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Rhapsody bristles at Apple subscription grab

I'm just a poor boy from a poor family ...

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Apple's subscription scheme, introduced yesterday, extends to all online content, not just newspapers. Movie and music services and ebooks must pay a tithe to Apple, if they're deemed to be bringing in new customers via the Jobsian platform. Those customers pay a recurring fee.

"Our philosophy is simple: when Apple brings a new subscriber to the app, Apple earns a 30 per cent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 per cent and Apple earns nothing," Jobs said in a canned statement.

There's just one slight problem. For many retailers, the marginal costs are unavoidable: the margin is much lower than 30 per cent (WalMart's margin is under 4 per cent). So gaining new customers on the iPlatform is crippling, and ultimately prohibitive.

Rhapsody has been the first to call foul.

"An Apple-imposed arrangement that requires us to pay 30 per cent of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable," the company said in a statement. "The bottom line is: we would not be able to offer our service through the iTunes store if subjected to Apple's 30 per cent monthly fee vs a typical 2.5 per cent credit card fee."

Rhapsody continued: "We will continue to allow consumers to sign up at www.rhapsody.com from a smartphone or any other internet access point, including the Safari browser on the iPhone and iPad. In the meantime, we will be collaborating with our market peers in determining an appropriate legal and business response to this latest development."

If your costs are largely fixed – say if you're an insurance company – then 30 per cent cut may be tolerable. It depends how badly you want that new business.

But magazine and newspaper publishers have only themselves to blame. They collectively shunned Project Alesia, a common payment platform, because they didn't trust Murdoch, who wanted to share the technology with rivals. ®

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