One of the biggest Apple stories to land last week was Apple’s announcement that it plans to take a 30% cut of all app subscriptions that originate from within the iOS ecosystem
Our philosophy is simple,” Steve Jobs explained. “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.”
Apple’s 30% take is especially worrisome for music subscription services who already operate on slim margins thanks to the enormous royalties they dole out to record labels and publishers. Rhapsody last week said it was contemplating legal action against Apple while Last.fm founder Richard Jones theorized that Apple was attempting to squeeze out existing subscription services to pave the way for its own subscription service in the future.
In light of last week’s controversy, MySpace co-president Jason Hirschorn recalled a story where, as Chief Digital Office at MTV, he pitched Steve Jobs the idea of iTunes subscriptions with an MTV tie-in. Jobs response? “Jason, you are a nice guy but all your ideas are wrong.”
It was me, Van Toffler (president of MTV Networks Music Group), Tom Freston (CEO of MTV-parent company Viacom), and Jimmy Iovine (music producer, chairman of Interscope-Geffen). It was Jimmy who introduced us to Jobs, and we flew up to Pixar to go meet him. I’m a product guy, so it was thrilling for me. If you’re a product guy, Steve Jobs is the guy you want to meet. He was incredibly gracious and nice.
We had been thinking up ideas about how we could work with Apple…So, I give him my views on the future of music, and I was always big on subscription services. He listened and then he said, “Jason, you seem like a nice guy, but your ideas are all wrong.” He was so blunt and funny, the whole room burst into laughter.
“I remember looking at the economics,” Hirschorn recalls, “and the amount of money Apple might have made on a subscription service would have been less than the money they were seeing on download revenue per user at the time.”
On a number of occasions, Jobs has explained that people want to own their music, not rent it. A fair point, but with music today available via all sorts of avenues (e.g YouTube, Pandora), the notion of subscribing to music for a finite period of time isn’t as outlandish as it was even 3 years ago.
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