Apple Sweetens the Deal for Subscription Companies by Changing Rate Structure

New rates designed to appeal to developers and subscription companies

Subscription News: Apple Sweetens the Deal for Subscription Companies by Changing Rate Structure

On Wednesday, Apple announced it will sweeten the deal for developers and subscription companies by changing its fee structure, reports The Verge. The announcement comes less than a week before Apple’s 2016 Worldwide Developers Conference (WWDC) in San Francisco where such news is typically revealed.

App developers and subscription companies will still have to pay Apple 30 percent of monthly fees received from subscribers for in-app purchases for the first year, but after that, the fee drops to 15 percent.

The goal is to entice more developers to allow in-app sales on iOS. Until now, Apple hasn’t allowed developers – including subscription companies – to accept third-party payment providers for in-app subscriptions. This ensures that Apple gets its cut, but it has caused many companies to not allow in-app purchases on iOS.

Subscription News: Apple Sweetens the Deal for Subscription Companies by Changing Rate Structure

The 30 percent Apple fee has been problematic for many developers, including media companies like Netflix who have to cover licensing fees and other expenses with its subscription revenue. Giving Apple 30 percent month after month can make such arrangements cost prohibitive. Some companies like Spotify make up for that 30 percent cost by charging iOS subscribers a higher rate than those who sign up online instead, says Variety.

In addition, Variety says that Apple will charge developers, who want to sell their apps outright, will still be charged a 30 percent fee. Other changes include tiered subscription pricing, the introduction of search ads in the App Store, and the expansion of categories that will accept subscription billing beyond news, cloud services, audio/video streaming services and dating apps.

This is a huge shift in Apple’s philosophy, encouraging developers to develop long-term relationships with customers rather than pushing one-time sales.

The Verge writes, “All of these changes underscore Apple’s intent on getting developers to sell subscriptions – so much so that the company is willing to reduce its revenue share.”

In January, Apple reported that it has paid developers $40 billion since 2008, with more than a third of that being paid in the last year. These new changes are likely to boost developer income even further, particularly as those who have been reluctant to put their apps in the App Store decide to give it a go.

Insider Take:

This is an interesting move by Apple, but a positive one that will positively impact developers, subscription companies and consumers. Apple will benefit as well, not only in gaining goodwill but in garnering recurring revenue from subscription companies that have, thus far, chosen not to sell their products and services via Apple and from developers who may go the subscription route instead of one-time app sales.