Commentary

Apple Unveils 'Offer Codes' For In-App Subscriptions, But Will Publishers Use Them?

Apple soon will give publishers another way to offer subscriptions to readers who use apps to read newspapers and magazines on their iPhones and iPads. The company last week announced the upcoming rollout of "offer codes"  that publishers can create for a variety of promotional efforts.

The codes are a sequence of digits that readers use to unlock offers, such as discounted prices on app subscriptions or free access to an app for limited period. Publishers can generate as many 150,000 codes a quarter for each app they have in Apple's App Store — and use them in various ways.

For example, a publisher could generate a batch of codes and send them in emailed offers to readers, or print them on gift cards to give to attendees of live events. It may be possible for publishers to test the response to their promotional efforts by generating different single-use codes for different campaigns.

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The major drawback from app subscriptions is the hefty fee that Apple charges on transactions processed through the App Store. The company collects a 30% commission on the first year of an app-based subscription, and 15% a year after that.

Publishers have to decide whether it is worthwhile to accept those fees for the sake of providing readers with an in-app experience instead of directing them to the mobile web -- where they don't have to pay the "Apple tax."

For example, The Wall Street Journalapp on my iPhone currently offers digital access for about $37 a month after trying the app for $1 during the first month. Presumably, Apple collects almost one-third of that payment to help cover the costs of running the App Store.

When I visit the WSJ's mobile website, I see an offer for $19.50 a month after paying $1 for the first two months, or about half the price of the app subscription. The newspaper would collect about $20 a month from either my web subscription or the App Store during the first year, according to my rough calculation.

Apple's fee structure has become a contentious issue for publishers, which don't have much incentive to steer readers to the App Store and make them pay a higher price for a subscription. Last month, Digital Content Next, a trade group representing publishers such as The New York Times and The Washington Post, asked Apple to cut those fees on publishers to match a deal it had offered Amazon.

Publishers also are concerned about Apple's plan to require apps to obtain opt-in consent to track the online activities of people who use its devices. The coming change to the software that runs devices like the iPhone and iPad is likely to limit the ability of publishers to sell targeted advertising.<

It's too early to tell whether Apple's offer codes will help publishers to gin up subscriptions to their apps. Instead, publishers are more likely to point readers to their mobile sites, where they keep a bigger share of digital reader revenue that has grown more significant for publishers faced with declining ad sales.

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