Beats Bites the Bullet, and Starts Selling Subscriptions From Apple's App

Apple has a crazily powerful digital store, used by hundreds of millions of customers. But if you want to sell something there it will cost you: In almost every case, Apple keeps 30 percent of the purchase price on whatever its users buy.

Beats Music, the new subscription music service that launched in January, figures that’s worth it.

Beats updated its iPhone app today, and now lets users subscribe to the $10 a month service from within the app, using iTunes’ billing system. That means Beats, and the music labels that license their stuff to the service, will give up $3 a month on every subscription sold through iTunes.

Beats CEO Ian Rogers says the decision to sell within the Apple app was fairly straightforward: More than half of Beats users use iPhones, and it’s very hard to get an iOS user to subscribe if you don’t sell in-app.

Two other music subscription services — Rhapsody and Rdio — have also agreed to sell subscriptions within Apple’s app, though Rdio raised the price for for in-app subscriptions from $10 a month to $15 a month to accommodate Apple’s tariff.

But Spotify, which is much larger than all three of the services, hasn’t made the move. Spotify does have a free, ad-supported tier available on its mobile app.

Selling in-app subscriptions is “what you do when you want subscribers,” Rogers said. “If you don’t care if people subscribe or not, and you’ve got a free product, maybe then you wouldn’t do it.”

The move may raise questions about Beats’ performance since launch. Last month Bloomberg reported that Beats was claiming, in investor pitches, a staggering 70 percent conversion rate among users trying the service via an AT&T promotion. But industry chatter is that Beats’ overall numbers aren’t blowing anyone away.

Rogers says his company is doing fine. “We’ve had far more people try the product than projected, ” he said. “Clearly the marketing works. The conversion rate on the AT&T plan is off the charts. It’s safe to say the biggest problem is coverting iOS users, and we’ve just fixed that.”

Beats should also have an iPad-specific version of its app available soon, Rogers said.

This article originally appeared on Recode.net.

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