Apple?s Vague Subscription Policy Sows Confusion, Doubt

Steve Jobs introduces the iPad in a January 2010 event. Photo: Jon Snyder/Wired.com

The fumbled introduction of in-app subscriptions shows that when it comes to charging for subscription services online, Apple is just as confused as everyone else.

The widely anticipated policy allows publishers, including Wired, to charge subscription fees for recurring content. But while this is in principle a feature that both publishers and readers actually want, the announcement has been met with derision and complaints about the extortionate rates Apple is charging.

Clearly, Apple misjudged its audience.

Adding to the confusion is the fact that no one really knows what counts as a “publisher.” Wired parent Cond� Nast certainly is. But what about the makers of Dropbox or Evernote, to name two popular cloud-based services that charge premium customers with a monthly subscription model?

Apple’s new in-app subscriptions policy requires publishers of “content-based apps, including magazines, newspapers, video, music, etc.” to pay a 30-percent cut to Apple for every subscription sale made inside iPhone, iPad or iPod Touch apps, according to Apple.�So for example, when an iPad customer purchases a subscription of�The Daily�newspaper through the app, Apple takes a 30-percent cut of the subscription sale. Sounds about reasonable.

To anybody who’s even idly followed Apple in the past few years, this shouldn’t come as a surprise at all. Currently for every app that costs money on the App Store, Apple takes 30 percent of each sale, leaving the software developer with a generous 70-percent cut.

Publishers can still take subscription payments outside the apps — for instance, on their own websites — and when they do, they keep 100 percent of the proceeds, as Jobs was careful to point out.

But the new in-app policy is more strict and more confusing than it initially appears.

Publishers that offer alternative means of subscription must also offer Apple’s in-app purchase system, and subscriptions offered outside the App Store can’t undercut the in-app price. Also, only the in-app sale option can appear inside the app; external links are not allowed.

Here’s where things get really confusing: The iOS developer agreement states that “Apps utilizing a system other than the In App Purchase API (IAP) to purchase content, functionality or services in an app will be rejected.”

Certainly any app would fall under that category, wouldn’t it?�So now is everybody a publisher of “content-based apps”? That language would suggest so.

In-app payments sound more convenient for iOS customers, but the wording of the policy is loaded and vague. Every app can be seen as something that provides content, functionality or services, but Apple particularly describes this policy as applying to publishers of “content-based” apps.

What about companies that provide paid, subscription-based software services through an app, such as Dropbox, Evernote and Salesforce? Marco Arment, developer of the iOS app Instapaper, points out these apps offer paid services outside the iOS payment system. Should they be rejected for not doing so? That would upset everybody, but it would only seem fair.

Those apps haven’t been pulled. And if a purported Steve Jobs e-mail is to be believed, they aren’t going to be — although it’s hard to say. The e-mail merely states, “We created subscriptions for publishing apps, not [software-as-a-service] apps.”

The bottom line is that Apple has managed to make its App Store review policy even more confusing and vague than it already was previously, and this disarray may discourage businesses from participating, Arment says.

“This policy will prevent many potentially great apps, from many large and small publishers, from being created on iOS at all,” Arment says in his blog.

A large contributor to the confusion is that Apple is creating an invisible hierarchy inside the App Store. Traditional publishers have been receiving different treatment than everybody else for over a year. �In early 2010, Apple approved the Playboy and Sports Illustrated apps, for example, while banning a plethora of sex-tinged apps made by smaller companies.

?The difference is this is a well-known company with previously published material available broadly in a well-accepted format,? Schiller told The New York Times last year.

Herein lies the problem: Apple seems to think there’s a difference between a media organization publishing a magazine through an app and a software maker publishing a service through an app. While there are obvious differences between the products provided, the fundamentals are the same: These are companies using Apple’s app channel to sell product.

From a media publisher’s perspective, it probably doesn’t seem fair to be stuck with different rules.

And from a software service provider’s perspective, it’s uncertain what it can or cannot do in the coming future given the broad wording of the new policy, and Jobs’ apparent statement that the policy doesn’t even apply.

If Apple wants to give different kinds of publishers different rules, they should give them a separate channel in iTunes, where partnerships are firmly established in inked agreements between publishers and Apple.

Why not create a separate store for magazine and serials publishers, just as Apple has done with book publishers in iBooks?

By giving publishers a separate place to play ball, Apple could also grant them access to an important resource: user data. The New York Times‘ David Carr points out that publishers are less concerned about the revenue split than they are about the difficulty of collecting user data with in-app subscriptions.

Apple only allows user data to be shared with the publisher if the user gives permission. When a customer chooses to subscribe to a publication, a message pops up saying, ?The developer would like your name, e-mail, and zip code so they can send you messages about related products in accordance with their privacy policy.? Who would hit OK on that? Tracking user data is crucial for a business that relies heavily on ad targeting, but Apple’s privacy policy creates a high hurdle.

Keeping developers in the same arena as publishers while enforcing rules inconsistently creates an atmosphere of unfair play, and suddenly the App Store no longer feels like the “best deal going” for mobile apps.

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