Apple announced new rules for its iOS App Store Wednesday that could have a significant impact on video subscription services like Hulu and Netflix.
The company reduced the fees it is charging developers for offering subscription sign-ups within their apps, with a twist: Companies will still have to give Apple a 30 percent cut of any monthly charges once a new user signs up within an iOS app. However, after 12 months, that fee is being reduced to 15 percent.
At the same time, Apple continues to charge developers 30 percent if they decide to instead sell their apps. And Apple is getting ready to offer subscriptions as a billing option to all kids of apps, instead of reserving it for media and a few other categories.
It’s still unclear when the new rates will go in effect. Apple SVP Phil Schiller previewed the changes in an interview with The Verge Wednesday; the company is expected to formally introduce the new rates at its Worldwide Developer Conference in San Francisco next week.
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Apple’s motivation for the fee changes is twofold. Developers have long complained about the company taking too high of a cut, and owners of subscription services in particular disliked that Apple gave them little other choice that to accept the 30 percent rate. Apple’s developer rules don’t allow the use of third-party payment providers for in-app subscription sign-ups.
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Media services who have to balance subscription income with licensing fees have been struggling with this in particular for some time. Netflix for example didn’t offer any in-app sign-ups for years to avoid Apple’s fees. The company eventually changed course on the matter in September, essentially accepting lower margins on iOS subscribers to reach additional customers.
Spotify on the other hand has been charging consumers $13 per month if they sign up via iOS, whereas users who sign up on the web only need to pay $10 per month for the same service. The music subscription service even went as far as emailing its customers to encourage them to switch their billing from Apple to Spotify’s own web-based system.
But Apple is also trying to improve the overall quality of apps on iOS with this move. Making recurring charges cheaper than one-off sales could potentially shift a wide range of app developers towards embracing the subscription model for their apps.
And making the lower rates depended on subscribers sticking with a service for over a year could incentivize them to more of an emphasis on a good customer experience, whereas developers of one-off paid apps may be less interested in updates and enhancements after selling the original app.
In addition to new rates for in-app subscriptions, Apple also announced the addition of ads to the app store to help publishers promote their apps.
