In 2018, Netflix earned $853 million through the App Store, of which $127 million went to Apple. So the 15% in-app purchase commission gave Apple a significant amount of Netflix’s profits. In an attempt to retain the likes of Netflix and Spotify, Apple decreases the percentage for (a subset of) subscription apps in 2016 from 30% to 15%. Yet, Netflix decided to discontinue the App Store as a payment method in 2019 and saved the 15% fees. Should you, as publisher, follow the same route?
Letting Apple have 30% (or 15%*) of your profits might not be so bad. They are not taking the money for no reason and the return is still higher than the tradition newsstand remit rates. The App Store is a reseller and distribution channel that does promotion of your app, brings in credibility and offers a seamless payment experience.
But you wonder of course: Why should we pay Apple for a subscription while there is no commission for the newsstand when a reader buys a print subscription?
Apple can only receive commissions for purchases made through the iOS app. The easiest way to avoid fees is not to offer subscription services through the app. This is exactly what Netflix had done: they redirect the audience from the app to the company’s website. Users are required to sign up and pay for the service through the site before they can log in on the app. Netflix is not the only developer that has attempted to cut Apple off. Spotify, Valve, and Financial Times have been trying to do the same.
But is the strategy as effective as it seems? Of course not, otherwise everybody would just be doing the same.
You just can’t do away with the Apple App Store commissions. Apple has guidelines laid out that define whether you can opt-out of in-app purchases or not. If you just use alternate payment methods, the app may get rejected (see here). Even if you conceal the link to the signup page, e.g. a link to a terms-of-service page which links to a support page which links to your home page which links to the signup page, Apple may use the circuitous path as grounds to reject your app.
Not offering subscription services in-app may also impact your App Store Optimization. Say an app is marketed as a subscription service, but users are unable to purchase it directly: this can lead to dissatisfaction among the users and may abandon the sales process.
So should you continue to pay Apple’s commissions?
I would recommend to look at the question with enterprise architecture glasses (see my post here). Enterprise architecture fundamentally build enterprise capabilities to nurture a desirable business outcome. These capabilities are developed using design thinking and customer centricity.
Design thinking starts with reframing the problem. So, why do you not want to pay Apple? Is it simply because you do not want to share profit as a matter of principle, or, is it because you want more revenue** from digital content and enter the digital-first era successfully? If the problem is the latter, then ‘payment collection’ should be key enterprise capability.
Customer centricity starts with the customer’s experience. So, why is avoiding Apple’s fee helping the customer? Are we product centric and solely focussed on our content (and ads), or, do we care about long-term customer value? You typically achieve value with your content. You can achieve long-term customer value through engagement and network effects. Network effects occur when customers advocate your content and defend it for example as their personal defense against fake news.
So if design thinking makes ‘payment collection’ a key enterprise capability and you want this capability to be customer centric, this capability must be frictionless. It may turn out that this frictionless capability enables you to collect more types of revenue. For example, let the customer pay for a ‘no-ads experience’. Or let the customer pay for a single article or a single reading session. Or let them pay for a week worth of reading. And entice to read more through your content and customer experience.
Keeping these considerations in mind, you may ask yourselves: does an app lead to the desired business outcome? A website optimised for mobile and the “Reader” option of Apple Safari may yield the same experience as a regular publisher’s app, if not better. And there are no commissions to Apple.
Alternatively, an app could add value to the customer when you can offer them frictionless payments for individual articles and short subscriptions. And because this represents additional revenue, paying Apple a commission may not be that bad after all. With proper App Store Optimization you can add more readers by improved rankings and visibility. Money spent to bring in more customers is money well spent.
So maybe do both: invest in your web presence to acquire new readers and sell digital subscriptions bundled with print, and increase your visibility with app marketing techniques and nurture mobile app users with micropayment-based reading.
Notes
*15% applies for some biggies, but also for business with less than 1m$ of App Store revenue and for subscriptions after more than 1 year.
**Personalised ads may also be a major source of revenue. This source is under threat by winner-takes-it-all behemoths that build on network effects such as Alphabet and Facebook. Design thinking and customer centricity leads to the question: do we want to fight these behemoths as a matter of principle, or, should we also aim to generate network effects through community building? If done well, the latter may generate significant long-term customer value (see my post here). To gain wide acceptance, though, it must be frictionless and thus should avoid any difficult registration cycle, e.g. a registration based on Apple ID (see my post here).
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