Thursday, February 17, 2011

Google trumps Apple on subscription plan

It’s rare when the sharpest marketer in Silicon Valley stumbles, but Google scooped Apple by introducing a subscription service that hits the sweet spot for publishers.

Just one day after Apple unveiled a gotcha-laden iTunes subscription service for publishers of newspapers, magazines and other media, Google yesterday stepped forward with a competing system that presciently obviates the most troublesome shortcomings of Apple’s plan.

Coincidence? Perhaps. But impressive nonetheless.

Like the Apple plan, the new Google system, which is called One Pass (not to be confused with the Continental Airlines frequent-flier program of the same name), allows publishers to sell subscriptions for any price and any duration.

But the similarities end there.

If the key to successful marketing is knowing your customer (and it is), then Google beat Apple at its own game by introducing a subscription system that gives publishers the three things they crave most:

Complete control of their product offerings, a direct connection with their subscribers and a far bigger share of the revenues than Apple has proposed.

Here’s how the plans compare:

:: While the Apple system works with iPhone and iPad apps downloaded from iTunes, Google says its service will work on any web or mobile platform, so long as the mobile platform permits “transactions to take place outside of the app market.” The quote is a not-so-subtle dig at the walled garden Apple has put around its mobile apps but it also exposes the biggest potential drawback in the Google plan, which is that Apple may block the use of the Google system on its products.

:: While a subscription acquired through Apple will be valid only within the carefully circumscribed Apple ecosystem, a subscription acquired on One Pass will be recognized at a any digital destination a user happens to go. If you sign up for One Pass at Website A, you can use the same account to purchase access to Mobile App B. In other words, you need only one account, one user name and one password.

:: While Apple puts itself in the position of having the primary relationship with the subscriber, One Pass puts itself in the background and lets the publisher communicate directly with the sub. Apple will let consumers voluntarily disclose their names and email addresses to a publisher, but the opt-in approach a major drawback for newspapers and magazines that need to know the identity of the people they count in their circulation audits.

:: While Apple seeks 30% of the transaction in most circumstances, Google is taking only a 10% cut.

How could Apple have stumbled so badly? In a word, hubris. Evidently beguiled by the steady stream of successful high-tech confections it has produced, Apple seems to have gotten the impression it can call all the shots.

Although many publishers are peeved at Apple, it may not be too late for this abundantly creative company to craft a more palatable solution. After all, these are the folks who turned the ugly-duckling Newton into the soaring swan we know as the iPhone.

Regardless of how the Silicon Valley sumo match plays out, the biggest problem the publishers and the tech giants face is whether a substantial market for paid content will emerge at all.

As discussed here, there are powerful reasons to wonder how much content can be corralled inside a pay wall after ranging freely on the web for more than 1½ decades.

11 Comments:

Blogger Stephen said...

This will put more power into the hands of publishers. Look... people love to throw out the line that "news wants to be free". Buts go back ad principio. Let's go back to the original quote at the 1984 hackers convention-

"On the one hand information wants to be expensive, because it's so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other."

News wants to be valuable AND to be free. The masses only remember the free part because THEY THEMSELVES want the information to be free. The information itself wants both. To say that free news will totally win is totally idiotic. The NYTimes paywall will be a lot more successful than people think. The news itself wants it that way. If you crunch the numbers on murdoch's Times of London transition to paywall, he's basically breaking even at this point and likely still gaining customers.

7:19 AM  
Blogger Molly said...

It's good that the google service can be used on multiple platforms, but right now the iPad seems to offer the most bells and whistles and if it's blocked on that it could face challenges. The idea of having it cross multiple sites with one username and one password is great though. I'll be interested to see Apple's response to this. Do they cut their revenue from it in hopes of attracting more publishers?
However there's still a problem no matter what service provides it - it's still a content pay-wall. How okay will consumers be with this?

3:28 PM  
Blogger Marc said...

The only problem with the Google Plan is that people need to buy Google powered devices, and there is no sign of an iPad killer, or even something that people are actually going to buy- and they are not buying the device for the ability to buy a subscription to a specific magazine. As long as there are enough Magazines and Newspapers available and there will be since the market is too big- then those who do not play by Apple's rule will likely be left out. Publishers might like certain things but there only chance of getting content inside the pay wall ( and its a small one ) it to ride the tiger. I have so far taken subscriptions to the Economist, the Daily and Popular Science- so we will see

5:17 PM  
Blogger Steve Ross said...

