In the three weeks since I finished writing Mobile Publishing Strategies for Media Owners, both Apple and Google announced subscription models for in-app purchase.
Basically, Apple wants 30% of in-app purchased subscription revenues, and a ‘best offer available’ guarantee for in-app subscriptions. It is also, effectively, saying no to sharing in-app subscriber data with media owners.
The very next day Google, clearly waiting for Apple to move first, announced its own One Pass: 10% of subscription revenues, with no pricing constraints and a willingness to share customer data. Touché!
The publishing world, as well as other major subscription-based services such as Spotify, are up in arms at Apple’s long-awaited but tough terms.
Personally, I had expected pretty much this shape of proposal from Apple, with the exception of its insistence that in-app subscriptions be offered, and a genuine surprise at how little it would appear that Apple understands about subscriptions marketing.
Furthermore, I don’t think that Apple’s terms fundamentally affect my recommendations either. Here’s my logic, starting with the premises…
* Apple is allowing existing subscribers to be authenticated for free access to iOS apps.
* The App Store is a pretty dreadful environment for promoting the discovery of new brands.
* Publishers have to learn to use smartphones and tablets (and in many cases, even their websites) in more innovative, value-added ways for subscribers, and not as mere replicas of (substitutes for) existing print formats.
* As Android (and now possibly Microsoft Mobile) continue to turn the competitive heat up, Apple will be forced to soften its position – helped by the threat of years of innovation-sapping legal actions and regulatory investigations.
These four points lead me to the following conclusions:
1. Even if you have to make your ‘best’ subscription offer available in your app, you won’t be getting many takers for it, so there’s not much to lose.
2. Subscription leads will therefore continue to be mostly generated “off-app”, where you can take steps to identify them – through registration, free trial, incentives, competitions, etc.
3. You should redouble your efforts to convert these leads into subscribers off-app; via email, website content-targeting, telesales, etc.
4. The subscriptions you offer should be integrated – ie subscribe once, access anywhere – with apps on different mobile platforms forming part of this multi-access model. Print is likely to form a part of this integrated offer for the time being, at least for magazines.
5. As smartphones and tablets become ubiquitous, increasing numbers of your subscribers will engage with your content / services via your apps, which is great, boosting both retention and ad targeting possibilities.
6. In time, Apple’s merchandising and flexibility will (be forced to) improve, and you’ll become more willing to give it a 30% cut of revenues. Especially since you’ll then be cutting out print, saving at least this percentage on printing and postage.
7. By offering tangible cross-platform benefits to your subscribers, you’ll be able to convince them to share data with you, so you won’t lose your customer connection.
In the mean time, just as I recommend in the report, push forward with both iOS and Android apps. And the latter can now serve as your main arena for experimentation and innovation, given the flexibility Google’s One Pass is offering.
The sad truth is that publishers’ response to Apple’s announcement rather misses the bigger point; they have failed miserably to offer app-content which consumers find sufficiently compelling to pay for. To be blunt - 30% of very low sales is still only a very small number.
The best way to push back against Apple is by demonstrating that it needs us more than we need it. To demonstrate my point, let’s see between now and June 1st whether any exceptions are granted to Apple’s terms… Netflix for example, or SaaS providers such as Salesforce or Dropbox. Could Apple really afford to lose successful players from the iOS ecosystem?
So my key point is that content owners have to put the consumer centre-stage, and be more innovative and radical in their approach to mobile apps - stop thinking in terms of “tweaking the print issue”. If you’re short of ideas, I provide plenty of case studies and examples in the report.
Having been somewhat cruel, I do feel specifically sorry for my UK publishing colleagues. I am not sure how many people have digested this yet, but UK publishers get punched two further times via Apple’s in-app subscriptions:
a) UK subscriptions have largely shifted to direct debit, which has a 15% annualised retention advantage over credit cards. So one of the App Store’s major benefits – continuous credit card subscriptions where the impact of expiring cards is largely minimised, giving a 5-10% boost in retention – is in fact a negative.
b) App subscriptions, being digital, will attract 20% UK VAT, on top of Apple’s 30% cut.
So if you’re British, I’ll grant you another week of feeling sorry for yourself. But then it will have to be back to the drawing board…
