Publishers may be excited about revenue possibilities on the iPad, but as Time Inc. is learning, the iTunes store isn’t always generous with media providers.

Apple encouraged the publisher to create iPad specific applications when the device launched this year, but according to MediaMemo, the company is currently preventing Time magazine from selling subscriptions through iTunes.

Apple’s approach to subscriptions is one that could quickly hobble publishers’ revenue prospects on the iPad.

Time magazine was one of the first publishers to get on the iPad bandwagon, and though some were disappointed with the results, the publisher invested plenty of resources into creating an iPad specific product when the device launched — at Apple’s behest. Now, the company is having trouble selling subscriptions on the device.

According to MediaMemo:

“The magazine giant has been unable to get Apple to let it sell and
manage subscriptions for its iPad apps — much to Time Inc.’s surprise.

“Last month, the publisher was set to launch a subscription version of
its Sports Illustrated iPad app, where consumers would download the
magazines via Apple’s iTunes, but would pay Time Inc. directly. But
Apple rejected the app at the last minute, forcing the Time Warner
(TWX) unit to sell single copies, using iTunes as a middleman.”

So far, no other publisher has been able to sell subscriptions through the iTunes store either. Executives at Time Inc. are apparently “going nuts” over the situation, at one point considering pulling their app from the store altogether.

Rightfully so. Many publishers were anticipating that the iPad could turn around their dwindling revenues. But they will need to iron out subscription issues before they can start bringing in consistent earnings on the device.

Apple now controls a major part of the music market online with the
iTunes store. And effectively, they have changed the way that music is
purchased. Before digital downloading of music, people bought albums
whole. Now they can pick and choose the individual songs they want. If
that happens to the magazine business, with people choosing only the
specific issues they want, rather than subscribing annually, it could cut out a major chunk of revenue for the magazine business.

Luckily, it seems like Apple will eventually allow subscriptions. The company’s statement on the issue is vague:

“We have two platforms that we support for apps of all types, including
magazines: HTML5 provides an open platform for developers to create and
distribute whatever they want, and the App Store which is a curated
platform offering customers the largest offering of apps for any mobile
device with over 225,000 apps and 5 billion downloads.”

They’re specifically not denying the possibility of subscriptions.
However, even once it’s fixed, the issue of user data will likely still remain. Subscriptions may not bring in more revenue than magazines and
newspapers bought on the newsstand, but they help with all important
readership numbers when publishers turn around and try to sell
space to advertisers.

That’s one reason why magazines generally handle their subscriptions in house — to retain and use subscriber info. Even if Apple allows subscriptions on its mobile device, the company retains the
user data it acquires when it sells apps through the iTunes store. Similarly on the
Kindle, Amazon retains most of the user data for subscriptions it
sells.

If customer data is going to be retained by the digital devices, publishers will be in trouble. No matter how many people are willing to pay more for publications in the mobile environment.