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Google Subscription Service Undercuts Apple

With Google Checkout, publishers will be able to sell digital content on the Web and on devices using a variety of business models.

One day after Apple announced rules for selling subscription-based content in iOS apps, Google unveiled an alternative payment model that offers more flexibility while requiring a smaller share of publisher revenue.

Google CEO Eric Schmidt introduced his company's content plan, called Google One Pass, at Humboldt University in Berlin, Germany on Wednesday. Whereas Apple's plan addresses specific requirements for selling subscription-based content through iOS apps, Google's One Pass enables several business models: subscriptions, metered access, "freemium" content and single article sales.

One Pass will be available for mobile apps, and also for Web sites.

Another difference is the cost of the respective services: Apple requires 30% of transaction revenue while Google requires 10%.

IDC analyst Al Hilwa sees Google intensifying its competition with Apple by offering greater flexibility and openness, at the possible expense of quality control. "The offering of subscriptions in both services highlights how the bar is rising in terms of the richness of monetization schemes and other eco-system features that the various application platforms are building," he said in an e-mail. "There is clearly a race to build the richest, strongest eco-system to attract apps and content."

Amid speculation that Apple's requirements could draw antitrust scrutiny, Rhapsody, a music subscription service, condemned Apple's plan and praised Google's. "[A]n Apple-imposed arrangement that requires us to pay 30% of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable," said Rhapsody president Jon Irwin in an e-mailed statement. "The bottom line is we would not be able to offer our service through the iTunes Store if subjected to Apple's 30% monthly fee vs. a typical 2.5% credit card fee."

The music service finds Google's offer more appealing. "We think that Google's proposed model is much more in alignment with what our business can support," a company spokesperson said in an e-mail. "We are very committed to the Android platform, which has been extremely successful for us, and are looking forward to working with Google to continue to bring the Rhapsody experience to Android devices."

"Our goal is to provide an open and flexible platform that furthers our commitment to support publishers, journalism and access to quality content," said Lee Shirani, director of business product management for Google Commerce, in a blog post.

Google appears to acknowledge the possibility that Apple may not allow One Pass as a payment mechanism in iOS apps. The One Pass FAQs specify that the service will be available "where the mobile OS terms permit publishers to access the Web via the app for Google One Pass transaction or authentication services."

Access to customer data remains an issue for publishers considering Apple's and Google's offerings. Apple will provide some customer data on an opt-in basis. Google will also provide some customer data and will allow customers to opt-out from receiving publisher marketing offers.

"Our goal is to provide a platform that allows publishers to sell their content to their readers," a company spokesperson said in a statement. "So that they can manage their relationships with their customers, we share some data, including the customer's name, post code and email address. People using One Pass to purchase articles are always informed of the data being shared with publishers, and can choose not to receive marketing materials from publishers."

While Google designed One Pass for periodicals, such as news and magazines, it acknowledges that its payment system "can be used for many other types of content." This raises the possibility that Android developers may try to implement Google One Pass, with its 10% fee, as their primary revenue stream and forgo charging for their apps entirely, to avoid the 30% for selling an app in the Android Market.

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