Opin­ion: Ap­ple’s new sub­scrip­tion model

Ap­ple’s Ser­vices divi­sion has be­come one of its more suc­cess­ful busi­nesses.

Macworld (USA) - - Contents - BY DAN MOREN

Over the past year or so, Ap­ple’s spent a lot of time talk­ing up its Ser­vices divi­sion—which in­cludes not only Ap­ple Mu­sic, but also the likes of icloud, the itunes Store, and Ap­ple Pay— and for good rea­son. An­a­lysts have been pay­ing a lot of at­ten­tion to Ap­ple’s Ser­vices, not least of all be­cause it’s shown solid growth, even at times when other seg­ments of Ap­ple’s fi­nan­cial re­sults have been more lack­lus­ter.

So you can bet that Ap­ple’s not about to walk away from the ser­vices busi­ness any­time soon. In fact, if re­cent re­ports are any in­di­ca­tion, the com­pany is de­vot­ing

even more ef­fort to the seg­ment, with at least two brand-new ser­vices in devel­op­ment and the shift­ing of two of its big­gest store­fronts to a more sub­scrip­tion-fo­cused an­gle.

DIG­I­TAL NEWSSTAND

The most re­cent Ap­ple sub­scrip­tion ser­vice to make the news is, well, the news. Back in March, the Cu­per­tino-based com­pany ac­quired Tex­ture ( go.mac­world.com/bytx), a dig­i­tal mag­a­zine sub­scrip­tion ser­vice. The sug­ges­tion at the time was that the com­pany would fold it into Ap­ple News, which has now been tac­itly con­firmed by Ap­ple se­nior vice pres­i­dent Eddy Cue as well as other third-party re­ports.

As al­ways with Ap­ple, though, it’s the de­tails that mat­ter. This isn’t the first time that Ap­ple’s tried to build a ser­vice for pub­li­ca­tions: the late, not ter­ri­bly lamented Newsstand de­buted in IOS 5 as an at­tempt to group to­gether news­pa­per and mag­a­zine apps. But it wasn’t a big hit with users, and pub­li­ca­tions had is­sues with the sub­scrip­tion mech­a­nism Ap­ple pro­vided, as it of­ten ended up putting a bar­rier be­tween them and their cus­tomers.

That’s one prob­lem Ap­ple will have to over­come for any news sub­scrip­tion ser­vice. The sec­ond is fig­ur­ing out what ex­actly con­sumers will pony up for. In the re­cent cli­mate, news or­ga­ni­za­tions have been push­ing harder on paid sub­scrip­tion models, so find­ing some way to group sev­eral pub­li­ca­tions with pay­walls into a sin­gle sub­scrip­tion fee could prove at­trac­tive to cus­tomers who don’t want to shell out for each dif­fer­ent news site.

This isn’t the first time that Ap­ple’s tried to build a ser­vice for pub­li­ca­tions: the late, not ter­ri­bly lamented Newsstand de­buted in IOS 5 as an at­tempt to group to­gether news­pa­per and mag­a­zine apps.

LET’S GO TO THE VIDEO TAPE

Ap­ple’s video sub­scrip­tion ser­vice is a fore­gone con­clu­sion at this point: it’s an open se­cret that the com­pany’s spend­ing $1 bil­lion on orig­i­nal con­tent. But be­yond the broad slate of pro­gram­ming that has al­ready come out, we know next to noth­ing about the sub­scrip­tion ser­vice it­self: Will it fea­ture con­tent other than Ap­ple originals? Will it be bun­dled along­side

Ap­ple Mu­sic? How will it play, if at all, with video con­tent avail­able via itunes?

Hav­ing just passed the 40 mil­lion sub­scrip­tions mark on Ap­ple Mu­sic, it seems like there’s a de­cent chance that the big built-in base of sub­scribers there will also get ac­cess to Ap­ple’s video con­tent. (Al­ter­na­tively, there may be a bun­dle price for both ser­vices, just as Hulu and Spo­tify have re­cently teamed up to of­fer.)

With all the other video stream­ing ser­vices out there, it’s pretty ob­vi­ous why Ap­ple wants a piece of the pie. Ama­zon, af­ter all, just an­nounced the first num­bers for its Prime sub­scrip­tion ser­vice, which has cleared 100 mil­lion sub­scribers. So there’s plenty of room for Ap­ple to grow by adding value to its own sub­scrip­tion of­fer­ings.

(On a per­sonal note, as some­one who’s wanted to see a full-blown Ap­ple sub­scrip­tion TV ser­vice for more than a decade, I’m still hope­ful that we might some­day see such an op­tion, though rights and ne­go­ti­a­tions make it tricky.)

REJIGGERING PRI­OR­I­TIES

On top of two brand-new ser­vices, Ap­ple’s also shunted a cou­ple of its ex­ist­ing ser­vices to­ward the sub­scrip­tion model. Ru­mors of the itunes Store go­ing away are prob­a­bly overblown, but the push for Ap­ple Mu­sic shows that the com­pany is clearly in­ter­ested in em­pha­siz­ing re­cur­ring

sub­scrip­tion rev­enue in dig­i­tal mu­sic over à la carte. And thanks to the rise of wide­spread con­nec­tiv­ity and mo­bile de­vices over the last decade, the mar­ket has proved plenty ready for it.

Like­wise, over in the App Store, Ap­ple has started to en­cour­age more de­vel­op­ers to take up the sub­scrip­tion model for soft­ware as well. That op­tion first de­buted for cer­tain types of apps, in­clud­ing pub­li­ca­tion-re­lated ones, back in 2011. But in re­cent years, Ap­ple has re­laxed re­stric­tions on what kind of apps can take ad­van­tage of sub­scrip­tion pric­ing; it’s also sweet­ened the pot for de­vel­op­ers, of­fer­ing a bet­ter cut of rev­enue for the de­vel­oper af­ter the first year of a user’s sub­scrip­tion.

That helps both Ap­ple, which makes a per­cent­age on sub­scrip­tion rev­enue, and de­vel­op­ers, who get re­cur­ring pay­ments that help them fund up­dates (as op­posed to the de facto “ev­ery up­date is free” model). Long term, ben­e­fits to de­vel­op­ers do ben­e­fit users, be­cause it helps keep apps alive and kick­ing, but the model’s not with­out its hur­dles.

TOO MANY SUB­SCRIP­TIONS

The real chal­lenge of the push to­ward sub­scrip­tion models is that there are sim­ply too many of them. Pay­ing $5 a month here and $10 a month there starts to add up, which can lead to each new sub­scrip­tion be­ing in­creas­ingly tough to sell users on.

That said, the good news is that even if Ap­ple is work­ing hard to con­vince users that the sub­scrip­tion model is ul­ti­mately less con­fus­ing and more ben­e­fi­cial, for the mo­ment, we have the best of both worlds. Video, apps, and mu­sic are all avail­able ei­ther à la carte or as a sub­scrip­tion, each with their own ben­e­fits and caveats.

Might those op­tions nar­row some day? It’s not out of the ques­tion. The sub­scrip­tion model cer­tainly isn’t go­ing any­where—not as long as Ap­ple’s Ser­vices divi­sion is truck­ing along, any­way. Ex­pect to see more re­quests to “please sub­scribe” in your fu­ture. ■

A video sub­scrip­tion ser­vice would help Ap­ple com­pete with the likes of Ama­zon, Hulu, and Net­flix.

The Newsstand IOS app didn’t last very long, re­placed by the News app.

The App Store is more open to of­fer­ing apps that work based on a sub­scrip­tion model.

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