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Apple throws lifeline to media companies with App Store subscriptions

Apple?s introduction of a subscription service for media companies that publish content-based apps in the App Store may be a godsend for publishers that have been suffering with monetization models since the rise of digital channels.

The new subscription model can be used by publishers of magazines, newspapers, video and music. It is the same digital subscription billing service that Apple recently launched with News Corp.?s The Daily app.

?I believe that Apple is throwing a lifeline to media, particularly newspapers and magazines,? said Mark Beccue, senior analyst of consumer mobility at ABI Research, Oyster Bay, NY. ?Print has been suffering.

"Media companies can?t seem to monetize online subscriptions,? he said.  ?When you look at the form factor for iPad, with an app like the one for Sports Illustrated, it reads like you have a magazine in your hands.

?You can flip through the pages and the experience is amazing.?

Monetizing digital media
Subscriptions purchased within the App Store will be sold using the same billing system used to buy apps and for in-app purchases.

Publishers set the price and length of subscription: weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly.

Customers pick the length of subscription and are automatically charged based on the time-frame they choose. Users can review and manage all of their subscriptions from their personal account page.

Apple processes all payments, keeping the same 30 percent share that it does today for other in-app purchases.

Steve Jobs, Apple?s CEO, provided the following statement to the press:

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.

All we require is that, if a publisher is making a subscription offer outside of the app, the same or better offer be made inside the app, so that customers can easily subscribe with one-click right in the app.

We believe that this innovative subscription service will provide publishers with a brand new opportunity to expand digital access to their content onto the iPad, iPod touch and iPhone, delighting both new and existing subscribers.

30 percent
?For a publisher this is good news as it now allows them to promote the actual content within their apps through a subscription,? said Michael Burke, president and founder of appssavvy, New York. ?Consumers can now rent the content for some time.

?In terms of whether it is fair that Apple is charging the 30 percent depends on whether the App Store is driving the subscriptions,? he said. ?If it is driving subscriptions then the fee is understandable.

?It could affect advertisers in terms of how they look at in-app advertising and brands will be more in tune with the subscriptions. I think these subscriptions will add more life to why brands and publishers should create apps and it will increase consumption.?

Publishers that use the subscription service in their app can also use other methods for acquiring digital subscribers outside of the app.

For example, publishers can sell digital subscriptions on their Web sites, or can choose to provide free access to existing subscribers. Since Apple is not involved in these transactions, there is no revenue sharing or exchange of customer information.

Publishers must provide their own authentication process inside the app for subscribers that have signed up outside of the app.

In addition, 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.

Protecting privacy?
According to Apple, protecting customer privacy is a key feature of all App Store transactions.

Customers purchasing a subscription through the App Store will be given the option of providing the publisher with their name, email address and ZIP code when they subscribe. The use of such information will be governed by the publisher?s privacy policy, not Apple?s.

Publishers may seek additional information from App Store customers provided those customers are given a clear choice, and are informed that any additional information will be handled under the publisher?s privacy policy rather than Apple?s.

?When I first heard about the iPad, I thought this could really save the publishing industry,? Mr. Beccue said. ?So, Apple is asking for a percentage of the profits.

?To me it?s perfectly fair and it is probably an advantage,? he said. ?Eventually, I think the other app stores will do the same.

?That said, publishers need to think about Android very seriously because there are only so many iPads.?