Different devices for different folks. It seems that Android 3 is more user-friendly for people that create content on the road. It may only be 90% as good as the iPad for those who only consume content. Right now, I have to carry a netbook with my iPad. I'd give up a bit of iPad-ness to replace the netbook totally.

I (and publishers) have no idea what hardline consumers of news will settle on, and whether the volume is enough. Most likely, they'll be on both platforms.

I have a web subscription to WSJ on line, and I get the print paper. But I'm on the road a third of the time, and the print paper can't easily follow me (it can, but I have to spend too much time setting it up). So... I'd like to read it on the iPad as an app. But the WSJ iPad app is iPad only. Right now, WSJ can't offer me an attractive package deal. Does anyone think that won't change?

BTW, I helped Belo think through a bunch of new apps at a December workshop (most of the credit goes to Chris Feola and the bright folks at Belo). The apps will be appearing all year. What Belo is doing is not confidential but has not received much notice (except for the flagship app for the paper itself). And this is only the beginning... of a truly new medium, not simply a new delivery system.

7:12 PM  
Blogger Len said...

It seems awfully premature to conclude that Apple stumbled in setting forth its subscription pay plan.

There are multiple constituencies impacted by these new subscription programs. While content providers will certainly be more comfortable with the Google plan, it's less clear whether consumers -- particularly the growing number of iPhone/iPad users -- will prefer the One Pass approach.

The convenience of Apple's one touch app purchasing as well as the greater control over identity privacy will certainly be appreciated by many consumers.

A gut check question is whether content providers will be so opposed to the Apple plan that they pull their content off Apple devices. Good luck with that!

In the end, consumers will dictate which plan will win out in the marketplace, and from that perspective, Apple is sitting in a pretty strong position at this point.

7:23 PM  
Blogger Steve Ross said...

BTW, Google announced One Pass as expected at the huge annual mobile conference and trade show in Barcelona. Apple, knowing Schmidt was to speak in Barcelona, timed its announcement to be ahead of Google's. Pretty much every pub I've read in the past few days presumes Google was catching up with Apple. It was clearly the other way around -- Apple trying to preempt Google.

Two monopolists that have destroyed a lot of value in the industries they claim to be helping. One gets an automatic bye because its products are, well, so cool. iCrap.

7:40 PM  
Blogger Greg said...

Steve is correct. Google destroys value. More, for years they were pushing the crazy idea that all content has to be free, that digital distribution costs nothing, etc. Now, when there are practically a monopoly, they "discover" micropayments and claim to be "helping" content creators monetize their assets. The really funny thing is though, some publishers seem to believe One Pass is a solution. How about all those other micropayment platforms that for years now have been trying to tell the publishing industry that there are solutions? People are sheep!

2:38 AM  
Blogger James Baka said...

Considering apple makes most of its money off of hardware, any deal that could hurt their hardware sales is short sighted--plain and simple. They need these content providers on their side--thats what makes their platform more valuable in the end. To gouge publishers on a deal they can't swallow is major gaff. They are dancing on the line of hubris and stupidity....

4:14 PM  
Blogger Len said...

The tenor of the comments to date on this topic is that Apple is evil/shortsighted and that Google destroys value.

But both of these brands are immensely popular with consumers. So the commentators are thinking more like content providers than consumers in tagging these two brands as evil.

To those who think Apple is shortsighted, time will tell if content providers pull their stuff off Apple's platform. I wouldn't bet on it.

The market will ultimately decide whose content is worth what on which platform. I don't begrudge Apple's moves any more than I begrudge the NY Times for setting up a paywall.

Both sides of this Apple vs. content providers debate are jockeying for control of the value chain. If Apple over-reached, the market will correct them. If not, content providers don't have as much leverage as they thought.

Neither side is evil... they're just trying to make a buck. Consumers will make the call.

6:46 PM  
Blogger Steve Ross said...

Apple may not be evil, but the Justice Dept saw enough evidence of illegal restraint of trade to open an investigation last week.

Under our 100-year-old tradition of antitrust laws, it is perfectly legal to extract as high a price as the customer will bear. But it is illegal to do that by restraining trade unreasonably (that is, by creating or seeking to create a monopoly or cartel by creating artificial barriers to other companies).

My own feeling is that the rise of Android will bring Apple into line, or force Apple to live with vastly reduced market share, before the legal gods can get their day in court.

5:08 AM  
Blogger John said...

Len says:

"But both of these brands are immensely popular with consumers. So the commentators are thinking more like content providers than consumers in tagging these two brands as evil."

Great insight, Len.

1:01 PM  

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