How Will Apple Subscription Plan Affect Digital Comics?

If you're like just about anyone else in the world today, you probably have an Apple product. iPod, iPhone, MacBook, name it, it's probably in your digital collection somewhere. I don't say that to start some flamewar about Apple vs. Android or PC vs. Mac, but to say that Apple has a pretty strong grip -a stranglehold even- on digital media. One of the newer entrants into the digital media arena has been digital comics, no doubt buoyed by the overwhelming success of the iPad.

There are currently a few publishers on iTunes, including Marvel, DC, Dark Horse, and comiXology, which covers most everyone else. Today Apple has announced (full press release after the jump) that subscriptions are now available in the iTunes Store. I can imagine your first thought is "awesome!" and in a way you would be right. Being able to subscribe to anything makes it easier to keep getting the content and comic books are almost built on the premise of subscriptions (less interruption in getting the latest issue of a certain work).

There is one potentially crippling caveat though: Apple has required, and I quote, "if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app." Basically, what Steve Jobs is saying is that a company can provide customers the opportunity to subscribe to anything the iTunes store carries OUTSIDE of iTunes, but the same offer (or a better one) must also be available as an in-app purchase. This has the potential to be fatal (if not near fatal) blow to the burgeoning digital comics scene, but I doubt that it will.

Please note, I'll be using a lot of examples that may or may not be truly indicative of process or pricing, but they still make similar points. I also use Marvel as a primary example, simply because they're probably the most well-known publisher both on and off of iTunes.

Let's say, for the sake of simplicity's sake, you're a big fan of Spider-man. You love reading comics about him, especially Amazing Spider-man. Previously, you would go to your local comic shop every week, talk to the folks behind the counter and have the comics ready and waiting for you. More likely than not, you've subscribed to them and the breakdown of how you pay (yearly, monthly, weekly, etc.) is irrelevant here. Why? Because all the money is going to the comic book store. They've already bought the comic through Diamond Direct and have fronted their share. They're just waiting on you to hand over your $3.99 to get your copy. Done and done. The comic book store made a sale and you have the latest issue of Amazing Spider-man.

Now let's say you just got an iPad (or any device for reading comics). Hey, there's a Marvel digital comics app on the iTunes store! And what's more, it carries the latest issue of Amazing Spider-man as well! You may be of the mindset to stop going to your local comic book shop and start reading it exclusively on the iPad. You buy the first issue for the digital price of $1.99 and after finishing it are given the opportunity to subscribe. Why not you say! Before you know it you're getting push notifications that the latest issue is available and is sent to your device without any effort on your part.

As a customer it's great, but you may not know what's going on behind the scenes. Apple's insistence that subscriptions be offered in iTunes means that they will now get a 30% cut of that subscription. At $1.99 a monthly issue, that's roughly $24 a year, $7.20 of which now goes to Apple while Marvel gets the remaining $16.80. Not bad for Marvel right? What you as the reader may not know is that you can go to Marvel and get the SAME subscription for the SAME price. The only difference is that Marvel gets the full $24 in that case and Apple is left destitute in that instance. Apple's logic here is sound from a business perspective. If more people are subscribing to more media through the app downloaded from iTunes, then Apple feels it's the reason people subscribed. The problem is that publishers will be taking more of a hit.

Apple's inclusion of a "trojan horse" for subscriptions almost guarantees that customers will simply purchase comics in app. Bigger publishers like Marvel and DC can pretty easily handle the shift...they'll just adjust their projected revenues from digital content by 30%. The smaller publishers -and by extension comiXology- though may not be as fortunate. comiXology thrives on having more than just Marvel and DC and, while they don't have a ton of indie comics, they do have some smaller publishers like BOOM! Studios and Red 5 comics available in their portfolio. If more readers start subscribing in app to those publishers then comiXology's cut gets smaller, after factoring in the amount paid to Apple (30%) and the publisher, which is no doubt significant.

It's clear that digital is here to stay. While digital comics aren't nearly as prevalent as I'm sure some would like, they're clearly making inroads against their print counterparts. The barriers to entry are so low that a lot of indie publishers have a better chance of making sales digitally as opposed to print. Having said that, publishers will have no choice but to continue digital offerings, despite their misgivings around capitulating to Apple's requests. The reality is that the customer doesn't really care about where the money is going behind the scenes; they just want the fastest and easiest route for getting the product.

What, then, is the incentive to publish on iTunes? Audience. iTunes has upwards of 160 million users and while not all of them are comic book fans it's a good number to reach out to. A comic could be about a topic that someone who's never read comics before likes and checks out the comic anyway. He/she reads it, likes it and recommends it, boosting sales for that particular comic. Maybe then they move onto other comics and so on and so forth. The point is that a publisher large or small can't really afford NOT to be on iTunes.

