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February 22, 2011 | Authored by: Vindicia Team

Think Different

Think Different seems to be the message emanating from the would be internet gatekeepers last week.

Think your subscription service could be profitable – well, Think Different!

Apple, in requiring “mandatory 30% subscription cut” plans on the App Store have bitten off more than they can chew. Not only is the basic concept economically impossible for many Media and Publishing providers, it looks to drastically cut into the value of the iPad. Two of the most compelling applications on my iPad are Netflix and Kindle. Should both of these services be forced out of the App Store, I question whether I should move to the Android platform. I saw value in the iPad if it saved me buying a ebook reader and another television screen, but if those high value content sources can’t economically be available to me as an end user, the iPad starts to become an expensive third screen that my MacBook Air or Netbook outperforms (with no 30% blocker for Netflix and Amazon!) Late breaking word is that Mr. Jobs himself says that the 30% requirement doesn’t apply to SaaS, but that still leaves a lot of gray area in the content sector. Is Netflix SaaS and if it is, why isn’t a Kindle eBook exempt too but maybe Amazon is a publisher? Are only Magazine and Newspaper guys forced to Think Different?

That leads me to Google’s foray. Both services are talking about sharing customer data with content and service providers but if you look at the fine print all that’s shared is name, email, and address. Apple iTunes and Google Checkout maintain firm control over the customer as they retain the ability to bill the end user in the future and in Google’s case, actually control the user’s login and password credentials. Digital providers are left in the embarrassing world of having to beg their existing and probably already paying customers for payment details or a new login should Apple or Google decide they don’t approve of some future service direction. Today those disapprovals are folks like Playboy and European news magazines (OMG! women without shirts!) but what if your service violates some other new found sensibility of these companies. Google has surprisingly wide limitations on what you can sell with Checkout. Make sure you don’t slander the Queen…

Google One Pass also highlights another issue that publishers need to be very aware of. One Pass takes the current news paradigm and simply attempts to assign a paywall to someone who views more than a few articles. Metering content is a painful business model that almost always migrates to flat rate subscriptions. However, in this case, the news business is only beginning to come to the realization that it needs to be thinking about its value to readers as a productized service instead of simply content to consume. I’ve long said that the news business incorrectly focused on news.google.com as a competitor when they should have focused on Google Reader. Those that add value to the news consuming experience beyond simply supplying the news will create sustainable future “news-as-a-service” offerings. One Pass remains in an old paradigm that forces people to keep asking themselves if they’re getting real value out of that next web page instead of whether their “news-as-a-service” program entertains and informs.

Serious Digital Leaders have to own their customer relationship. The shift to subscription is driven by the perceived drop in value of a digital version versus a physical version. Lowering the perceived average selling price by using subscriptions can succeed only because digital content and services can rely on the much longer average customer lifetime values that can be had in the switch to services. Handing control over the annuity stream profit (and much of the annuity in Apple’s case) is giving your business to a hardware company or a search engine. Maybe they’ll send you a nice T-shirt or an iPad for your trouble…

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Vindicia Team

Vindicia Team

We value our subject matter experts and the insights each of them brings to the table. We want to encourage more thought leaders to come together and share their industry knowledge through our blog. Think you have something interesting to contribute as a guest blogger? Contact us at info@vindicia.com