Apple 'blowing it' with app subscription scheme, analyst says

We know that Apple’s mobile application subscription scheme is unpopular with publishers, but now analyst firm Forrester’s CEO is panning it too.

In a blog post at the official Forrester website, CEO George Colony suggests that Apple is letting the success of its iPhone and iPad devices go to its head and that it risks massive hubris if it doesn’t drastically lower the subscription fees it charges publishers.

BACKGROUND: EU publishers blast Apple’s iPad subscription plan

COMPETITION: Google payment system for publishers rivals Apple's

Apple caused a furor among publishers and developers this week when it announced that it would be taking 30% of all subscription revenue generated from sales conducted through its iTunes Store.  Publishers can still sell their subscription-based content for the iPhone and iPad independently from Apple but they are not allowed to undercut the pricing that Apple has established on the iTunes store.

Colony thinks that Apple is wildly overestimating the pricing of content on mobile devices and says that the proper fee level for subscription-based applications should be around 5%, or one-sixth of what Apple plans to charge publishers.  By charging such high subscription fees for access to the iTunes Store, Apple risks driving more developers into the arms of rival mobile operating system Android, Colony argues.

"Apple is blowing it," he writes bluntly.  "It risks replaying the PC wars of the early 1980s when Microsoft welcomed everyone into their development world while Apple stayed ‘pure’ and scared away its allies… This time around Apple’s hostile position could result in a 2014 App Internet market that looks something like this: 80% Android, 10% Apple, 10% Other."

Mobile applications have become an increasingly popular feature of smartphones over the past couple of years, especially with the high-profile launches of application shopping centers such as Apple's App Store and Google's Android Market. The most recent survey data from research firm ChangeWave shows that 14% of smartphone users said that applications were what they liked best about new smartphones, followed by ease of use (12%) and Internet access (12%).  Additionally, a recent survey conducted by Forrester showed that 45% of tablet users said they spend about the same time using mobile applications as they spend on a web browser, with 39% saying they spend more time on the browser than on applications.

Research in Motion, which has traditionally been far more selective in the applications it allows on its BlackBerry devices, is apparently considering whether to allow its upcoming PlayBook tablet to run applications designed for Google’s Android platform.  If the Android App Market is used on RIM devices, it could give Android a boost in its efforts to get developers to spend more time developing apps for Android rather than the iPhone.

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Tags smartphonesbusiness issuesGooglewirelessAppleAndroidNetworkingPhonescorporate issuesconsumer electronicsmobile appsApple subscription

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Brad Reed

Network World
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