How are content providers going to react to Apple’s new App Store rules, which mandate that providers of music, video, e-books, and other stuff sell their wares using Apple’s in-app purchasing and subscriptions–at least as an option–and give Apple a 30 percent cut when they do? Music purveyor Rhapsody is the first company I’ve seen to respond in public. And it’s taking an almost-hard line–it doesn’t say it’s pulling out of the App Store, but it does call Apple’s 30 percent fee “untenable” and says it “would not be able to offer” Rhapsody under Apple’s new terms.

It issued this statement by Rhapsody’s President, Jon Irwin:

Rhapsody is the leading digital music subscription service in the U.S.,with 750,000 subscribers.  Music fans can access the service using free apps from any Internet-connected device, be it on an Android, Sonos, Tivo, BlackBerry, iOS or personal computer. Today, Rhapsody subscriptions are available for purchase exclusively via Rhapsody.com.

Rhapsody offers a content-based subscription service that makes millions of tracks available to fans pursuant to longstanding partnerships with thousands of rights holders, all of which then distribute revenues to artists and other creators.

Our philosophy is simple too – an Apple-imposed arrangement that requires us to pay 30 percent of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable.  The bottom line is we would not be able to offer our service through the iTunes store if subjected to Apple’s 30 percent monthly fee vs. a typical 2.5 percent credit card fee.

We will continue to allow consumers to sign up at www.rhapsody.com from a smartphone or any other Internet access point, including the Safari browser on the iPhone and iPad.  In the meantime, we will be collaborating with our market peers in determining an appropriate legal and business response to this latest development.

Sounds like someone’s going to have to call someone’s bluff here: Either Apple reduces the fee, or Rhapsody pulls out (unless it chickens out and stays in). That’s assuming that the reference to “appropriate legal…response” doesn’t turn into a lawsuit.

Apple says that content companies need to abide by the new policy by June 30th. It’s going to be an interesting four and a half months…

 
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