Apple (Nasdaq: AAPL) has finally opened up a subscription option to publishers, but details of the option has publishers thinking Apple is looking for a bigger cut than they deserve.
As announced yesterday, subscriptions will give Apple 30% of any transaction, and Apple will keep user content private unless users indicate a desire to share information -- something publishers say is key in their business. Publishers like News Corp's (Nasdaq: NWS) Wall Street Journal rely on user information to target advertisements, and with a subscription model already in place, an App Store subscription isn't very attractive. But Apple is testing the power of the App Store by threatening to shut down any service that provides subscription content without giving Apple its cut.
This isn't the first time Apple has stepped on a few toes in the App Store. Remember the music industry's constant fighting of Apple's one-price-fits-all model, and the DRM drama a few years ago? In the end Apple found a reasonable solution for the music industry, and with Android phones already outselling the iPhone, there are millions of reasons to meet publishers somewhere in the middle. The stakes are just as high for Apple in this high-profile game of chicken.
Don't mess with my streaming video
The big questions surround some of the apps that help make Apple products the devices we know and love today. Netflix (Nasdaq: NFLX), Hulu, and Sirius XM (Nasdaq: SIRI) all have apps that allow subscribers to access content, and would laugh in the face of Apple demanding a cut of their action. According to reports, Netflix DVD-plan subscribers are safe but streaming only subscribers are left in limbo under the new terms.
Do we really think Apple will allow an app like Netflix to just fade into the night over a subscription disagreement? Apple relies on the popularity of these apps just as much as these apps rely on Apple to make great devices.
In this Fool's view, the power in this struggle lies firmly with content providers like Netflix, Sirius XM, and The Wall Street Journal who make the iPhone, and iPad in particular, more attractive. Content providers still have a wide range of Android devices that will accommodate their business models. Apple isn't the only game in town any more, and it has to know no one really owns an iPhone because it's a phone: We own it for the apps.
Round 1 may look like a game of hardball by Apple, but we'll see how that changes by June 30 when it wants all apps to be in compliance. Like the NFL labor negotiations, we don't really know the strength of both sides until a deadline approaches.
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