How many apps made healthy revenue through In-App Subscription?

Jesal Tanna
May 9 · 9 min read

Auto-renewable subscriptions give users access to content or services from within your app on an ongoing basis. At the end of each subscription duration, the subscription will automatically renew until a user chooses to cancel it.

An auto-renewable subscription is an iOS In-App Purchase category that allows an app to provide and charge for content or features over a set amount of time. We talked about the criteria of an auto-renewable In-App Purchase (IAP) and the things Apple could do to improve on its subscription.

Now let us walk you through the steps needed to implement and
test an auto-renewable In-App Purchase in your app.

85% Revenue After One Year:-
The revenue structure for auto-renewable subscriptions differs from other business models on the App Store. Within a subscriber’s first year of subscription, you receive 70% of the subscription price at each billing cycle, minus applicable taxes. After a subscriber accumulates one year of paid service, your revenue increases to 85% of the subscription price,
minus applicable taxes. Days of paid service continue to accumulate when users upgrade, downgrade, or crossgrade within a subscription group.
Even if a user cancels and resubscribes within 60 days, they will still accumulate days of service from the point where they lapsed. If they resubscribe after this 60-day grace period ends, their days of paid service starts over, and you receive 70% of the subscription price until one year of accumulated service passes. Each time a user cancels, a new grace period

Designing for subscription success :

Get insights into effectively communicating the value of your subscriptions, streamlining the signup flow, and providing
a positive and effortless subscription experience.

Groups and Service Levels:-

A subscription group is a set of in-app purchases that you can create to provide users with a range of content offerings, service levels, or durations to best meet their needs. Users can only buy one subscription within a subscription group at a time. If users would want to buy more that one type of subscription — for example, to subscribe to more than one channel in a streaming app — you can put these in-app purchases in different subscription groups.

User Options:-

Users can manage their subscriptions in their account settings on the App Store. For each subscription, they will see all the renewal options the subscription group offers. They can easily move between service levels and choose to upgrade,downgrade, or crossgrade between grouped subscriptions as often as they like.
For each in-app purchase, create a user-friendly, self-explanatory name that differentiates it from other options within the subscription group. Ensure that you use distinct terms to describe the app name, the subscription group name, and the subscription in-app purchase name to avoid confusion. Where possible, keep your subscription offerings simple so that users can make a choice easily.

Ranking In-App Purchases:-

Within each subscription group, you can determine the upgrade, downgrade, and crossgrade path by ranking each in-app purchase. Your subscription levels should be ranked in descending order, starting with the one that offers the highest level of service. For more details on how to use iTunes Connect to rank your subscription offerings, watch this demo from the WWDC session.

Introductory Pricing New:-

To attract new subscribers, apps with auto-renewable subscriptions can offer a discounted price or a free trial for a limited time at the beginning of a subscription. You can offer one of the following introductory price types per subscription, per territory:
Pay as you go. New subscribers pay an introductory price each billing period for a specific duration — for example,
$1.99 per month for three months for a subscription with a standard price of $9.99 per month. This type may be useful if
you want to attract price-sensitive users with a recurring discount without having to offer that price for the lifetime of the subscription.
Pay upfront. New subscribers pay a one-time introductory price for a specific duration — for example, $9.99 for six months for a subscription with a standard price of $39.99 per year. This type may be useful if you want to offer an extended introductory experience that gives users time to enjoy the subscription before the next renewal.

Free trial: New subscribers access your subscription for free for a specific duration. Their subscription begins immediately but they won’t be billed until the free trial period is over. This type may be useful if you want to give users
the ability to try out your subscription with the option to cancel before billing occurs.
To offer introductory pricing, you’ll need to manage pricing for each in-app purchase in iTunes Connect, and implement StoreKit APIs in your app to display information to eligible users. When communicating an introductory price in your app and marketing materials, use clear, consistent messaging to
make it easy for users to recognize the value of the offer.