Clearly, the new policy will have a big effect on smaller publishers. While they'll still benefit from the exposure of their work on iTunes they'll generate less revenue. It's hard to commiserate and say it sucks for the publisher as they're still going to be getting money; they'll just be getting less of it. Selling digital media is different than print because you're only paying the original cost of creating it. After that, there are no production costs, storage costs, etc. as there's no physical goods you're making. The biggest cost is creating the work and adapting it to a digital format, but once it's created and good to go it's just a matter of disseminating and selling it.

The customer really doesn't see any change in daily operations and will probably be pretty excited to subscribe in app. The bigger question may be whether or not publishers will offer the subscription option in the first place. The language in the press release says if a publisher offers a subscription through their own website the same option must be available in iTunes. Publishers will be faced with either alienating their customers by not offering a subscription or sucking it up and dealing with Apple taking a 30% cut.

It's a win/win for Apple, as they get 30% of just about everything on iTunes now. It's a win/win for customers because they get a simple way to subscribe. It's a win/lose for publishers though; they'll be able to offer easier subscriptions, but they'll also owe Apple 30% for the privilege. Comic book store owners are still probably the biggest losers in the entire digital push. Fewer and fewer customers will go to physical stores for comics as digital comics become more and more prevalent. While some publishers will say they want digital comics to supplement print comics, I have a feeling that they will eventually overtake and replace them (books will follow the same path most likely). A subscription option only expedites this process.

Comic book publishers will still publish on iTunes (because they can't really afford not to). The work will still be there, but there will probably be less of it until digital completely replaces print. Indie publishers will still want to get their works on iTunes if for nothing else than the sheer attention it will get them. Yes, it's kind of a dick move on Apple's part, but, honestly, you can't completely fault them for it. Just like you pay a cable company for shows passing through their equipment you're paying Apple for medium passing through iTunes; only Apple has passed the cost onto the publisher and not the customer. Time will tell if this really has any noticeable impact on digital comics sales.

Full press release below.

Apple Launches Subscriptions on the App Store

CUPERTINO, California-February 15, 2011-Apple® today announced a new subscription service available to all publishers of content-based apps on the App Store℠, including magazines, newspapers, video, music, etc. This is the same innovative digital subscription billing service that Apple recently launched with News Corp.'s "The Daily" app.

Subscriptions purchased from within the App Store will be sold using the same App Store billing system that has been used to buy billions of apps and In-App Purchases. Publishers set the price and length of subscription (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly). Then with one-click, customers pick the length of subscription and are automatically charged based on their chosen length of commitment (weekly, monthly, etc.). Customers can review and manage all of their subscriptions from their personal account page, including canceling the automatic renewal of a subscription. Apple processes all payments, keeping the same 30 percent share that it does today for other In-App Purchases.

"Our philosophy is simple-when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing," said Steve Jobs, Apple's CEO. "All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app. We believe that this innovative subscription service will provide publishers with a brand new opportunity to expand digital access to their content onto the iPad, iPod touch and iPhone, delighting both new and existing subscribers."

Publishers who use Apple's subscription service in their app can also leverage other methods for acquiring digital subscribers outside of the app. For example, publishers can sell digital subscriptions on their web sites, or can choose to provide free access to existing subscribers. Since Apple is not involved in these transactions, there is no revenue sharing or exchange of customer information with Apple. Publishers must provide their own authentication process inside the app for subscribers that have signed up outside of the app. However, Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app. In addition, publishers may no longer provide links in their apps (to a web site, for example) which allow the customer to purchase content or subscriptions outside of the app.

Protecting customer privacy is a key feature of all App Store transactions. Customers purchasing a subscription through the App Store will be given the option of providing the publisher with their name, email address and zip code when they subscribe. The use of such information will be governed by the publisher's privacy policy rather than Apple's. Publishers may seek additional information from App Store customers provided those customers are given a clear choice, and are informed that any additional information will be handled under the publisher's privacy policy rather than Apple's.

The revolutionary App Store offers more than 350,000 apps to consumers in 90 countries, with more than 60,000 native iPad™ apps. Customers of the more than 160 million iOS devices around the world can choose from an incredible range of apps in 20 categories, including games, business, news, sports, health, reference and travel.

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork, and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple is reinventing the mobile phone with its revolutionary iPhone and App Store, and has recently introduced its magical iPad which is defining the future of mobile media and computing devices.