New Apple subscription service making software-as-service unfeasible on iPhone, iPad?

Readability, the service that takes the cruft out of online articles and gives you pure, gloriously legible text, has been rejected from the iPhone and iPad App Store due to Apple's new subscription service and its policies. If you're not familiar with Readbility, think Instapaper or the Reader button in the latest version of Safari (which ironically uses Readability's technology!) However, this has far wider ramifications as it suggests all iOS software-as-a-service (SaaS) front ends might like

Readability, like the App Store's own business model, takes 30% of subscription fees to pay their bills and gives 70% to publishers in payment for the content read. (Because Readability strips out ads, this still allows publishers to make money off their content). Since Apple requires a 30% cut of subscription revenue... well, you do the math. Readability would have to reduce the publisher's cut to 40% or reduce their own cut to near zero. Neither is a workable solution for them.

To be clear, we believe you have every right to push forward such a policy. In our view, it’s your hardware and your channel and you can put forth any policy you like. But to impose this course on any web service or web application that delivers any value outside of iOS will only discourage smaller ventures like ours to invest in iOS apps for our services. As far as Readability is concerned, our response is fairly straight-forward: go the other way… towards the web.

Part of the problem here is that Apple, no doubt purposefully, hasn't clarified what's subject to in-app subscription policies and what's not. If everything is subject to them than Apple needs the rate to remain 30%, same as app and in-app purchases. If subscriptions are only 10%, for example, almost every app will simply become free and offer a low-share subscription option instead (subscription Smurfberries, as we discussed on the podcast last night).

What this shows, however, are that there are clearly flaws in the current system that either Apple has to address or the market will with more apps like Readability abandoning native iOS apps for the web or other platforms. (Unless a new business model emerges that better leverages iOS' distribution system). Bottom-line content creators, content distributors, and platforms all need to remain financially viable. Readability thinks Apple should split their own 30%, giving content creators 70% of that as well. (Sharing the pain, so to speak.)

What's your solution?

[Readability blog via TechCrunch]