18 Comments

Summary:

Apple had a tremendous opening weekend for the iPad 2, regardless of which analyst’s estimate you choose to believe, and that success could translate into another win in an upcoming battle for the company. I’m talking about the in-app purchasing showdown coming in June.

app-store-icon

Apple had a tremendous opening weekend for the iPad 2, regardless of which analyst’s estimate you choose to believe, and that success could translate into another win in the company’s next big battle. I’m talking about the in-app purchasing showdown scheduled for the end of June.

As of June 30, Apple will require apps that offer content for use in an app through an external store also offer it through in-app purchasing. Apps must also refrain from providing a link to their own external stores, and hand over the same 30 percent cut to Apple that the company makes from all App Store purchases. Likely the most high profile app that will be affected is Amazon Kindle for iOS devices, which currently handles all its e-book sales through the Amazon web store, but it’s far from alone.

So why did Apple give apps until June 30 to comply with the policy, especially when it already barred the Sony Reader app from even entering the App Store beginning in February? It probably had at least something to do with giving publishers time to get their act in order and figure out how best to comply and rework apps without feeling rushed, but there’s no way that Apple’s release timeline for the iPad 2 didn’t figure into its scheduling in this matter.

The iPad 2′s inability to stay on store shelves serve as a blunt, effective reminder that, when it comes to the tablet market, Apple has the game safely in hand. Essentially, it’s a way of saying “you could opt to walk away, but remember, this is what you’re walking away from.” Amazon may have a hit on its hands with its own Kindle hardware, and apps for every major platform, but walking away from the App Store means turning its back on millions of potential paying customers. It was true before the launch of the iPad 2, but the success of that device serves to underscore the point in a way that’s impossible to logically argue against.

As Ryan notes, new reports have also surfaced that Apple’s lastest update renders web apps launched from the home screen slow and just generally worse than their native App Store. If Apple does indeed want to close the iOS ecosystem even further than it has already, it makes sense that it would do so now, when iOS has enough reach and mindshare to make even Apple’s biggest content partners think twice about disputing the Mac-maker’s terms.

Numbers may be in Apple’s favor going into the June showdown, but there’s still no guarantee that that means things will definitely work out in its favor when the gauntlet drops. Users, for their part, will likely side with the platform they’re most invested in, and for a vast majority, that’s going to mean Apple, although I’ve talked to at least a couple people who say if Amazon leaves iOS, they’ll likely follow. If it does come down to an either/or choice, which side are you on?

  1. This is one of a few reasons why, when my iPhone contract runs out, I will be giving Android a try instead of iOS.

    Share
    1. Stephen – give Android a try before you buy.

      Share
    2. Been there, done that, ended up back on iPhone. Android has a lot of customization and widgets, but honestly, who needs to know what the weather is like 24/7? iOS apps won me back in the end.

      Share
      1. Completely agree. I was iPhone for 3 years then android… Had the EVO… But yes I will be back to iPhone soon. Apple can’t be beat just yet. Their device integration is awesome.

        Share
  2. Jack Wasserstein Tuesday, March 15, 2011

    My guess is the Kindle application will remain in the app store without the ability to purchase through the app store. It will simply be a reader app.

    Share
  3. I’ll stick with Kindle for book reading, iPad for magazines, newspapers, games, shopping, and endlessly more apps. The iPad has cornered most of my attention, even from my TV set.

    Share
  4. Amazon sets the prices for companies that wish to have their books on it’s Kindle platform and no one complained at all. Apple’s terms are far better than what Amazon and Barnes & Nobel are offering and it’s time they finally closed the loop hole that you can drive a mac truck through in their app store model. The App store as it is barely generates any profit. With a phone and a tablet, I just want my stuff to work. With a PC/Mac well those items are open enough for tinkering if I want to. I think having an android device is actually the best Apple ad Apple could’ve ever had. I’ve used them and they are just not as good. I don’t care about open and closed because not Google nor Apple is open no matter what they tell you. It means nothing if the product that comes out is inferior in real world use. I care about good hardware, software and design.

