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PayPal exec says publishers won't embrace Apple's iPad 2, App Store subscriptions

Sam Shrauger

Apple is set to unveil the iPad 2 on March 2, and the next-generation tablet is widely expected to carry on the blockbuster sales success of the first model.

But Sam Shrauger, PayPal's vice president of global product and experience, isn't so sure the next iPad will be a hit with content publishers, particularly due to the 30% cut Apple is taking in its new App Store subscription service.

"Somehow I doubt it," Shrauger wrote in a company blog post on Wednesday. "We have heard from a number of publishers since last week who are outraged at Apple's 30 percent cut."

If Apple's subscription service doesn't pan out, that might not be so bad for its competitors -- which among them is PayPal, owned by EBay.

PayPal offers a service of its own for publishers and takes a 5% cut of revenue.

"Publishers need an easy way to monetize their content while also retaining information about their readers across multiple platforms," Shrauger wrote. "With Apple's subscription service, publishers lose both these controls and have few options. They can charge consumers more, withdraw from the Apple apps store or continue status quo, knowing they'll make far less money. This simply doesn't work in the long run."

Apple's App Store subscription plan requires any content publishers who want to sell subscriptions through the iTunes and iOS ecosystem to charge the same price or less through Apple as what is offered elsewhere. All subscriptions sold though Apple leave the tech giant with a 30% cut of that revenue.

If a subscriber signs up for a magazine, newspaper, video series or music outside of the iOS ecosystem, they can still access content in an iPod Touch, iPhone or iPad app and Apple will take no share of that revenue since the subscription originated outside of its service.

PayPal's gloomy outlook on Apple's terms with publishers isn't the first.

On Monday, Arc90, the maker of the Readability Web app, posted a letter to Apple stating its displeasure with Apple's 30% cut for subscribers, which it said resulted in its iOS app being rejected.

Arc90 charges a subscription fee for its Web app of at least $5 a month and for itself, it takes 30% of revenue -- the same cut Apple would take.

The Department of Justice and the Federal Trade Commission are investigating the legality of Apple's new App Store subscription service, and content publishers aren't excited about the policy of subscribers having the option of not sharing their personal information with publishers.

Shrauger wrote that PayPal's stance is that payment models should be determined by publishers, not those providing the platform to publish content.

"Our message remains the same, one device or operating system will not win out," he said. "Ultimately the consumer is going to choose. History has shown time and again that the open Web, where consumers can pay for content they want, in the way they want, across multiple devices, will win out over the walled garden that Apple offers for digital content providers."

But that doesn't mean that Shrauger or anyone else at PayPal is abandoning Apple products.

"I'm not saying that I won't be in line to get a new iPad," he wrote. "All I'm saying is that publishers deserve a better deal and consumers deserve the choice to get their news in the format they desire. I can't wait to see what's unveiled at the Yerba Buena Center in San Francisco on March 2nd."

RELATED:

Apple sends out iPad 2 invite for March 2: 'Come see what 2011 will be the year of'

Readability maker Arc90 isn't happy with Apple's App Store subscription plan

-- Nathan Olivarez-Giles

twitter.com/nateog

Photo: Sam Shrauger, PayPal's vice president of global product strategy. Credit: PayPal

 
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