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Google may be able to capitalize on Apple’s subscription fallout

by Phil Hornshaw

Google (GOOG) is still working on rolling out its Android 2.3 Honeycomb operating system, along with in-app purchases to go with it, but the company might want to start thinking about subscriptions.

Apple (AAPL) just finally got its subscription policy hammered out, and it includes a few provisions about which iTunes App Store content providers aren’t very happy. The new rules dictate that any content provider who sells content for use in an app must do so through in-app purchases, and the prices for the content through the in-app purchase has to be equal to or less than the price in other places. Apps can no longer link to outside content stores and instead have to sell everything through the apps -- oh, and Apple gets a 30 percent cut of all that content.

The rules go for subscription services like newspapers and magazines, as well as other content providers: streaming music company Rhapsody is included under the new rules, and it isn’t happy about them. In a statement released yesterday, Rhapsody said it would be “collaborating with our market peers in determining an appropriate legal and business response to this latest development,” according to Engadget. At the same time, the Wall Street Journal must have wondered if Apple’s new policy might violate the law, because it wrote up this story asking experts whether the government could potentially make an antitrust case against the company.

Meanwhile, Google, which is just getting its in-app purchase system ready to go, gets to stand outside the gathering hurricane of elements over the iOS nation and see how it spins out. Many subscription services are being created for Apple’s devices, and dolling out 30 percent to the company because providing content on iOS machines is what’s helping drive subscribers to their services. But others might be bracing to jump ship, including Rhapsody, or be forced to increase prices, as might be the case for e-book sellers like Amazon (AMZN) and Barnes & Noble (BKS).

Lucky for Google, it’s about to create another potential port with Android and in-app purchases. It wouldn’t necessarily be impossible for the company to quickly try to build an in-app subscription service, as well, and try to compete with Apple as some developers get angry about 30 percent of their revenues going to Cupertino.

I wouldn’t be surprised if Google’s brains aren’t already working on this. In fact, it wouldn’t have to do much of anything in many cases -- Rhapsody already has an Android app that it offers for free to interact with its subscription service. If the music streamer bails on iOS, that means users will have to change music services for find another device to stream their music to. All Google has to do is raise its hand.

The same thing goes for Amazon’s Kindle service and Netflix’s (NFLX) streaming video service. Amazon has a Kindle app on both Android and iPhone -- so does Netflix -- but if things aren’t going well with the competition and its in-app subscription fees, both those big services could become Android-exclusive, or at least more Android-friendly. Chalk up two more reasons to buy an Android phone or tablet computer over something that runs on iOS.

If Google gets subscription services for publications together relatively quickly, it could easily offer a better deal to content providers on that front, as well. Google’s getting ready to drop Android Honeycomb and its major improvements along with the Motorola Xoom (MMI), and if its tablet and smartphone businesses continue to grow at the rate they have, it might be able to pretty effectively woo content providers over to its camp.

The whole situation has the potential to snowball, at least on paper. Google undercutting Apple on subscriptions pulls more content providers to Android, which brings more users looking for the content they want that they can’t get on iOS, which brings more providers and developers, which brings more users. And all Google would have to do is set a subscriber tax below Apple’s -- significantly lower, and it could cause the grass to look a whole lot greener on the Android side of the fence.

Of course, this whole line of thinking carries some big “ifs,” and those are, it’s all possible if Google capitalizes with an in-app subscription service, and if it’s able to offer one at all. Android still isn’t even to the point of in-app purchases just yet, much less subscriptions. But it’s still fun to think about the possibilities -- and hopefully, Google is thinking about them, too.