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App Store Services & Subscriptions on the Rise

December 15th, 2016

App Store Services & Subscriptions on the Rise
David Quinn

by David Quinn

VP of Strategy & Partnerships at Gummicube, Inc.

Subscription-based services are growing on the App Store, and Apple has made no secret of their wish for more developers to start offering them. In an October earnings call, CEO Tim Cook detailed the company’s record-breaking Services growth in the fourth quarter front and center. “We’re thrilled with the customer response to iPhone 7, iPhone 7 Plus and Apple Watch Series 2, as well as the incredible momentum of our Services business, where revenue grew 24 percent to set another all-time record.” Those Service revenues contributed to “a new record [in operating cash flow] for the September quarter” according to CFO Luca Maestri. In other words, App Store Services are here to stay, and they’re only going to become more commonplace as the market matures. The success of Services on the App Store has already led Apple to incentivize their inclusion in apps. Earlier this year, Apple announced they would begin taking a smaller revenue split from Service subscriptions as long as customers maintained their subscription for over a year. After one year of consistent subscription, the traditional 70-30 revenue split will lower to 85-15, incentivizing more developers to offer quality subscriptions through their apps. Some developers are already taking advantage of the change. Major services like Netflix and Spotify are no doubt anticipating the benefits of a massive increase in revenue from a loyal subscriber base. However, subscriptions are no longer limited to services. Just look at Supercell’s Extra Builders service for Boom Beach. To quote their app description as of this writing, “Extra Builders is a monthly subscription service that allows you to build or upgrade two buildings at the same time. Extra Builders cost 2.99 USD/month (or local equivalent”. At a low cost of $2.99/month, it’s a relatively harmless buy for hardcore fans of the game that offers a real, tangible in-game benefit. Expect to see much more of this spreading to games in the future as developers attempt to incentivize users to start up a subscription in addition to (or even in place of) paying for individual in-app purchases. It’s not hard to see subscription-based shopping networks, dating apps and other services flourishing as Apple continues to incentivize subscription purchases, too. As the App Store continues to mature, consider the market your app services and how your app can best approach monetization. If a subscription makes sense for your app, it could open you up to a growing new alternate revenue source.

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