Apple Has Caused a Ruckus. Again.

apple_its_showtimeBut this time it’s not over the latest iPod iteration or another generation-defining device.  Nope, now they’re pissing people off with their new subscription rules.

The facts are these: Consumers can now subscribe to magazines and newspapers through the iTunes App Store.  The pieces were put in place with Newsweek and the Daily, in October and earlier this month respectively.  But now you can subscribe to almost anything, provided the publishers agree to the new regulations.  And the big sticking point for the publishers is that if consumers make the purchase from within the iTunes App Store, Apple takes a 30% cut of the revenue.  If you make the purchase outside the App store, Apple gets nothing.  And the publisher can’t provide a Web site link from within the app.

From a consumer point of view, this changes nothing.  I repeat: This changes nothing.  Apple has always taken 30% from all App Store-generated revenue.  And Apple will always equal or better the price advertised on the publisher’s Web site.

And what, precisely, is wrong with that?  When you purchase an iOS device, you’ve bought into an entire ecosystem that’s practically self-sufficient.  Apple devices are some of the most consumer-friendly devices ever created, and the Apple App Store offers a simple, expeditious way to purchase your entertainment.  I can choose whether or not to give my personal information for publishers to sell off.  If iTunes could become my one-stop venue for all things entertainment, to my benefit, why not?

Well, this is a book blog.  And book-wise, I can’t say I’m terribly worried.  Oh, I know people have been bleating about impending doom, and when Apple rejected the Sony Reader app it seemed to herald a similar demise for the Amazon Kindle app.  Well, first of all, Apple only required Sony to modify their app, in a way that still allows you to read your books purchased elsewhere on the app, so why shouldn’t Apple cut the same deal with Amazon?  But really, I think it comes down to this: Apple is not stupid.

I mean, what’s the worst-case scenario?  Maybe after siccing the Justice Department and Federal Trade Commission on Apple, all publishers refuse to play ball, boycott the App Store and go over to Google?  Well, if Apple is dumb enough to let things get that far, then they don’t deserve our business.  And Apple is not dumb.  Besides, I do not believe for one minute that publishers are going to ignore a customer base of 150 million credit cards.

I remember using the Apple IIe in grade school.  Everyone used PCs at home, because PCs were “better.”  Never mind that schools were buying up those rudimentary Macs en masse because the most un-computer-savvy kids could hop on one and get cracking with Oregon Trail in minutes.  Fifteen years later, the iPod – a device that single-handedly made my Discman obsolete.  Then the iPhone.  Now the iPad.  You get the picture: There’s a reason Apple has become the most valuable technology company on the stock market, and it has everything to do with understandings its consumers.

They’re not perfect, and maybe Apple will come out of this wrangle bruised and battered.  But you can bet that they’ll go back to the table, re-evaluate, and kick the pants off everyone next year.

- Jean AAR

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7 Responses to Apple Has Caused a Ruckus. Again.

  1. Leigh AAR says:

    I not sure I understand about the issue is? Haven’t publishers always discounted magazines with door to door sales (usually schools now), and subscription inserts in the actual magazine?

    Are you saying that you can buy a book on itunes that really you are buying from Amazon? like a kindle book? Or are you just talking about the kindle app?

    I rarely access itunes. I do love my iphone though.

  2. LynnD says:

    Leigh: As I understand it, the issue here is the “agency” pricing model that Apple and 5 of the Big 6 publishers came up with last year for ebooks last year. This model provides that publishers set the price for their ebooks for all retailers (the same price across the board) and the ebookseller gets 30% and the publisher gets 70%. If Apple requires ebooksellers such as Kobo, Amazon, Sony etc. to pay 30% of the ebook price to Apple for any sales made within the Apple App itself, these booksellers will get nothing from that sale (even though they are actually providing the content). At the present present time, these third party ebooksellers get around the 30% charged by Apple for sales within the Apple App by having the “purchase” portion of the transaction completed outside the App (i.e. via the web as opposed to in iTunes). Apple is trying to close this loophole. If they do and if the agency publishers continue to insist on the Agency model; how much revenue will Amazon and the other ebooksellers lose? Will it result in some of the smaller ebooksellers to go out of business? From a competition or anti-trust perspective, this is concerning because it raises the question of whether Apple is trying to deter fair competition in the marketplace with this policy. I think that it will be an interesting few months in the book world as the publishers, Apple, Amazon, Kobo, Sony and Google fight this one out. It will also be interesting to see if the “agency 5″ decide to renew the agency pricing agreements when they expire next month (get the popcorn ready).

  3. KJ says:

    You do realize that you are defending anti-trust practices?

    Just want to make that clear.

    Also, Macs are PCs. PCs are personal computers and NOT a term that means Windows. Linux machines are also PCs. For some reason Apple marketing tried to make this a dirty word and only came off looking foolish. The only people who use this word to mean “Windows” machines are people who don’t know any better. Read: Apple fans.

    Apple used to make really awesome hardware and they used to have a great company but the minute the iPhone became popular something went really, really wrong in their philosophy and they become arrogant. Actually they became exactly like Microsoft and they lost their focus.

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  5. Leigh AAR says:

    Thanks, Lynn D. . . that makes sense to me now. they earn 30% and then have to pay that 30% to apple. . .

    Don’t get me started on the agency pricing. . . Apple and the five have a lot to answer for, in regards to e-book

  6. Jean Wan says:

    The way I see it, iTunes is analogous to a bricks-and-mortar store (let’s call it, for the sake of brevity, the Store) where I can purchase various forms of entertainment. The Store has an overhead that has to be maintained through the sales of physical products – the more the overhead can be reduced, and the more books a store can sell, the more money the Store makes. I’m simplifying immensely, but generally, I gather that’s the gist.

    I see iTunes as that same store, but in the digital sphere. Now, some have argued that Apple has no right collecting money a) on apps that they don’t even develop, b) on digital merchandise that costs them nothing to maintain, with no overhead. The former may be true; the latter, I’m not so sure about. I know even less about a digital business than I do about a physical business, but I figure, who am I to judge the inner workings of iTunes? Someone has to be paid to make the App Store run.

    That’s only my point of view. My small, consumer’s, peon’s point of view. And I agree with LynnD – the next few months are going to be interesting.

    KJ – Yup. I am a) an Apple fan, writing this from b) a PC, which I have admittedly called a PC without any derogatory undertones because c) that’s the way I’ve grown up calling them, having a mother who wrote programs for PCs. Mea culpa. However, I do respectfully disagree with your usage of the past tense; I think Apple still makes great hardware.

  7. Carrie says:

    The upshot of Apples in-app purchase rule ultimately means less choice for the consumer and more money out of our pockets and into Apple’s pockets. The Agency 5 agreement and now this new one DO limit the ability of retailers to discount ebooks from these publishers, and now limits their profits. In short, the “in-app” purchases will mean Apple gets the 30% and amazon (or whoever) doesn’t get squat in this 30/70 split brought on by Agency 5 price(fix)ing (now Agency 6, since Random House joined in today). What motivation does amazon have to continue selling through the apple app? (Did anyone notice that all Random House ebooks went up in price at mid-night last night??)

    I’m glad you’re sanguine about it, but I’m not. This isn’t good news for anyone interested in ebooks.

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