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Apple Would Be Crazy to Block Use of Outside Content

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The Sony Reader (s sne) app for iPhone has been rejected by Apple(s aapl), according to the New York Times (s nyt). The app would have allowed users to purchase and read e-books from the Sony Reader Store, which currently also provides content for Sony’s Reader hardware, and the Sony Reader Android app (s goog). According to the Times, Apple rejected the app because from now on, all in-app purchases would have to go through Apple. We’ve reached out to Apple for comment, and will update if any response is forthcoming.

While Amazon(s amzn), Kobo and Zinio currently offer apps which allow users to make purchases outside of the App Store, and then use that content within those apps, the Times report indicates that this, too, could no longer be possible under Apple’s new app requirements.

It’s this second restriction that, if true, would really make waves. Apple already doesn’t allow apps to sell content without either using its in-app purchasing system (for which the company takes a 30 percent cut on all transactions) or sending users to an external website to complete the transaction on their own with a separate (non-iTunes) payment method.

The exact reason behind the rejection isn’t clear from the Times article. At one point, the reason behind the rejection is listed as follows:

Apple told Sony that from now on, all in-app purchases would have to go through Apple, said Steve Haber, president of Sony’s digital reading division.

If Sony’s app was rejected simply for violating this rule, as Haber seems to suggest, then there’s nothing to get upset about. But Times writers Claire Cain Miller and Miguel Helft don’t leave it at that. Instead, they offer the following:

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. [Emphasis added]

Apple disallowing the use of content purchased outside the App Store would mean the highly successful Kindle iPad and iPhone apps would have to be removed, as would Netflix(s nflx), Hulu Plus and many others. Or such content could move to an in-app purchasing model, giving Apple a 30 percent cut of all revenue from content purchases.

Earlier this month, a report surfaced claiming Apple wasn’t allowing magazine publishers to offer print subscribers free digital editions under the new in-app subscription model the iPhone maker is rumored to be introducing tomorrow alongside Rupert Murdoch’s dedicated iPad newspaper, The Daily. Such a move does suggest Apple intends to do more to ensure it’s reaping the benefits of the App Store economy in every possible instance.

But would Apple really go so far as to wall off paid content from all outside sources after allowing it for so long? There’s no doubt the success of iOS has contributed to the success of the Kindle store, Netflix and others, but the relationship hasn’t been one-way. Apple benefits at least as much from having content to offer users, and making sure that users can carry that content from one platform to the next.

Apple can force record companies to acquiesce to its terms in the iTunes store because the ultimate beneficiary is the consumer, and any objections by labels can fairly easily be spun as greedy in terms of popular opinion. There’s no way Apple blocking access to Kindle books, Zinio magazines and Netflix accounts can avoid looking like a slap in the face to consumers, no matter how much you spin it. No, this is simply a case of Sony not playing by the rules by trying to provide access to its own store through the app, and then running crying to the press when it ran up against a wall.

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14 Responses to “Apple Would Be Crazy to Block Use of Outside Content”

  1. Apple is being foolish. The iPad’s only advantage as a reading platform over the hot-selling Kindle isn’t the color display. Amazon could easily bring out a color LCD version of the Kindle and use it to sell movies as well as books. Maybe they’re already working on one.

    No, the iPad’s sole advantage for reading is that in the past it has been a more open platform. Although you can load digital books from any source on a Kindle (as long as they’re in the right formats and not protected by DRM), the Kindle only lets you buy books from Amazon. In contrast, Apple wasn’t doing anything to discourage users from buying books from other sources, including Amazon as well as the unfortunate Sony.

    Now they are. Apple wants to load iPads with heavy restrictions that it thinks will favor the iBookstore and either drive away the competition or make selling books on the iPad unprofitable for competitors and profitable for Apple. Don’t forget that the Apple behind the iPad has an iBookstore that’s competing with Amazon, Sony, B&N and others.

