Could Apple's 30% Levy Kill Off Music Subscriptions?

Earlier today I received emails from 2 music subscription services arguing that Apple's 30% levy on content subscriptions would force them out of the iTunes ecosystem. Digital music is a low-margin business. Rights costs typically account for over 70% of revenues and payments, technology and marketing taking most of the rest. So Apple's 30% levy has the potential to instantly turn premium music subscriptions from a low-margin to a negative-margin businesses. Apple's role in premium music subscriptions is key. Subscriptions have spent half a decade failing to break out of a niche. Portability delivered by iPhone apps and the like have given them a new life. So the levy hits subscriptions where it will hurt them most. So if subscription services opt to take their transactions out of Apple's ecosystem, the net result will be less "internal" competition for Apple's music offerings . . . just in time for a new iTunes subscription launch? And all done in an FCC-friendly manner. But perhaps most importantly, this could be an effective pre-emptive strike against an Android music service beachhead on iTunes? So the 30% levy won't kill off music subscriptions, but it will be a major speed bump with the added benefit for Apple of moving some pesky competitor tenants off its front lawn.

Comments

Alternatives?

I'd love for Apple to be charging less for, well, everything... but I don't see any sensible reason why subscription revenue should be treated any differently to any other revenue stream that travels though iTunes.

How does Apple have any option but to charge the same fee that they do for all other transactions? If they charged less for subscriptions than they do for DLC, they are distorting the market and there is even more incentive for all developers to make all Apps subscription-based instead of selling DLC. If they charge less for both than for selling an App, all the developers start giving away their Apps and requiring a mandatory DLC to make them functional.

Subscriptions are not new to the App Store. You could do subscriptions (through Apple) previously but the user had to approve the transaction every month, so the new facility improves the capability for everyone (users don't have to type in a password every month, we get to keep more subscribers). Really, the biggest thing that has changed is that Apple is now starting to enforce the rule about not selling content in an App that doesn't go through iTunes, or rather, have relaxed it so you now just have to provide the option of going through Apple... and we're all assuming that most consumers are going to choose to do that.

Please, focus on Apple's share of all transactions... perhaps they can be pressured into reducing THAT number, which would be good for everyone!

Rj