

Tell HN: Why I'm ecstatic at Apple's subscription model. - nika

The AppStore is not an easy-money kind of environment. It rewards hard work and quality, and consequently we've been able to do relatively well there. But as it has evolved it has become clear that low app prices are a permanent fixture.<p>So, for the past several months I've been working on moving our bread and butter app from a "Pay us $4 and use it forever" to a SaaS model.  We'll make the app free, and give people 3-4 months of cloud service to go with the app. (This cloud service is a genuine value add for the app, so we're shifting models by adding a fundamental new feature. Anyone who doesn't want it will have the functionality they have now.)<p>Then for the ones that like our App and stick with it-- and we get about %20 retention with some really fanatical users now-- the cloud service is eventually a $1 a month subscription.<p>So, instead of making $3 per customer, we'll be making $8.40 per year for customers we retain.<p>Further, as a free app we'll get at least an order of magnitude more customers, which means if the retention rate drops by half we'll have 5 times as many long term users as we're getting now. Many people don't try our app because we're forced to collect the entire lifetime customer revenue before they even get a chance to use the app.<p>This is a much better model for apps where it makes sense.<p>Why are so many people complaining?  Generally, it seems those who are complaining are not making their own product.  I can understand how reselling something another person has made means tough margins.  (Which makes me wonder how these book publishers are doing on Amazon where they take %70 in many cases, and only go down to %30 if they get to set the price.)<p>I looked at the Amazon Android Store terms the other day.  They are similarly bad.  The wording is vague but it looks like Amazon will pay you between %20 and %70, and <i>they</i> get to set the price. Which means if Amazon wants to do a $1 sale on your app to promote their store, tough for you.<p>But I also think the publisher model is on the way out- and I say good riddance!  These are essentially middle-men and they don't make sense in the age of digital distribution, in most cases.<p>I used to work in the game industry for a studio with a deal with the largest independent games publisher in the country.  If I make an iOS game, I don't need to find a publisher, I don't need to appease the publisher producer, or any of that crap.  I've been down that road. The game industry is broken because of the power that publishers have. (Or it was broken when I left.)<p>I am very happy that all I have to do is just upload my product to Apple and they take care of the rest.  Apple takes %30, but handles distribution, updates, customer service, taking credit cards, does a decent cross sell and will send me good marketing if I happen to get featured.   That's worth %30 to me.<p>This is a new model for iOS apps, and it is great news for iOS developers.
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kleinsch
I agree with you 100% that allowing recurring subscriptions is great news for
iOS developers developing applications with certain usage profiles.

The people who are complaining are people with low margin businesses, for whom
giving up 30% of a sale will put them at a loss on every sale. EBook sales,
music sales/subscriptions, and video streaming don't operate on huge margins
like Saas does, they operate on tiny margins. Apple is also prohibiting people
from raising the price of their products to account for the tax, so for anyone
whose margins are less then 30%, the app store will basically be closed in a
month or two.

In short, app store subscriptions are great for your business - good for you!
Use it and get rich. The terms are lousy for other businesses, who are going
to have to pull their apps from the app store.

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ebiester
"Why are so many people complaining? Generally, it seems those who are
complaining are not making their own product. I can understand how reselling
something another person has made means tough margins."

Look at Mog. They are making a quality product and also providing aggregation
of others' products. Having a subscription to each musician's content would be
pointless. It's the search, the ability to make a playlist of music from all
sorts of areas that makes the product worthwhile.

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minalecs
what is your app ?

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anonymous246
I'm sorry, it's not clear to me why you're "ecstatic".

Are you thinking that your SaaS strategy won't work without the Apple tax?

Second, a lot of people have pointed out that taking 30% of _ALL_ subscription
revenue just sounds unconscionable. Computers/Internet were supposed to reduce
friction in commerce, not add a 30% tax.

It seems to me that you're OK leaving a huge amount of your fruit of your
labour on the table. I hope there aren't too many people like you. Many won't
be "ecstatic" at this offer.

And for the record, I think Amazon terms are just as bad, if not worse.

~~~
nika
There is no mechanism currently on the AppStore for doing a SaaS strategy for
Apps. In app purchase is set up for one time purchases, not for recurring
subscriptions. This is a brand new feature, and it dovetails right in with the
SaaS business model.

Apple doesn't take %30 of "ALL subscription revenue" though people seem to
keep saying this because it plays into the "apple is taxing us arbitrarily"
meme.

IF I wanted to, I could set up a webpage with paypal, and charge people
directly, and save %30, minus paypals fees. However, paypal has proven itself
to not be a trustworthy company in the past so there's an additional cost
there, but that involves a lot of setting up servers, dealing with customers,
etc. There really is a lot of effort required to sell things directly to the
customer, there are liability issues, and if I were to outsource all that work
I'd be buying several services that ultimately would take around the same
total cut.... and I'd be more stressed on top of that.

All that stress and time is energy that would be better spent on additional
features or products. In fact, it would produce much higher returns because it
is more highly leveraged. The effort that requires on the current app is just
maintaining the status quo (I think there are zero customers who would rather
pay by paypal than iTunes).

I find it interesting that you say I'm leaving "a huge amount of the fruit of
[my] labor on the table", as Apple is freeing up a huge amount of time and
energy to improve the app or do new products.

Look at the alternatives- I could give the app away free on android and let
google advertise on it. How much would I be giving up in "google tax?" %60.
And they only revealed that it was %60 _after_ Apple made it public that they
give developers %70. Who knows what it has been for the past decade before
google had to be public about it. Plus, I _know_ how many copies of my app are
sold, I don't know how many clicks google disallows. Sure there are competing
models, or I could do paypal with an android app (this would at least have the
advantage of selling into all the countries paypal supports but not google
checkout.) but again, that is time I have better use for.

OR Amazon which will make me give up price control and possibly %80 of my
revenue. These terms are not "just as bad" they are far far worse.

And finally, before this, I was paying %30 on the initial sale in the
Appstore. Nobody seemed to be complaining when Apple originally introduced
that model-- and for good reason-- before that Carriers controlled app sales
on phones and were much worse than publishers, taking %90 in many cases.

Apple has greatly reduced the friction, and has added a new feature that lets
me offer a better, more profitable model while simultaneously capturing many
more customers.

It's a no brainer.

~~~
minalecs
"ot of effort required to sell things directly to the customer"

I think its a misconception that having an app on the app store is automatic
success. The difference is that if you app doesn't go viral (or apple never
puts your product in a curated list) on the app store, then what other
channels do you have. Selling things directly for a lot of apps also has to be
done as well or figuring out different marketing strategies and to me this is
no different than selling directly to the customer.

