Apple has a crazily powerful digital store, used by hundreds of millions of customers. But if you want to sell something there it will cost you: In almost every case, Apple keeps 30 percent of the purchase price on whatever its users buy.
Beats updated its iPhone app today, and now lets users subscribe to the $10 a month service from within the app, using iTunes’ billing system. That means Beats, and the music labels that license their stuff to the service, will give up $3 a month on every subscription sold through iTunes.
Beats CEO Ian Rogers says the decision to sell within the Apple app was fairly straightforward: More than half of Beats users use iPhones, and it’s very hard to get an iOS user to subscribe if you don’t sell in-app.
Two other music subscription services — Rhapsody and Rdio — have also agreed to sell subscriptions within Apple’s app, though Rdio raised the price for for in-app subscriptions from $10 a month to $15 a month to accommodate Apple’s tariff.
But Spotify, which is much larger than all three of the services, hasn’t made the move. Spotify does have a free, ad-supported tier available on its mobile app.
Selling in-app subscriptions is “what you do when you want subscribers,” Rogers said. “If you don’t care if people subscribe or not, and you’ve got a free product, maybe then you wouldn’t do it.”
The move may raise questions about Beats’ performance since launch. Last month Bloomberg reported that Beats was claiming, in investor pitches, a staggering 70 percent conversion rate among users trying the service via an AT&T promotion. But industry chatter is that Beats’ overall numbers aren’t blowing anyone away.
Rogers says his company is doing fine. “We’ve had far more people try the product than projected, ” he said. “Clearly the marketing works. The conversion rate on the AT&T plan is off the charts. It’s safe to say the biggest problem is coverting iOS users, and we’ve just fixed that.”
Beats should also have an iPad-specific version of its app available soon, Rogers said.
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