Amazon crashes digital gate
It looks as if Amazon.com Inc. wants to become a quasi app store similar to Apple or Google’s mobile versions.
Amazon on Monday created a single spot for people to sign up to digital subscriptions from companies including the Los Angeles Times and digital file cabinet Dropbox. For the hundreds of millions of customers who have Amazon accounts tied to their credit cards, it’s easier to buy from Amazon than handing over their personal information multiple times to sign up individually for Dropbox, the New Yorker and SlingTV.
Amazon has previously sold subscriptions such as these, but this is first time it has packaged them in one place for customers to browse and purchase. What Amazon is doing sounds a lot like Apple’s App Store or Google’s Play Store for Android phones.
For now, Amazon’s new digital subscription storefront is a pipsqueak. Amazon announces new products or services all the time that don’t go anywhere. But the potential is intriguing.
The app stores from Apple and Google are hugely powerful gatekeepers for sales of online music, newspapers and magazines, digital video packages, food delivery subscriptions and software. If you’re a company that offers a digital service—particularly ones like Spotify or newspapers that are commonly accessed on smartphones—Apple and Google call the shots that influence your business and stand between your success and failure.
Amazon is giving companies an alternative to distributing their digital subscriptions without relying on the storefronts controlled by Apple and Google.
The new service is part of a trend at Amazon that isn’t broadly understood. Of course everyone knows Amazon is the supreme gatekeeper for products. If your shoes or headphones aren’t sold on Amazon, they don’t exist in the minds of many shoppers. More quietly, Amazon has also become an influential storefront for non-physical things too, like software subscriptions and online TV services.
And indeed, the new digital subscription storefront mimics one Amazon started in 2015 for online video subscription services like Starz and Seeso, a comedy-focused Web video service. Entertainment companies were initially sceptical about Amazon’s motives but changed their minds. For some digital video channels, Amazon quickly became the single largest seller of their subscriptions, according to a report last fall in tech news outlet The Information.
For companies that aren’t well known—and even ones that are—selling subscriptions is a grind. They have to splurge on ads to get noticed, try free marketing tricks or hope that Google or Apple decide to feature them in the highly visible home pages of their app stores.
Subscription services can easily get lost in the cacophony of Amazon, too, but the company can also suggest that customers who buy a book of New Yorker cartoons also purchase a digital subscription to the magazine. Amazon is good at selling subscriptions to its own Prime shopping club, which analysts estimate has 60-70 million members, and it could bring that expertise to bear to sell outsiders’ subscriptions, too.
The real intrigue is whether Amazon would change the rules of the distribution game if it can join Apple and Alphabet’s Google as the gatekeepers for all sorts of digital goods. For companies that opt to sell digital subscriptions through Amazon, it is offering similar revenue sharing as Apple’s recently revised business terms for companies that sell digital services. For a customer’s first year as a subscriber, the owners of a digital subscription keep 70% of the revenue and gives 30% to Amazon. After the first year, the company’s cut goes up to 85 cents of every dollar from the subscription fee.
But what if Amazon decided to take an even smaller share of revenue from subscriptions, or none at all? Presumably that would put pressure on Apple and Google to follow suit. Companies have complained for years that they are giving away too much money to the owners of mobile app stores and would welcome an upstart who lets them keep a bigger slice of the pie. Spotify has gone so far as to recommend people pay for the music service away from Apple’s App Store. For people who don’t, the price of a Spotify subscription is 30% higher to offset the revenue it has to share with Apple.
For companies that rely on powerful gatekeepers like Google and Apple for their livelihood, an Amazon alternative for selling subscriptions could be a breath of fresh air.