    Share
    1. After reading your comment again it is clear that you don’t have any idea what you are talking about. Apple, Amazon and Barnes & Noble all have exactly the same 70/30 revenue split with publishers for book sales. Apple wants Amazon and Barnes & Noble to hand over their 30% cut. If Amazon sells a book in the Kindle app 70% would go to the publisher, 30% to Apple and the sale is a loss because Amazon would have to pay the processing fees for the payment.

      If you want your device, OS, apps AND content all to be controlled by Apple then you’re in luck. You’ll soon be able to watch, hear, read and use only what Apple says that you can.

      The design will be good though, so I guess you’ll be happy.

      Share
      1. I think saying the previous commenter doesn’t knowmwhat he’s talking is pretty damn harsh. If YOU know what you’re talking about then you know that amazon used to have a 70/30 split with amazon getting 70%. Only after apple opened it’s bookstore did amazon change those terms and accepted 30%. Also, apple isn’t wanting 30% for a logo on the back. They want 30% on any NEW subscribers these companies get through the iPad. That seems pretty fair to me since apple took the risk and spent the cash to create the iPad. Why should some company swoop in and make millions for only a $99 investment? How would these companies feel if apple and paid apps only received os updates while free apps had to cough up additional monies to continue or get left in the dust? Also, Netflix, amazon, etc. Spend millions to market their services and products outside of the iOS ecosystem so there’s no reason to think that apple will be sucking up ALL of their revenue. If apple did do that then I think those companies need to rethink their business plans and quit blaming apple.

        Share
      2. @Freckledbruh You raise and interesting point because Apple was clear that it felt that if New subscribers were brought to the fold through their technologies, they deserved a 30% cut of that transaction. So, what happens when the “new” subscriber renews his/her subscription? Since this person is no longer a new subscriber does the publisher now get 100%?

        Share
  5. Been there, done that, ended up back on iPhone. Android has a lot of customization and widgets, but honestly, who needs to know what the weather is like 24/7? If anything it just slows the phone down. iOS apps won me back in the end.

    Share
  6. @chris The Amazon comparison is wrong. Amazon never allowed anyone else to operate a bookstore on the Kindle, Apple did. Apple isn’t hosting the content or delivering the content, Amazon is. Apple wants 30% because their logo is on the back of the device. Amazon has done nothing that even comes close to this.

    On the post, my phone is an Android but I have an iPad 1. It was available when nothing else was so I bought it. It has it’s flaws but it is a great device. That said, I am going with a TouchPad or Android tablet.

    I have bought books through the Kindle app. I subscribe to Netflix, Pandora, XM, DirecTV, Slacker, Evernote, Catch and DropBox. All services that will walk away before giving Apple a 30% cut. I will favor my content and services over the iPad. Even if none or only a few of my providers leave, the thought that I could lose access to more because of some future greedy play by Apple is a total negative.

    I will never buy another iOS device again.

    Share
  7. It’s already annoying that the Amazon store app won’t show Kindle versions of books but this is making things worse.

    Consumers want a transparent and straightforward solution. Amazon is trying to provide one but Apple is making it difficult. I understand some of what Apple is trying to do and agree that some of it is good for consumers but there needs to be a better balance. For example, the same price everywhere rule lets the platform dictate who wins rather than pricing artifacts — clearly Apple thinks it has a better platform. Perhaps something that involves a smaller initial cut but adds a consumption fee would be reasonable. In that scheme, Apple would get <30% for purchases made from an IOS device but the seller would also agree to pay Apple for every page view for that purchase when the customer uses an IOS based reader (up to some cap). Apple would get nothing from page views from non-IOS based readers. That would encourage platform competition while permitting Apple to monetize their platform goodness. If the other platforms are good enough everybody wins. Apple would be placing the (pretty good) bet that it can stay ahead of the platform competition.

    Share
    1. Actually, if the FUD pans out on this, it would be the exact opposite. Right now, if you want an amazon book you are kicked out of Kindle to a web page, where you need to surf to the book you want and go through Amazons checkout process. Under Apples proposal, the Kindle bookstore would be INSIDE the app itself and you would buy with one click using your Apple account. Apple would handle all the transactions and subscribing would be the same as any other in-app or appstore purchase – Totally seamless and straight forward, which is why the publishers are frightened by this. It is not just the 30%, it is the loss of control they have by sending you to their sites and collecting your personal info to (maybe) sell for advertising.

