Apple’s latest changes to purchasing rules for iOS devices have news organizations like The New York Times, The Wall Street Journal and other businesses removing third-party sales systems from their apps.
The new Apple rules took effect June 30, but many are only now complying with them. The new rules say no app may include a link or button that sells content to the user through anything other than Apple’s official iTunes store. (Apple keeps 30 percent of that revenue, and publishers get personal information about subscribers only from those who choose to share it with them.)
Recent updates to the Times’ mobile apps sell in-app subscriptions through the iTunes store on Apple’s terms. To add up the financial impact of this, we have to do some light math:
- If I buy a $14.99 a month subscription to NYTimes.com and smartphone apps this way, over the course of a year the Times cedes $53.96 to Apple out of my $179.88 total payment.
- If I buy a $19.99 a month subscription to NYTimes.com and the iPad app, the Times gives $71.96 a year to Apple, out of my $239.88 payment.
- If I’m buying the “all digital access” plan that includes smartphone and tablet access — that’s $34.99 a month or $419.88 a year, of which Apple keeps $125.96.
So what does that add up to? It depends how many subscriptions the Times sells through its apps. The Times’ iPhone and iPad apps were downloaded by millions of people when they were entirely free, so there’s a large potential market of new subscribers.
At the end of June the Times had 224,000 digital subscribers, adding over 100,000 in the quarter. So with millions of apps out there and hundreds of thousands of people subscribing, suppose that at least 20,000 eventually buy a smartphone or tablet package through an app. That’s somewhere between $1 million and $2.5 million in annual revenue the Times would be losing to Apple. If you think my estimate is too low or too high, scale it up or down as needed — either way, the Times will lose 30 percent of all its subscription revenue via iPhone or iPad apps.
The defense would be that Apple’s one-tap purchasing system with automatic billing is the easiest payment method for consumers. A couple million dollars a year also isn’t earth-shattering for a New York Times Co. that counts its revenue by the billions. Still, it’s significant money, especially in the new mindset of stacking digital dimes to catch up to print dollars.
Another interesting wrinkle in The New York Times’ strategy is a tactic to make sure it gets access to subscribers’ personal data. The Times is offering a free week of access to new subscribers who opt in to letting Apple share their name, email and ZIP code with the Times.
The Wall Street Journal is going a different route. It agreed to remove its own subscription system from its iPad app, but instead of using iTunes it says app downloaders who want to subscribe will have to call a customer service number or visit WSJ.com in a Web browser. That way the paper still keeps all the money and subscriber data.
Newspaper apps probably aren’t even the most-squeezed by Apple’s new restrictions. The majority of them on the market just make the traditional newspaper stories available to subscribers on a mobile device. If users were already print subscribers, they can just log in to the app and start using it.
The bigger challenge is for new types of news apps that may aggregate multiple publications or provide new kinds of information services. Those new products won’t have existing subscriber bases, and every new subscriber will need to sign up somehow. It’s likely most of those apps will feel pressed to use iTunes as the sole provider of in-app purchases.
This fall, Apple will make the iTunes purchasing system even more central to news apps when it debuts its Newsstand app in iOS version 5, a single market to buy and read newspapers and magazines through iTunes.
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