Territory Pricing and Expanded Price Tiers:-
Apps with auto-renewable subscriptions can offer territory-specific prices and have access to 200 price points across all currencies. You can set the prices you think are suitable for subscribers in different markets, and you have the flexibility to price your subscriptions at parity if they’re available elsewhere. The iTunes Connect pricing tool can help you manage pricing based on current exchange rates. If there is a tax change or currency adjustment in a particular region, the price of subscriptions will generally not be affected unless you decide to pass the change on to your users.
Any time you increase pricing for existing subscribers, they will have the opportunity to agree to the increase, which may result in lost subscribers if they do not accept the change. Before you make any pricing decisions, research your target market’s pricing expectations, and weigh the potential impact of raising the price against retaining existing subscribers.
If you want to change the price of a subscription in a specific market, it’s important to understand which markets are tax inclusive before you take action. For example, if you decide to lower the subscription price for users in Germany, the revenue you’ll receive will be the purchase price minus the European Union’s Value Added Tax (VAT) and minus Apple’s commission. If you use the default pricing in the iTunes Connect pricing tool, tax rates are already considered for you. For more information, review Schedule 2 of the Apple Developer Program License Agreement, which describes territories that have different tax treatments. If you look at the 20 top-grossing iPhone apps you will notice that all of them are free to download, and all of them (that
are not games) use auto-renewable subscriptions. This is a model that has worked very well over the past few years, but some aspects of it needed fixing, and iOS 10 has thankfully come along to address these issues

Following are the 6 Major Changes:

1. Auto-renewable subscriptions are now open to all categories of apps
It’s no coincidence that the top 20 media apps all use auto-renewable subscriptions as their core business model — it is key to profitability! The big change here is that this potential minting press is no longer limited to media: all apps can now take advantage of this. For example a fitness app that could only offer a once-off ‘upgrade to pro’ payment can now
offer a month-on-month subscription for the full service.

2. The publisher gets more proceeds after the first year Like before, Apple will take 30% and the publisher will get 70% in the first year. Unlike before, Apple will only take 15% in subsequent years, giving the publisher 85% thereafter. This is obviously great news, and will certainly help apps make more money. However, it was not previously the main blocker to profitability, which is, and will remain to be, conversion, i.e. turning a free user into paying customers. Most apps only really convert about 2%-3% of users, but this is a figure that apps live and die by — improving this has to be a priority. The great thing about the App Store is how little friction there is when making a purchase; it is only one simple and familiar touch away, which always beats 6 pages of account and credit card entries. This vastly improves conversion rates and far outperforms other methods. Sure, if you do this internally you’ll get all the money, but you also get carpet burn levels of friction. Typically, when using Apple, conversions are between 100%-400% better. Some say the downside of this is that you don’t get to know who the user is, and you don’t have a direct relationship with them and we strongly argue that you publish through the App Store.

3. Subscriptions groups are no longer limited Previously, subscription offers were pretty limited. Now there is a lot more flexibility in the pricing model, allowing for multiple options. A great way of monetizing is starting users off on a low-cost plan and iteratively upgrading them once they pass certain thresholds or usage conditions. In iOS 10, an upgrade takes place immediately, while a downgrade waits for the current subscription to end, which is all positive for the publisher. And of course, all these price plans can be A/B tested to find out which ones make the most revenue for the app.

4. Publishers Can Control Local Currency Prices

Apple would only let you a price once — in dollars — which was then converted automatically into different currencies. In iOS 10 you can set prices for individual territories. This is great for basing prices on local market conditions, and you can command a better price in a region that is particularly strong for your app. Or you can experiment in a region with isolated A/B tests — New Zealand is a particularly popular country to do this in — which you can apply worldwide once the results are in and you are confident which variant works best.

5. You Can Preserve Pricing for Existing Customers

Previously, if you wanted to change the price of a subscription, you had to it for all users — including existing. This broke the subscription contract, and current subscribers had to re-subscribe manually — they had to go into iTunes, find the app, find the plan and resubscribe. What this did was effectively create the most effective churn machine there ever was. This has now changed, and any price increases can be applied to only new customers, which will not affect current ones, taking out that unnecessary churn risk.

6. Better handling of price changes

This is partly covered in the point above, but Apple has gone one step further and has improved how they communicate price changes. Their opt-in messaging, consisting of a push notification which takes the user to a 1-touch
opt-in screen into the App Store, creating a much more frictionless experience for the user. Cumulatively, these add up to a big change that affects billions of dollars in the economy. For growth and revenue teams the opportunity to grow a sustainable business and increase revenue is huge. In the next blog post, I will concentrate on ways that apps can profit from these changes.

I hope this blog was helpful to you in better understanding about In-App Subscription method and how to structure it to earn more revenue.

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