Report: Apple met secretly with developers to sell them on subscription pricing

Report: Apple met secretly with developers to sell them on subscription pricing
Apple has stated that its goal is to achieve $50 billion in services revenue from the $30 billion it garnered in that category last year. To help it expand its take in services, a new report says that Apple met privately with 30 developers in New York last year, trying to convince them to charge a recurring subscription rate for their apps. During the get-together, which took place in April 2017, Apple allegedly told these developers that they should replace one-time payments with the monthly stream of cash flow that they would receive by using a subscription model for their apps. Inside Apple, this initiative is known as Subscription 2.0. There are only about 30,000 apps in the App Store that require a subscription, although some of these have a large number of subscribers such as Netflix, and Tinder to name a couple.

The meeting was apparently successful on some level as several developers made the switch, raising subscription revenue from Apple and third party firms to $300 million during the fiscal third quarter of 2018. The company receives 30% of first year subscription revenue from an app, which is cut to 15% starting with the second year. The remaining percentage goes to the developers, which offers them quite an incentive to switch to subscription pricing.

Facetune2 was one app mentioned in the report as making a successful conversion to the subscription model. The selfie editor was the most downloaded paid iOS app in the states last week. While great for the developer and for Apple, we're not so sure that iOS users are completely open to this focus on subscriptions. One subscriber to Facetune2 writes on the App Store listing, "Seems like more and more developers are jumping in on the monthly/yearly Feed-Me payment method which benefits them and not the user especially when one adds up all the $2 here and $3 there that get billed each month."

source: BusinessInsider (paywall) via AppleInsider

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24 Comments

1. Subie

Posts: 2298; Member since: Aug 01, 2015

Thanks Alan. The quote you added at the bottom of the last paragraph sums up what I have always believed in regard to subscription based software.

4. Finalflash

Posts: 4063; Member since: Jul 23, 2013

It's borderline collusion at this point because they're trying to get a group to change their behavior (increase prices) against the best interest of consumers. Though subscriptions make sense in certain cases, that should be left up to individual developers. Once again, Apple intends to make money without offering any additional value. Oh well, they'll probably kill their own cash cow with death by a thousand cuts at this rate.

8. AxelFoley unregistered

My guess is that a retailer "colluding" with a supplier to make more money is a fairly common practice. Better yet, it is a normal practice. Where you're definitely correct is the consumer's ability to vote with their wallets, in this instance. The Face Tune app and most others aren't a life necessity. And if people start subscribing to it, there is no reason the developer shouldn't adopt that model. Likewise, Apple should never consider lowering the ASP of an iphone. For many people, paying a high price for an iphone is a badge of honor.

9. lyndon420

Posts: 6509; Member since: Jul 11, 2012

I paid $999 for my LG V30. You can't see it, but I'm secretly patting myself on the back for a job well done. "Look at me everyone! I'm a somebody because I paid a thousand bucks for a stupid smartphone"!!! Badge of honor? A big white dunce cap? Same difference lol.

12. tedkord

Posts: 17133; Member since: Jun 17, 2009

If they're not spending your money, why would you give the tiniest damn?

16. Atechguy0

Posts: 918; Member since: Aug 03, 2018

If you already purchased an app, and then that developer or company wants to change it to a subscription model. Then that is just gouging at the customers for more money. Especially if the app hasn't changed much. I rather have ads instead.

2. Dr.Phil

Posts: 2297; Member since: Feb 14, 2011

This all started out with good intentions: like defeating your $100 cable bill in favor of smaller $40/ month packages with channels you want. But now we have everyone doing their own thing that in the end the customer is going to be paying a lot more than they did a year ago. It starts out with Netflix, Hulu, and Prime but ends up with Disney streaming service, DC Comics service, ESPN+, Apple TV, YouTube Red, etc. Now instead of paying that $40 a month to get those 70 channels you want, you’ll have to pay the $40 plus $20 for ESPN and another $5 for HGTV and so on and so forth. It’s ridiculous. We need subscription neutrality.

