30% Cut from Subs Rhapsody blasts Apple's in-app

Music streaming service Rhapsody today blasted the decision of Apple taking a 30% reduction for all subscriptions in-app and content revenues, saying that the move makes it unsustainable business model of the iPhone.

The Seattle-based company was the first to publicly express his displeasure with Apple announced rules changes, which not only reflected the 30% cut of revenue, but also require content sellers delete links to sites selling out-app and offer equal or lower prices for in-app purchases as they do for subscriptions or content purchased elsewhere.

In a statement yesterday, Jon Irwin, President of the Rhapsody subscription plan, called Apple "economically unsustainable". Elaborated that in an interview today.

"We have to pay the rightholders, publishers and music labels, of our content," said Irwin. "With all taxes that go off, [added] Apple 30% will exceed revenue on our product. Is not a matter of making less money, it would be zero profit. "

Although Rhapsody could continue to rely on his current business model--not solicit subscriptions within its iPhone app, but instead adds members through your own website--Irwin said that the purchase of a single click to in-app proposed subs gives Apple a big edge with clients.

"If, as a result our marketing, a customer is our app, then uses the single-click subscription option within the application, Apple Gets 30%. This is what just doesn't make sense, "said Irwin.

"Our position is that Apple does not deserve a take, they provide a valuable service [App Store], but there is a fair value that they should receive for this," said Irwin. "What's under discussion here is what it is."

Irwin refused to specify a percentage that would embrace Rhapsody, but when asked about Google One Pass, the subscription payment model just announced Android-based creators, Irwin said, "that is much better than 30%. That is sustainable for us. "

Google has not announced what it would be off the top for purchases-app subscription, but several sources including the Wall Street Journal, said Commission of Google will be equal to 10%.

Currently, Irwin said that Rhapsody is charged between 2.5 and 3.5% in transaction fees by credit card when it bills monthly subscribers.

Irwin seemed to applaud the subscription model of a click, in application of Apple, but continued to hammer the impracticability of the size of the piece of cake, that the company of Cupertino, California, is demanding.

"One-click subscription is the App Store is to bring value, but the content and app providers are what adds value to the iPhone and iPad," said Irwin. "Is a cooperative relationship. But the content and the costs of distribution channel of Apple product that we sell is lower. So the question is: ' how can we work together? ' "

Irwin not commenting if Rhapsody is considering pulling her iPhone and iPad apps from the App Store and refused to comment on whether he thought that Apple was changing the rules of the game.

Rhapsody has launched its iPhone app in September 2009 and updated in April 2010 to allow subscribers to listen to their playlists when your smartphone is not connected to a cellular network or Wi-Fi. Although the application is not designed for big screen of the iPad, runs also on Apple Tablet PC, as well as on the iPod Touch.

In its statement yesterday, said Irwin, "we will collaborate with our peers in the market to determine a proper legal and working on this latest evolution," a comment that some interpreted as a threat to sue Apple.

Today Irwin has refused to comment further on possible legal action. "But I am responsible for delivering value for shareholders, so I need to look at all options," he said.

An antitrust lawyer said today that a move to the judges probably would fail.

He was in contact with other subscription music services, including U.K.-based Spotify, to discuss a response to the new rules of Apple, Irwin confirmed. "Each of us is in the same boat," he said.

Irwin also said that he hopes to have further discussions with Apple or even music labels, their rates. "We want our customers to access their music everywhere they want, when they want," said Irwin. "But Apple's new rules make it very difficult, not impossible to do business".

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and General technology breaking news for Computerworld. Follow Gregg on Twitter at @ gkeizer or subscribe to Gregg's RSS feed. His e-mail address is gkeizer@computerworld.com.

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