In a fairly dramatic announcement on Wednesday, Apple executive Phil Schiller said that the company is making some dramatic changes to its multibillion-dollar app store. The most significant of these changes is that Apple will now support subscriptions in a much wider range of apps than it did before, and it will be giving the publishers of those apps a bigger cut of the proceeds.
From a media company perspective, this amounts to the classic glass half-full, glass half-empty kind of deal. On the one hand, it will be easier and more appealing for publishers to offer subscriptions than it has ever been before. Under Apple’s new terms, if a user remains a subscriber for more than a year, the publisher gets to keep 85% of the revenue instead of the 70% they used to get.
As the Nieman Journalism Lab points out, however, one downside of this new arrangement is that it is likely to trigger an explosion of new subscription-based apps. In the past, only media companies were allowed to offer recurring payments, but now every gaming app and entertainment service and workplace productivity app on the planet is going to start offering subscriptions. As Joshua Benton notes:
That means that many, many more apps will likely start charging for subscriptions—including productivity apps for devices like the iPad Pro, for instance, and lots and lots of games. In that environment, I wonder if consumers will see a news app as “just one more monthly bill.”
In a way, this is an extension of the existential problem many newspapers and magazines have when it comes to paywalls. Every publisher out there wants to think that they will be the one app that their faithful readers sign up for—or at least that they will be in the top five. But there are so many other media outlets and entertainment services like Netflix clamoring for their attention and asking for a monthly fee. How many of those things is one person going to sign up for?
This is the dilemma of an increasingly fragmented media environment in which cable TV is getting unbundled into dozens of competing services such as Amazon Prime Video (AMZN), Hulu, and Watchable, and the news and information market consists of thousands of newspapers, hundreds of magazines, and an increasing number of smaller players such as The Information, Quartz, or Ben Thompson’s Stratechery. One problem is who has time to watch or read all of that, and the other is who can afford it.
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As we’re talking about the Apple (AAPL) app store (and the Google Play store because Google (GOOGL) appears to be matching Apple’s move), it’s worth remembering that—statistically speaking at least—no one is going to download your app. Recode recently declared that “the app boom is over,” and while that might be a bit of an overstatement, it’s probably not that far off the mark.
According to research from comScore (SCOR) in 2014, more than 65% of smartphone users in the United States downloaded an average of zero apps per month. Zero.
Other studies have shown that the average smartphone user has about 30 apps on his or her phone but only uses three or four of them on any regular basis. A recent survey from Nomura said that even the top 15 app publishers saw downloads fall by an average of about 20% year over year. Call it app fatigue or whatever you like, but it is happening.
So if you’re Snapchat or Uber or Facebook (FB) or YouTube, your chances of having lots of people downloading and using your app are pretty good. If you are almost anyone else—and especially if you are a small media outlet—you are climbing a vast mountain of indifference. You may be getting 85% of whatever money comes in through those app subscriptions, which is great, but it’s probably not going to make the difference between life and death for you or your business.
That doesn’t mean you shouldn’t have an app, although some media companies are making that decision for a variety of reasons. Even if you have a small audience of die-hard fans using and paying for your app, that’s still a worthwhile relationship, and something you can build on. But if an app (or a paywall, for that matter) is your only strategy for growth and revenue generation, you’re probably doomed—unless you happen to be the New York Times or the Washington Post.