Quoted: On Apple’s subscription model

March 2, 2011

From tech blogger John Gruber of Daring Fireball:

The idea with Apple’s 70-30 revenue split is that developers and publishers can make it up in volume — that people aren’t just somewhat more willing to pay for content through iTunes than other online content stores, they are far more willing. The idea is that Apple has cracked a nut no one else1 has — they’ve created an ecosystem where hundreds of millions of people are willing to pay for digital content.

Unfortunately he’s missing a few complexities of the issue from the publishers’ perspective, most notably name-gathering (although many analysts are for good reason not sympathetic about its absence in Apple’s model), but it’s a good read and raises some important points.


2 Responses to “Quoted: On Apple’s subscription model”

  1. Jon Spencer Says:

    Hi Kat!

    I think the vague references everyone’s making about publishers wanting customer data make it all sound so nefarious.

    That Globe article the other day was the FIRST place I saw any mainstream media correctly convey the longer-term strategic implications of mag subs via Apple (see esp. the last 3 paras):

    In the print world, if a customer subscribes to my magazine, even through a subscription agency (that takes a cut of the revenue in exchange for having sold that sub in the first place), that’s now “my” customer, my reader, a component of my demographic, a small chunk of the reader profile that I (in turn) use to sell the value of my readership to advertisers. And yes, as it nears expiration, I can take a shot at trying to renew that customer and capturing the full price, instead of only a remittance after some agency has taken a cut.

    So if Apple is going to be the primary contact for my reader, and that reader will have no direct contact with me, then it threatens both of my profitable revenue streams: advertising and subscription renewals. If Apple knows more about the demographic and buying pattern of our readers, and especially if they can package it up to provide targeted market segmentation for their entire customer base, across all their digital media, that is going to have a huge impact on magazine publishers. They will also have the only method for directly contacting our readers (their customers) to resell subscriptions as they come due (or put them on auto-renewal or what-have-you).

    Many of us publishers have a business model where we usually lose money on acquiring new subs, and on newsstand sales, and on creating original editorial, and on design, and on production, and on delivery. We make virtually all of our money off … um … advertising and subscription renewals.

    We need some $$ to live on here. A revenue model that isn’t subject to someone else deciding (a year or two from now?) that maybe a 60:40 split would be more realistic. No wait, make that 50:50. After all, once they have a large portion of your customer data, why do they need to accommodate a whiney publisher? “There are plenty of other publishers out there, if you don’t like 50:50, that’s cool, your competitor is down with it…”. Maybe it won’t be a revenue split, but a flat payment to get our mags displayed in primo (“featured”) positions in Apple’s App Store, regardless of how appealing each title is to other readers … and thereby shutting out smaller publications who can’t afford such a huge placement fee. It’ll still be a revenue grab.

    Referring to this relationship with our customers as “name-gathering” makes it sound like some sort of insidious thing we do … yeah we do the odd list rental or whatever, but that’s just chicken feed. This ain’t about list rental revenue. This is The Big One. Our industry’s Craigslist moment, quite possibly.

    • Kat Says:

      Thanks for the expert opinion, Jon. (I certainly don’t pretend to be a circ expert.) I do think there are ways to use Apple for finding new customers and still get their information through the app in other ways – whether it’s games, contests, premiums, etc. Lots of app developers are making a killing through the store without a high purchase price so I do think the volume argument is a valid one. And I’d like to think that our iPad publications will be so high-quality that readers will renew subscriptions without any effort on our part – meaning saving on the costs of enticing people to renew. I’m also not worried about a change in the 70/30 split – after all, it’s been that way since the launch of the app store and it’s an equalizer across all developers.

      I’m looking forward to seeing what our industry’s most creative minds can come up with to create a great reader experience that also drives revenue.

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