      Share
  8. I’m not sure Apple will pull the plug on either the Kindle or the Netflix apps come July. Steve Jobs is already muttering technicalities like a lawyer with a weak case. Buying ebooks from Amazon, we will probably be told, isn’t “subscribing” and Netflix, Apple will claim, isn’t a “publisher.” It’ll be a lie. The Kindle app does pretty much the same thing as the recently rejected Sony app. But Apple will pretend there’s a difference.

    Why? Because beating up on either Amazon or Netflix isn’t like beating up on a minor player like Sony. To the extent that people are buying iPads to read ebooks, they buy them for the Kindle app. The iBookstore probably has one-tenth the sales of Amazon’s Kindle store. The same is true of Netflix. People buy an AppleTV to get Netflix. They don’t buy one to get Apple’s limited video offerings.

    Recall the late 1990s when Steve Jobs made a deal with Microsoft to ensure that the then-dominant Office suite stayed on Macs. Apple’s finances may be much better today than then, but if it wants to sell products, it needs the Kindle and Netflix apps just as badly.

    Also, removing the Kindle and Netflix apps would create serious legal woes for Apple. Short-term they’d face a massive lawsuit from customers. In their ads, Apple has promoted their iOS platform’s wealth of independent apps, and two of the most popular are Kindle and Netflix. Removing those two would constitute false advertising and perhaps, if intent can be shown, outright fraud. Apple can’t point to the previous existence of vague rules as justification because in the past they’ve not interpreted those rules that way. What Apple has done, Apple must continue to do. I’d add that the same isn’t true of Amazon. The latter has always be careful to stress a Kindle’s limitations. There’s no false advertising and no fraud involved.

    Even more risky in the long run, attempts to use market dominance in one area (iOS hardware) to crush competition in another (subscription sales) is a near-perfect illustration of anti-trust behavior. It’d be like Amazon buying UPS and then refusing to deliver a competitor’s packages without a 30% surcharge.

    Share
  9. I thought that Apple specifically stated this requirement was for publishers apps and not software as a service apps. Since neither Zinio, nor Amazon, are technically publishers, are they not exempt? How is buying an ebook on Amazon any different to buying a paper book on Amazon, or a toaster on QVC? You are not subscribing to either item through the app.

    Has anyone even spoken to the developers of these Apps to find out what is going on? Could it be that all this speculation has no data to support it?

    Share
    1. Not sure if you are the same Paul that referred to me upthread, but if you are, my answer to your question is that I personally think additional payments is wrong on apple’s part and most likely will be revisited.

      As for your previous comment, those companies are considered agencies since they do not create the content but distribute it. Software as service would be an app like logmein which provides a service of their own creation and requires a monthly subscription to continue service.

      Share
  10. The way I understand it, Apple says if an app is used on iOS, that the app sells updates and extras through that app and refrains from encouraging users to purchase them elsewhere, like a link to a website. I am a businessman, I’d do the same thing if it was me.

    Honestly I don’t understand all the complaining here. When you buy a drink in a bar, you can pay $5 and the profit is $3.50. When you buy a loaf of bread for $2, the cost to the supermarket is under $1. Everyone who opens a store and sells things is entitled to a profit, except Apple apparently.

    If I had a product for sale and a company told me they would sell it in their store, and that they would provide millions of devices for people to effortlessly purchase it worldwide, and they would process all the credit card payments, and they would advertise my product in their store all over the world, the would provide all the customer service, and would only want a 30% of the gross sale, then I’d jump on it. Anybody would because that’s a sweet deal.

    All the hand-wringing is about something else, and not because Apple is offering bogus terms. There’s nothing bogus about it. Is it just cool to distort things to feel a sense of outrage?

    As a practical matter, I’ve purchased add-ons to iOS apps independently and LOST those add-ons when moving to a newer device or even resetting it. Letters to the vendors have gone unanswered. When I purchase items in-app, and move the app to a new device, the add-on is offered for free download again. I only have to buy it once instead of repeatedly. There’s something to be said for purchase protection, and vendors should be grateful for this level of customer service – NO extra charge.

    Share

Comments have been disabled for this post