Apple’s iOS subscriptions: Online, offline and the hard line

At PCWorld.com, Brennon Slattery has a good rundown on the terms of Apple’s new in-app  subscription service, which seems to invoke the most controversy since Apple’s decision not to allow apps created with tools other than its own, a policy that Apple eventually reversed. The policy seeks to give Apple credit for initiation of subscriptions via its iOS products while allowing subscription providers the flexibility to also bring to the iPhone subscriptions initiated off the device. The tension is around the idea that app developers who offer subscriptions from sources other than the device must also offer them from within the device, and must do so for the same (or lower) price while giving Apple a 30 percent cut of the transaction.

It’s not unreasonable for Apple to want to monetize a transaction for which it has offered exposure (and in doing so, it can create a user experience of not economic equation that is customer-centric.). It is, however, somewhat of a leap to think that just because a consumer activates a subscription on an iOS product that that the iOS product drove that subscription; this ignores much of the promotion that providers of these services do in other media. Providers of subscription products might try to get around the requirement by obscuring the ability to sign up in the app or offering some bonuses for offline activation.

But why encourage these games? Apple could compromise and still save face simply by making in-app subscription activation optional. Then, if the subscription provider feels as though the iOS audience is worth it, they can pay Apple the share. If not, then they risk losing out on that customer until she goes to a Web site, calls a phone number, or engages in some other delay that may risk losing out on the subscription. If Apple holds its ground, we may at best see subscription providers pushing customers to competitive platforms. Making in-app activations optional offers a cost-effective customer acquisition mechanism for companies that aren’t spending a lot on off-device promotion while recognizing the investment of those that do.

During the Adobe CS5 development tool controversy, I argued that Flash developers were more likely to simply abandon iOS than switch, and that would be even more true for subscription service providers that found customer acquisition unprofitable on iOS devices.

This is simply another situation where Apple must decide between iOS devices being a platform versus being a sales channel. By allowing services that compete to an extent with iTunes such as Rhapsody, Slacker, Hulu Plus and even Netflix – the latter of which Apple has embraced on its own closed AppleTV product – it has done much to silence critics that complain about the closed nature of the platform and continue to attract best-in-class and exclusive applications. Apple has historically leaned to the platform end of this debate to the benefit of its customers and its products.

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