Rhapsody mulls exiting Apple App Store

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Music-subscription service Rhapsody today said it may have to yank its popular app from Apple's App Store as a new subscription model announced by the Mac maker carves into its razor-thin margins.

"With the costs that go to the publishers, labels, artists, all of our content costs -- it's not a workable economic model," Rhapsody President Jon Irwin told USA TODAY.

Apple today announced a new subscription-billing service to content publishers on its App Store that extends to magazines, newspapers, video and music. The change promises sellers in the App Store subscription fees and would allow Apple to grab a 30% cut. Apple had previously taken just a one-time 30% stake of the download price of apps.

"Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30% share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100% and Apple earns nothing," Apple CEO Steve Jobs said in the announcement today.

If Apple's App Store were to shave 30% of that revenue from Rhapsody, recurring each month, under its new subscription model, it would be "economically untenable," Irwin said.

Rhapsody isn't alone. European company Spotify, which offers similar music services, will likely face the same App Store dilemma, Rhapsody's Irwin said. Both services boast about 750,000 subscribers. Rhapsody has a library of 11 million songs.

The move underscores Apple's increasing influence in the music industry as the distribution point for digital media.

"The issue is that Apple controls the distribution of content," said Forrester Research analyst Ted Schadler. "Now they have an opportunity to control movie distribution, music distribution, magazine distribution - -and those companies hate that."