July 1, 2011

An interesting battle is looming over Apple's newspaper and magazines subscription pricing for iOS devices (notably the iPad). Apple's offer to publishers is simple. They can offer an app that allows consumers to buy individual issues of their content or to subscribe to it from within the app; the publisher sets the pricing. But Apple will take a 30 percent cut of the revenues and it will also require the publisher not to undercut the price offered to iPad app users.

A publisher could grab a customer directly on their own site and avoid the 30 percent sharing rule, but publishers could not simultaneously offer the customer a discount to bypass Apple. That is, they could choose not to share revenues with Apple but could not do a side-deal with customers. Apple appears to have relaxed that rule, but others — for instance, Amazon — maintain it.

Not surprisingly, publishers would prefer not to share revenues in this way. And, of course, they needn't — if they attract paying customers "off pad," so to speak. But Apple has some real advantages in grabbing customers. Purchases made from an iPad are easy and can use Apple's iTunes accounts, so there's no extra adding of credit card information. That may not give Apple an advantage if publishers can sell their customers subscriptions who otherwise would not have been bothered. But if that ease is cannibalizing customers who otherwise would have purchased directly from a publisher, then that publisher will lose out. In fact, they may be better off not having an iPad app at all.

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