Apple's new subscription rules could face legal challenge

Posted by Emma Woollacott

Apple may face a legal fight over its plans to introduce a newspaper subscription service through its App Store which would see it raking off 30 percent of revenues.

The deal - the same as it uses for Rupert Murdoch's new online newspaper, The Daily - would see publishers setting the price and length of a subscription, which would then be processed by Apple.

"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," says Apple CEO Steve Jobs.

"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."

But this is deeply unsatisfactory, says music subscription service Rhapsody.

"Our philosophy is simple too – an Apple-imposed arrangement that requires us to pay 30 percent of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable," says the company in a statement.

"The bottom line is we would not be able to offer our service through the iTunes store if subjected to Apple’s 30 percent monthly fee, versus a typical 2.5 percent credit card fee."

It says it plans to talk to other firms about 'an appropriate legal and business response'.

Even before the new rules were announced, European newspaper publishers were warning Apple that they might not be acceptable.

The European Newspaper Publishers’ Association (ENPA) last week raised concerns that the rules might bar publishers from selling subscriptions on their own websites. While Apple hasn't in the event  gone quite this far, it's still likely that the Association will object, given that its members also wanted the freedom to set different pricing and payment methods.

It's possible that a legal challenge could center on anti-trust issues, as Apple could, rather easily, be argued to have a dominant position in the market.

* See also: Apple's App Store Subscriptions Poses Issues for Cloud-Based Music Services (SmallCloudBuilder)