The media world is in a tizzy over Apple’s new subscription billing rules for iPad and iPhone apps. Basically, Apple will now take a 30 percent cut of all in-app subscription revenues and own all the customer data. As written, the rules apply to everything from iPad magazines and newspapers to subscription music services and even subscription movie services like Netflix.
We’ve debated these rules up and down. In this special episode of Fly or Die, Rhapsody president Jon Irwin joins us to explain how online subscription media businesses work from his perspective. Irwin is one of the few executives brave enough to speak out against the new rules. Rhapsody’s position, in a nutshell, is this:
Our philosophy is simple too – an Apple-imposed arrangement that requires us to pay 30 percent of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable. The bottom line is we would not be able to offer our service through the iTunes store if subjected to Apple’s 30 percent monthly fee vs. a typical 2.5 percent credit card fee.
Rhapsody’s iTunes app is used by a substantial portion of its 750,000 subscribers, but they also listen across other devices. Rhapsody’d service is not limited to the iOS platform. Similarly, many media companies want the ability to bundle print subscriptions with iPad subscriptions to publications. Apple’s new rules complicate such bundling.
So will the rules fly or die? I am reminded of a similar move Apple did previously when it changed its rules for how it would handle other mobile ad networks. They issued new rules, which effectively turned out to be a trial balloon. When the market reacted and antitrust investigations were threatened, Apple backed down. The same could happen here, or Apple could choose to selectively enforce the rules against digital publishers but not against music or movie services.