Apple’s new subscription plan announcement has several cloud music providers steamed.
Apple’s announcement yesterday has two very important stipulations for publishers. If a publisher is making a subscription offer available outside of the app, the same (or better) offer must be made available in the app.
Translation: First: publishers have to use Apple’s subscription model in all applications offering subscriptions. Second, you can’t charge more for an iOS subscription compared to other offers. This means any new subscriptions obtained via a publisher’s app are subject to Apple’s 30% take.
This assumes that publishers have 30% margin to lose in the first place, which is not the case for many music streaming providers. Under this, Pandora would only get $25.20 from a normally $36 Pandora One subscription. For a company barely breaking even and an IPO looming, this is not great news.
It’s important to understand the difference between this subscription charge and the 30% taken from app purchases. Apple hosts a significant amount of resources for its developers to use in their apps, like push notifications. Apple levies a 30% charge in order to help maintain and improve the infrastructure it provides.
Subscriptions, however, have little involvement from Apple, similar to in-app purchases. Anyone offering a subscription (basically a recurring in-app purchase) must provide all their own hardware and software to host these services. Apple basically provides the transactional layer, which compared to a normal 2.5% credit card fee, is vastly more expensive.
For the music industry, all this could be remedied if the hefty streaming fees that cloud-based music providers are required to pay could be reduced. This does not solve the issues however for other subscription models (like newspapers).
All applications in the App store must be compliant with these new rules by June 30, 2011. We’ll keep watching this, as we’re sure there is more to unfold in the coming months. For now, check out TGDaily’s additional coverage.