[NeilN]

Apple should get slammed, and slammed hard for this. They want all content purchases to be in-app purchases (not going through Safari either) so they get their 30% cut for doing absolutely nothing (even the content isn't stored on Apple's servers). This is going to affect companies like Zinio by forcing them to raise prices and depriving them of subscriber info. I'd like to know what's the difference between e-books/magazines and other forms of content. Is Apple going to go after companies like Grooveshark and Spotify for a 30% cut?

 

[NeilN]

I read some rumblings a couple weeks ago about how Apple was moving to force Zinio to change its purchasing model. From the article:

The company has told some applications developers, including Sony, that they can no longer sell content, like e-books, within their apps, or let customers have access to purchases they have made outside the App Store.

The bold part is what concerns me. Apple shouldn't interfere with how content gets into apps.

 

[NeilN]

Another big question is if the prices have to be the same. For example, if Zinio adds an in-app purchase option you know they'll have to hike the price for the same product ~30%

 

[NeilN]

That's fine if Apple doesn't force the price to be the same between the two purchase methods. Still a pain for content companies having to maintain two different price lists and having to code in in-app purchase support. I haven't looked this up but are in-app purchases downloaded from Apple's servers? If so, that's another hurdle content providers have to overcome.

 

[NeilN]

And when you look at the infrastructure that these magazines and newspapers no longer need to put in place to deliver their content to there customers but is now provided by Apple you can understand why Apple wants their cut.

No, I don't understand why Apple should get a cut of subscription/book costs if they don't provide anything. Fine, charge $0.99 for the app but even that is stretching it. For example, there's a great e-reader app called Stanza which has links to online bookstores. You can also add links to other virtual bookshelves (basically web pages with XML markup). Baen Books, one of the few publishers who have a clue, have had an online bookstore for about a decade (or more). They added a feature a couple years ago where each account had a Stanza-compatible bookshelf. You buy a book on the website and it automatically appears in Stanza, ready for downloading. In this case, why should get Apple get a cut? And if they move to enforce this, who would they charge? Stanza or Baen?

 

[NeilN]

And I repeat, Apple should be smacked and smacked hard for this. The iPad doesn't exist in a vacuum and content can be consumed on a variety of platforms. Why should Netflix pony up 30% if a subscriber watches a percentage of videos on their iPad?

 

[NeilN]

Hey, I *like* Apple products and I'm usually defending Apple but the argument that they created the platform carries no weight for me. Content providers aren't charged a fee by Microsoft/Apple to have their stuff on Windows/Mac OS. The in-app option with the extra 30% markup creates a barrier to entry that Android doesn't have and is going to bite Apple in the ass if they try to enforce it.

 

[NeilN]

Apple Launches Subscriptions on the App Store

Terms announced: http://www.apple.com/pr/library/2011/02/15appstore.html

“All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app...

They're nuts for trying to effectively dictate prices for non-iOS customers.

 

[NeilN]

@Gino, let's take Zinio as an example. It charges $24 for a National Geographic subscription which I can read basically anywhere - Windows, Mac OS, Linux, iPad. Now Apple is coming in and saying hey, you need to offer that sub in-app and we get 30%. That's probably close to Zinio's gross margin so they'll have to raise the in-app price. Ooops, can't do that without raising the outside website price which affects everyone.

 

[NeilN]

hugh, I have a real problem with this. I can go down to my local Future Shop (or online store) and buy a copy of a Blu-Ray software player. That is the end of any connection I have with the store or the software manufacturer. I can play as many movies as I want and both these entities won't get a single dime more.

If Apple wants to be compensated then they should specify a mimimum price for subscription based apps.

 

[NeilN]

Would you expect the owner of a popular shopping mall not to charge rent. Sure a store could choose to locate outside the mall but if most people choose the convenience of the mall shopping experience then that mall location has value and the mall owner has a right to charge for it.

This is a false analogy. Rent is charged per square foot and perhaps a percentage of sales, not from future income generated derived from the initial sale.

 

[NeilN]

In Amazon's case, they were keeping prices down. In Apple's case, they're forcing prices up.

 

[NeilN]

Expanding on DancesWithLysol's point, Apple sells iPods and iPhones in mall stores, right? So the mall owner can expect a cut of iTunes sales?

 

[NeilN]

This is worse than it appears:

Apple today announced a new subscription service available to all publishers of content-based apps on the App Store, including magazines, newspapers, video, music, etc.

Say goodbye to Netflix, Hulu, Rdio, Spotify, Pandora, etc?

 

[NeilN]

Apple has its own book store. So is it eliminating competition on the iOS platform?

 

[NeilN]

I'm sorry you will need to expand on that a bit. I don't understand how Apple is making money from future income after the initial sale.

Say Zinio charged $1.99 for its app. Apple gets 30%. It now also wants 30% from any future subscription revenue when all it's doing is forcing its payment processing on unwilling vendors.

Boy you are really stretching here but I'll bite. No, since the mall owner isn't providing a mechanism by which Apple can sell the iTunes media. They are only providing a means for them to sell the hardware.

And Apple isn't providing a mechanism by which publishers can sell content. It's forcing it on them. Are you saying the publishers should pay a price to make their content available on iOS even though Apple isn't involved in the transaction? This is like having aftermarket parts manufacturers having to pay GM a percentage of their sales.

You forgot one key ingredient. Apple doesn't hold a monopoly position in mobile devices.

Ok, if you want to play that way, Microsoft has a monopoly with Windows on Intel desktops. Apple has a monopoly with iOS on the iPad. Both platforms have alternatives: Linux, MacOS / Android, Win7.

ScaryBob has the key point. Apple can do whatever it wants with payment processes initiated on iOS. Mucking around with pricing outside of iOS is a different story.

