of people, that trust and are loyal to the ecosystem. You pay $99 a year, you get distribution, hosting and marketing for free. Why are we complaining that Apple no longer wants you to use their service as an “up sale” and marketing tool? I don’t get it. What other website will allow you to market on their site/platform without paying for it? Do you really think hosting, hardware, bandwidth, and security provided by iTunes is free for Apple? Have you seen the numbers Evernote reached from being in the App Store? I know we like everything to be free, its the American way, but you get access to millions of people and their devices. I’m not saying that the complaint is ridiculous, but I obviously see why Apple would go this direction. Folks profiting off of your service or platform won’t last for long until they want a cut, Apple is no different.

  67. I don’t really think that it’s a greedy move by Apple. You build the infrastructure why shouldn’t you charge rent?

    Heres the situation you offer a free app(ala Kindle) then you deliberately sidestep Apple so all the money goes to you. How are they getting anything out of that relationship? Why should they pay the hosting? Why should they sit by while you’re using their distribution platform to profit and not take a cut themselves? Heres how Apple’s priorities boil down 1. Themselves 2. Their customers 3. Developers/Content Creators and that’s the way it should be.

    As a consumer I love this idea of the subscription service and not giving over any personal info I don’t want to give. Have you tried unsubscribing from a magazine you no longer read? It’s damn near impossible this fixes that.

    • I agree that Apple should take a cut for purchasing of the initial app (the file which lives on Apple’s servers) and is sold through iTunes… it makes sense Apple gets the cut.

      The problem is Apple is now claiming they want 30% for subscriptions and digital content that lives on MY companies server that is handled by MY companies software and only exists within the realm of my iOS application.

      This 30% is absurd and has nothing to do with application developers using “[Apple's] platform to profit,” unless of course you mean the hardware and operating system… but that is what you “pay” 100% of the money to Apple to buy the iOS device!

      • How much are these apps worth that offer subscriptions/IAP(In App Purchase)? The Daily? Free! Kindle? Free! etc etc. So where is Apple making their money? Instead of selling an app publishers give away their app and charge for subscriptions through an external site cutting Apple out of any money at all. That’s not going to fly in Apple’s world and they aren’t saying you can’t sell subscriptions outside of the app to be accessed inside the app, you just have to offer the same deal in app as you do on your site. Simple.

        By cutting Apple out of any transactions involving money you are of no worth to them and really of little consequence. What Apple has done is create a system whereby you can create content offer it to your subscribers and they can get it all in one place Apple haven’t screwed you out of any profit there they have given you a system to make more of it.

        As a consumer I prefer being able to buy content in app as opposed to have to go to another site and muck around with another log in and another pay pal/credit card situation which can be instead handled by my Apple ID. In most cases it’s enough for me to think twice and probably decide against paying for it as I have far too many logins etc to keep track of at the moment anyway.

        Just because Apple has invested in their infrastructure more than their competitors and made a superior product doesn’t give anyone else the right to freeload off that platform or to set the price. It’s Apple’s choice to choose who it lets in and therefore who it exposes it’s customers to and it’s their choice how much to pay. Don’t like it? There’s the Android Market Place, Ovi store etc they only differ in one respect those stores aren’t Apple and they don’t have the same users who are willing to pay for quality content.

        • Actually Apple charges the developer $100 / year to keep an app in the App Store… if you don’t pay your app gets yanked. And by your logic it would make far more sense for Apple to say “If your app is a subscription based application, you must sell it in the App store for a minimum of $3 or something… but jacking 30% of every subscription is absurd.

          • What is the proper percentage to take from devs? Do you know how much it cost to maintain the most successful and high traffic App Store in the world?! I guess you do, you’re an insider for Apple? I mean how much does bandwidth cost for billions of downloads, of varying sizes? Get over it, Apple is successful, they are helping companies make millions of dollars and they can charge what they will. Name another company with an App Store as successful, then compare their plan to Apple’s.

  68. I, personally, think Apple is doing just fine with it’s suppliers and customers. Go pick on something in your pc world!

  69. Thanks for this post.

    One of my clients is currently managing a dating website (where people can subscribe to premium accounts).

    Does it mean that we must provide the subscription in the iPhone application too?

    Will application like match.com have to upgrade too?

    Thanks in advance!

  70. I wish developers (and I include companies developing apps in that) would just wake up to iOS. First, there was the locked store, then the issue about using unapproved languages, then apps like Android magazines being removed, then they blocked anything but their own ads, and now they’re doing this.

    Protest all you like, but don’t expect Apple to start acting like a reasonable partner. Even if they modify this, they’ll be along with another plan soon enough to try to make money by screwing you.

    As someone doing some Android development, I can tell you that none of this exists on Android. There’s a few sensible restrictions on content (no malware, no “adult” material), but every developer knows the score, what the cut of the revenue is and so forth.

    • You’re serious. This is amazing, why don’t people complain about Wal-Mart? They don’t sell porn and they don’t let folks put ads in the store without their consent. Why does Apple get hit in the head for thwarting free lead generation?! You don’t see this on Android because they don’t have to worry about 150 million credit cards on tap and millions of loyal (satisfied) customers. Android has no where near the platform that Apple has created. Its not an equal comparison. Android’s open system is not showing the same fruit as Apple’s closed system, because in the mobile world Apple’s closed system is working better than open. My reasoning comes from the success of all the million dollar games (companies) that have been created, the thousands of users acquired by free services (Evernote, etc), and the many other successful individual developers. All done by a closed system. You are only thinking of yourself. Again, I ask, what is the correct percentage to take given the overhead of running the most successful App Store ever created? Please give me some proof that 30% is not rationale. If you can’t make up the lost funds in volume, then you need more than Apple’s ecosystem to help you.

  71. I totally agree with you: we don’t like something, we should kick up a fuss; but will Apple really listen? I still buy Apple products but I refuse to buy an iOS device because of Apple’s policy and this reiterates my point. So, if Apple want to screw over publishers, let them do so, but then the publishers need to push their content via other channels and inform consumers that Apple doesn’t provide the best delivery method for their content. That ought to really poke a stick up Apple’s arse.

  72. I totally agree with you Ryan – I think they would do well to remember that a little over 10 years ago they were on the verge of bankruptcy because of some very bad decisions. I would say this is another very bad decision.

  73. Apple will do its song and dance for now but Microsoft & Android devices are catching up and with the way the terms of service are set up, it will only aggravate developers into moving to other platforms. Hey if they cannot make revenue, why would they want to stay on that platform.