5. toukale

Posts: 611; Member since: Jun 10, 2015

I don't actually have an issue with it, you pay for what you watch. For someone like me who is super busy why should I pay $140 a month for a cable bill when I barely watch anything. So far I only subscribe to hulu year round. Netflix for 3-4 months out of the year, and HBO for 3 months for Game of Thrones. Don't care for sports or news channels these days. I save a ton that way. It's an issue only for those who has ton of time to waste.

7. Eric7779 unregistered

It's a question of some eating ten times a day while explaining to you, "you could eat just two times, the third one is not mandatory".

21. Leo_MC

Posts: 6689; Member since: Dec 02, 2011

Watching TV is nothing like eating; one needs to eat in order to live, but no one needs to watch the last of the avengers.

18. Dr.Phil

Posts: 2297; Member since: Feb 14, 2011

Yes but you’re not seeing the whole issue. Right now, the majority of what is on Netflix are things that they license in order to show people. What happens when Warner Bros., Disney, Fox, Sony Pictures, etc. decide to pull that content and instead have it on their own streaming network? Then you’re paying the $12 a month for Netflix (for their original programming) plus an extra $10 for every other service to make up for what Netflix used to offer by itself.

20. Leo_MC

Posts: 6689; Member since: Dec 02, 2011

How about unplugging your TV set and read books? They are free at the local library you know...

3. RebelwithoutaClue unregistered

Yup consumers first and consumers are not the product...

6. NarutoKage14

Posts: 1306; Member since: Aug 31, 2016

Some subscription services make sense but a subscription for a selfie app does not.

10. Rigmaster

Posts: 234; Member since: Jan 22, 2018

Pretty sure the market would make the decision for them. Apps that continuously develop and add new features probably have no problem getting buyers to do subscriptions. However far too many apps don't really do much from one version to the next so buyers will simply stay away. How about this for a thought though: Why not charge app developers to use my private data for development or any purpose and make them subscribers to my info instead?

11. Wazupmrg

Posts: 141; Member since: Apr 10, 2017

Hate this idea. Just like Microsoft with their 365 service. You can't just buy something and have it as your own anymore. Not business friendly. But the avg consumer isn't strong enough to push back. Just like gas. We'll keep paying whatever price they shove on us because of our attachment to our cars. Apple just being greedy again.

17. Rigmaster

Posts: 234; Member since: Jan 22, 2018

I don't love the idea, but I don't think it works for app developers like it does for MSFT. App developers aren't Apple people so the market will hit them hard if they go this route because it's hard to move all developers at the same time. The greater worry to me would be Apple doing it for their own apps.

22. Leo_MC

Posts: 6689; Member since: Dec 02, 2011

Every Apple app on my iPhone was free; I think iMovie was something like €4 one time, but now it's free.

13. RoyalMike unregistered

Apple wants to steal money all the time,, they don't care how much extra you've already paid for an iPhone but they want to continue stealing even after the purchase with subscriptions and repairs by regularly making the product faulty,,, as most other brands walk on Apple path '' Micro-transactions'' is the future of tech world

24. tedkord

Posts: 17133; Member since: Jun 17, 2009

Well, making more money is the purpose of every for profit business.

14. cmdacos

Posts: 3885; Member since: Nov 01, 2016

Years ago when some of the apps that I used started forcing me to re-up my subscriptions through iTunes is when I realized there were a lot more shady things happening behind the scenes and stopped buying anything in iTunes at that point. Always subscribe outside of apple or Google stores now except for GPM.

15. nikhil23

Posts: 418; Member since: Dec 07, 2016

Guess who's greedy

19. almostdone

Posts: 425; Member since: Sep 25, 2012

No matter how much you dislike it, Apple will always suck you dry.

23. shiv179

Posts: 136; Member since: Aug 08, 2012

Only Apple users are dumb enough to pay a subscription for a selfie app

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