 

[NeilN]

I think Apple has drunk its own Kool-aid and really thinks the iPad is a "magical" device. It's not. It's a great first generation product which is reaping the very deserved benefit of being first-to-market but so was the Macintosh and that almost died in the nineties. As an iPad and iPhone owner I want Apple to succeed. I want the iOS platform to get the latest and coolest apps. But just as I dumped the Mac when Windows 95 came around with the accompanying explosion of applications, I'll dump the iOS platform if it becomes clear that software developers have moved on to a different platform. Being early days in the tablet market share war, Apple should be courting app and content developers, not throwing up additional roadblocks. Netflix, Spotify, Amazon, etc., aren't going to screw with the pricing of their products for all their customers just to jump through Apple's hoops. Not when they can put their resources behind something like Android ("Netflix, only for Android!" is something Apple should dread hearing). Unlike the gaming console manufacturers, Apple makes a very healthy profit on every device it sells. But it needs to realize that apps are selling the platform, not the other way around, especially with iOS looking a bit long in the tooth when compared to newer OS's.

 

[NeilN]

Apple is trying to prevent the very situation that almost killed it in the late 90s. It's doing it by spreading it's income over a wide area so it isn't susceptible to price fluctuations on only the hardware side.

No, it's actually endangering its current revenue stream. If developers decide it's not worth it to create iOS apps and instead develop for Android then you'll see consumers shift platforms. 30% of zero is zero and Apple will also have lost the iPad revenue.

Apple creates entire eco-systems but as you can see its competitors have no problem copying its methods after Apple has done all the hard work. Apple creates opportunities for its partners and they all flourish together. Just look outside of Apple at all the companies that have sprung up over the years and have made a good living off of what Apple creates. Look at all the software, peripherals and content that is being created to feed that eco-sytem.

Just like Microsoft did with Windows. Isn't it exactly the same situation? Windows peripherals... Windows software...

Now contrast that with Microsoft. I've already given you two examples above of companies that are forced to diversify in order to survive in Microsoft's world, HP and Dell and they are barely hanging on. IBM gave up years ago and sold off their PC business. Compaq, DEC, Gateway gone! Now let's take a look at the carnage left behind in just one industry by Microsoft.

Can you please explain how Microsoft, a software company, forced hardware manufacturers to turn their business into a commodity based model?

 

[NeilN]

Wow. There are so many fallacies in this post I don't know where to start. At the beginning I guess.

Sure there are risks in Apple's approach but I think they've been looking at what's been going on over the past year and beyond and they noticed something. That despite the fact that the subscription news and magazine industry have been looking for a business model to shift that industry into the 21st century no one has come up with a solution. No one else has even tried.

Wrong. Zinio, mentioned multiple times in this thread has. Also, you're ignoring the fact that services like Netflix and Spotify are affected as well. Have they not come up with viable business model?

Now that Apple has, in consultation with one of the biggest media companies in the world, they're complaining that they don't like it.

This is the same company who bought Myspace for $327 million and let it rot? The same company who brought out a much-hyped app a couple weeks ago only to see it fall flat?

Well, anybody else is free to try and come up with a solution but if the past is any indication of the future, they'll have a long wait.

Solutions are already there. See above.

They are being handed a business model on a silver platter.

A silver platter that costs 30% of their revenues. And, oh yeah, dictates their pricing for other models.

As for Amazon and their Kindle app and ebooks, I have no sympathy for them. Before Apple came along they made and sold their Kindle hardware and used predatory pricing to benefit their hardware sales to the detriment of the publishers. They never fostered an ecosystem that was beneficial to anyone else except themselves. Now that they've got some competition in ebooks they have to adjust. Isn't competition grand.

Not beneficial to anyone else? I think consumers liked the $9.99 cap on ebooks.

Microsoft is a software company, peripherals grow out of hardware so they aren't directly responsible for that.

Windows 95 and on made it a heck of a lot easier to write drivers for peripherals. And it's a lot easier to handle that investment when it gives you access to hundreds of millions of desktops.

As for software Microsoft sure, a large industry grew out of Windows and I give them props for that but many companies were destroyed by them as well. I'm too tired to come up with an extensive list but some of the bigger ones that come to mind are WordPerfect, Borland, Novell. If they aren't dead they are mere shadows of themselves.

Are you seriously saying that the number of companies Microsoft "destroyed" is more than a tiny percentage of the companies created to develop Windows software? Seriously?

They didn't force the commodity model. That grew out of competition on the hardware side. It was their brutal licensing model for the OS that destroyed any chance of there being competition on the OS side. That resulted in them gaining their monopoly position. Before the antitrust lawsuit, Any company that wanted to licence Windows had to licence a copy for every cpu they sold whether that computer was sold with Windows or not. Since the hardware manufactures were forced to buy a Windows license anyway it didn't make economic sense for them to licence any other OS for sale since they had to pay for the Windows license anyway.

You wrote originally:

Now contrast that with Microsoft. I've already given you two examples above of companies that are forced to diversify in order to survive in Microsoft's world, HP and Dell and they are barely hanging on. IBM gave up years ago and sold off their PC business. Compaq, DEC, Gateway gone!

Nothing about OS's. So, how did Microsoft's world cause HP and Dell to barely hang on and Compaq, DEC, Gateway to be gone?

 

[NeilN]

How's that false? Are you saying that Amazon's presence in the app store near launch did nothing to generate iPad sales?

I think he's referring to:

So, that book I may want to buy at kobobooks.com and read on my Nook, Archos, and PC as well as my iPad (if I had one) I am not allowed to.

If he is, then he's wrong to call it false. You are literally not allowed to buy a Kindle e-book at Amazon and have it sync to the Kindle iPad app the way the app works now.