Apple is turning Japanese

The announcement of Apples in-app subscription has created an uproar amongst content creators and received a lot of coverage in the press. To summarize it, Apple generally wants 30% of all the revenues generated in and through applications in its online store. This now also includes iOS subscription services to magazines, newspapers, movie rentals and other content offers.

What might seem as a surprising move is just a logic step towards an even more closed ecosystem. Very much like what we have seen here in Japan over 10 years ago. Apple is and has been an avid learner. It is safe to say that already a long time ago Apple (and in a sense Google too) took a lot of inspirations from the i-modes business model: The iPod and its integration into iTunes, providing a vital ecosystem for developers and content owners, controlling the hardware and the service, one-stop payments, etc.

Lessons learned from Japan

Interestingly withy the start of i-mode in Japan, all paid applications in the official menu were only available as subscription services. This means that even for just downloading a game the user had to subscribe to the game service and pay a monthly fee ranging from around 100 – 500 Yen. For content providers this made it possible to have a constant stream of revenues right fro the start. And as users are often reluctant (or lets call it too lazy) to cancel subscriptions that monthly revenue tends to last for quite a while

So looking back at Japans past, Apples in-app subscription approach is nothing new. It has been one of the cornerstones of success of the mobile ecosystem.

The introduction of the iPhone and other smart phones in Japan recently started to threaten this subscription based business model as suddenly application fees only needed to be paid once and even upgrades came for free. Not to mention the new freedom for independent developers allowing them to be part of the mobile revenue game even just as a “one-man-show”. It brought a new fresh open wind to the Japanese mobile business world. But how things look right now, Apples business model is more and more turning into what i-mode was all about right from the start: a tightly vertically integrated and controlled solution, expanding into new hardware platforms with a shared content and business platform, relying heavily on subscription based content offers.

Don’t be greedy

There is only one important difference: NTT has always been less greedy. Apples demands quite a big share when it comes to splitting revenues. 30% is a lot if we compare it to  i-mode. NTT only asked for 9% of the revenues.  And this was one of the main reasons that i-mode became an attractive platform for content owners and developers. So right from the start there was enough interesting content to drive users to the platform. In the end what makes a platform successful depends very much on these developers and content providers. They turn a technical gadget into a joyful experience. Content sells.

While this seemed to have turned out fine for Apple in the past now things start to shake up. Already application developers and content announced they might not give in to Apple this time.

30% is a lot to ask for. If you have something like  “mobile ecosystem monopoly” this might work out for a while but in the end it bites the hand that feeds you: content providers.

Our advice on this: Never be too greedy. Be willing to share. That is what it is all about. Keep you partners and customers happy and you keep everybody happy.

This entry was posted on Monday, February 21st, 2011 at 9:47 pm

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