Google launches new payment system as developers fume over Apple in-app subscriptions

Google has announced a new payment system for publishers which lets it charge users however they want, with lower fees, in a move some analysts believe could steal business away from Apple.

The move is a clear reaction to Apple’s new in-app subscription model, which some analysts and developers have attacked for forcing publishers into using a system that will net them less money than if they charged for subscriptions via their own platforms.

Google announced its One Pass service yesterday, with chief executive Eric Schmidt speaking at Humboldt University in Berlin. In a blog post the company said One Pass means publishers can maintain “direct relationships” with their customers.

“Readers who purchase from a One Pass publisher can access their content on tablets, smartphones and websites using a single sign-on with an email and password,” the company says.

“Importantly, the service helps publishers authenticate existing subscribers so that readers don’t have to re-subscribe in order to access their content on new devices.”

The company said the system is intended for “periodicals, such as news and magazines, but is a flexible payment system that can be used for many other types of content”.

Google said the program allows publishers to customise how they charge for content, whether it’s via  subscription, access for single articles or through mobile apps. Part of the system allows users subscribed to print publications free access to digital content.

Payments are handled through Google Checkout, with the system initially only available in the United States, Britain, Canada, France, Germany, Italy and Spain.

Google has courted some publishers, including Germany’s Axel Springer AG along with others including Media General, Popular Science and Rust Communications. The New York Times reports that unlike Apple’s 30% cut Google will only take 10%.

The key drawcard is that Google will allow publishers to sell content through their own websites, which Apple discourages with its in-app subscription plan.

Apple made the announcement yesterday, bringing to new developers what it had already introduced through News Corp’s new publication “The Daily”.

Currently publications can sell new editions of their magazines or apps through their website but Apple says those publishers must offer the same subscription through in-app purchases.

“With one click customers pick the length of subscription and are automatically charged based on their chosen length of commitment (weekly, monthly, etc),” Apple says.

“Customers can review and manage all of their subscriptions from their personal account page, including cancelling the automatic renewal of a subscription. Apple processes all payments, keeping the same 30% share that it does today for other in-app purchases.”

It sounds good, but some app developers are protesting against the move.

Apple knows most users will be drawn towards subscribing within individual apps instead of going to an outside website and that nets them a substantial amount of money.

Chief executive Steve Jobs isn’t being shy about that approach.

“Our philosophy is simple — when Apple brings a new subscriber to the app Apple earns a 30% share, when the publisher brings an existing or new subscriber to the app the publisher keeps 100% and Apple earns nothing,” he said yesterday in a statement.

“All we require is that if a publisher is making a subscription offer outside of the app the same (or better) offer be made inside the app, so that customers can easily subscribe with one click right in the app.”

That could affect a range of different apps, including those made by retailers Amazon and Netflix in the US.

Music streaming service Rhapsody has attacked Apple, saying the new system will see the company become unprofitable.

“We have to pay rights holders, the music labels and publishers for our content,” president Jon Irwin said in a statement.

“With all those fees that go out (adding) Apple’s 30% will exceed the revenue on our product. It’s not a matter of making less money, it would be zero profit.”

Anti-trust lawyer David Balto, who has previously served as a competition expert at the Federal Trade Commission, told the Wall Street Journal there are some legal concerns with the new model.

“I think it’s going to raise some very serious anti-trust concerns that will be closely scrutinized by the FTC,” he said.

Other major publishers – including Time, The Economist and the Financial Times – said they are reviewing the Google and Apple announcements.