    This also confirms my suspicion, based on some sales figures I have seen, that the iBookstore isn’t doing very well, that it is running a distant third behind both Amazon and B&N. That would certainly explain the belated application of this rule and their picking on Sony, which is perhaps in fourth place.

    Apple’s behavior also implicitly supports my conviction that, as a reading tool, the Kindle 3 at $139 beats the socks off the iPad at $499, not just in price but in sheer usefulness. The Kindle 1, which I have, isn’t that great. It’s clumsy to use. But Kindle 3 is a far better reader than the iPad and sells at one third the price.

    That may be one reason Apple is behaving so badly. In the past decade, they’ve grown accustomed to winning. They’ve forgotten how to lose gracefully and with style.

  2. happy happy day. walking the grey line for so long made me think that maybe its actually possible. but the dark side is tempting and corrupting. walking the grey line will eventually trip you to step on the dark side. welcome to the dark side my friends – we have Cookies. the google trio must have a gingerbread party tonight.

  3. Alcibiades

    Apple launched from day 1 with significant content that could be purchased from outside the App Store but viewed in an App. Here are apps I have installed on my iPad that allow this:

    1) Netflix
    2) Wall Street Journal
    3) Economist
    4) Financial Times
    5) Pandora

    I don’t see Apple tightening the reins on these apps

    Something else appears to be going on here (or maybe Apple is limiting its watch on “books”)

  4. Apple’s real statement: “We have not changed our developer terms or guidelines. We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase.”

    • That implies that content offered outside an app must be the same content offered inside an app.

      Content offered for sale inside an app is subject to a 30% commission to Apple, must be individually reviewed by Apple and approved for sale by Apple, and may not be used outside of the app such as on another platform.

  5. Actually book vendors and publishers could do exactly what Amazon does with their MP3 store — sell DRM free .ePub versions of their books which readers could then load into iBooks through iTunes.

    The vendors get to keep 100% of the book price. Simple, and not something Apple would or could ever block.

  6. I agree that this seems more like sensational media coverage prompted by an overreaction or misinformation provided by Sony, rather than reality. Why would Apple have featured apps like Netflix in past presentations, and even added it to Apple TV, if their ultimate goal was to later take them away? They know the public outcry that this would cause. While many people disagree with some of Apple’s decisions about a closed system, the App Store review process, and other related issues, they aren’t stupid, and they know that this would be much, much bigger than that.

    That said, if this were to come true, I think I might actually truly consider switching to Android if they did, and I’m not one to throw a threat like that around lightly.

    • Actually, this is not an over-reaction or misinformation. Working for a development company myself, I have seen this first hand. An application we designed for a florist was rejected because the florist pays us a monthly maintenance cost (outside of the app) for hosting their product database on our servers. The Apple rep who spoke with us told us that we either had to stop charging the customer for hosting fees or give them a 30% cut of it by charging that fee through the in-app API.

      We are a small business and the hosting fees for the server that they need in order to provide their customers with the ability to use the iPhone version of the application are not something we can simply stop charging, nor can we afford to now tell a customer (who has been providing the Android application to his customers without issue for months) that he now has to pay more to cover the pound of flesh that Apple wants from us.

      So no, this is not an exaggeration or overreaction, this is exactly what their new policy is, a shakedown of developers that they are already charging a $99/year fee from just to be called an “iOS developer” and 30% of the cost of the application itself on the app store. They are really just trying to drain every drop of blood from this stone that they can.

  7. What? Apple’s iTunes pricing benefits the consumer? In what way? Across the board, iTunes pricing is nearly always more expensive than other sources, which is why I buy almost exclusively from Amazon. Note that Apple’s wading in with publishers for the iBookstore did pretty much the same thing; moving to the agency model bumped up a LOT of pricing on e-books across the board, including at Amazon. Look at how many Kindle editions are the same price as paperbacks to see what I mean. Gee, thanks, Steve. SO helpful.

    Apple’s tyrannical need to control everything they possibly can may very well BE their downfall. I haven’t seen a need to jailbreak my devices. Were they to move to an “all content through our store” model, that would be the moment that I did.