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How to Beat Apple's 30 Percent Subscription Fee: Sell Your Stuff on Apple TV

Different devices, different prices.

Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

Did you sign up for HBO Now so you could watch “Game of Thrones” last night?

If you did, where did you sign up — on your iPhone, your iPad or your Apple TV? The answer could be worth millions to HBO and Apple.

Apple and HBO haven’t disclosed the terms of their partnership, which gives Apple a three-month digital exclusive for the streaming service.* But Apple’s existing deals with some video services give us a sense of what the company might be doing with HBO — and what the new economics of “over-the-top video” could look like.

When any publisher, including a video service, signs up a subscriber via an Apple app on an iPhone or iPad, Apple takes a 30 percent cut of the monthly fee. Apple introduced that policy in 2011, and while it was initially controversial, most publishers have learned to live with it. The only way to end-run that set-up is to not sign up customers via Apple apps at all.

But Apple didn’t extend its 30 percent policy to developers on its Apple TV platform. While Apple and its partners have never talked about it publicly, my understanding is that a handful of video services, including Netflix, Hulu Plus and pro-baseball’s MLB.TV, give Apple 15 percent of their monthly fees for any subscriber who signs up on Apple TV.**

To consumers, this doesn’t matter: Whether you sign up for Hulu Plus on Apple TV or an iPhone, you can watch the service on any Apple device. And until now the difference between the two sign-up methods hasn’t been a big deal for the video distributors either. Executives at companies that have Apple TV sign-ups say the device has been an insignificant source of new customers.

That could change, since Apple TV is getting a push in HBO Now marketing campaigns for HBO. And Apple will presumably give it another push when it rolls out a new version of the box this year.

But it’s even more interesting to think about Apple’s tiers of fees as we enter a world where lots of people are going to be selling Web video subscription products via platforms like Apple’s. Whether Apple is charging 15 percent or 30 percent a month, it’s giving distributors a much better deal than the 50 percent that pay TV providers usually charge premium networks like HBO. That makes the platform even more enticing to cable channels that are thinking about stepping outside of the traditional pay TV bundle — and it puts more pressure on the cable guys to sweeten the deals they already offer.

* Apple is also trying to strike HBO Now distribution deals with its existing pay TV distributors, so they can sell the service as an add-on to their existing subscribers. So far, HBO has brought on Cablevision and is reportedly in talks with Cox and Verizon.

** Most of the apps on Apple TV, though, are either free or available to people who have pay TV subscriptions, like ESPN’s WatchESPN app.

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