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August 01, 2011
Leading mobile application publishers have adapted their services in response to Apple's rules regarding in-app purchases and subscriptions.
Apple requires that developers selling additional content from within an iOS application must use its in-app purchase or subscription billing (from which it takes a 30% stake). Developers can also offer links to their own billing, but it must be at the same price as via Apple's platform.
To ensure compliance with these rules, publishers have adopted a number of strategies. These include simply removing links or references to external payment options inside their applications and also investigating the possibility of developing HTML5 web-based apps outside Apple's strict controls. Recent changes include:
- Amazon has removed all links and references to its Kindle book store from its iOS applications. Books can still be purchased via the browser and synched with the iOS app, which is now simply an e-reader application.
- Barnes & Noble, the US bookseller, has removed its store from its iOS applications. It plans to offer magazine access via its Nook iPad app. Content can be purchased via its website, with no links provided within the app.
- The Financial Times, the UK based newspaper, anticipated Apple's changes and launched its web-based HTML5 application in Q2 2011. The browser-based app offers subscription based iOS access outside Apple's App Store billing.
- Spotify and We7, online and mobile music providers, offer no links or references to subscription payments from within their applications.
As things stand, it is consumers who are set to lose out. Rather than being able to download and subscribe to content seamlessly from within their applications they will often now be forced to exit the application and visit the developer's website to acquire further content. There will be little or no instruction available within the app to inform them what to do.
When Apple updated its guidelines in February this year, it was likely that a compromise would be reached. As the App Store owner, Apple can justify its policy given that as it hosts and distributes the content it deserves a share of revenues. For many types of content such as music, movies and books, Apple has an interest in encouraging customers to use its own iTunes and iBooks stores.
Other than the Financial Times, many newspapers have proved more willing to use Apple's billing. Newspaper applications from the New York Times, UK newspapers The Guardian, The Times and Sunday Times and Italian publications Corriere della Sera and La Repubblica all offer paid-for content via Apple's subscriptions or in-app billing. For such companies which often lack their own direct billing relationships with consumers, it makes sense to use Apple's service as the higher number of users willing to pay via iTunes will likely offset any effects the revenue share has on margins.
Companies such as Amazon have built their business on the ability to exploit a wealth of customer information, credit card details and billing relationships to sell huge quantities of content, often at a low margin. For them, it is simply not possible to part with 30% of revenues.
Well known brands with established consumer relationships can use HTML5 web-based applications to provide an additional way to connect with and monetise users. Less established applications may well struggle to gain exposure outside the App Store and could face a difficult task encouraging users to trust their alternative billing platforms.
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