Steve Jobs to Media Companies: My Way or the Highway

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Apple caused a minor firestorm of criticism on Tuesday after it rejected Sony’s eReader app from the app store, saying the service had to allow in-app purchases as well as those that take place on Sony’s website. The company later clarified that this was always the rule for apps, but it’s cracking down on the practice now, and requiring all apps which allow external purchases to also offer in-app purchases — which go through the Apple payment system, and therefore give the company its standard 30-percent cut of every sale.

The news caused all kinds of consternation, but the deal is really very simple: If you want to use Apple as your distribution platform, you have to pay the piper. That’s a useful lesson for media companies to learn, although it’s probably too late for most.

Be Careful What You Wish For

When the first rumors about the imminent launch of an Apple iPad started circulating, many media outlets leaped at the chance to partner with the company and get their content on the new device. At the time, I (and others) warned that the new tablet was unlikely to be the solution to the problems of the media industry — and that publishers should also be careful what they wished for. By giving media companies an all-in-one platform for reaching readers and viewers and potentially selling them content via iPad apps (although that hasn’t been going all that well so far), Apple was also effectively locking down its control over that distribution channel and the relationship with those users.

This became obvious when some media outlets started negotiating with Apple about a subscription-based newsstand — a service the company is expected to announce tomorrow, as part of the launch of Rupert Murdoch’s highly-touted new iPad-only publication, The Daily. Apple balked at the idea of giving publishers access to any of the subscription or user data that would come from such an arrangement, saying only it would be able to see that data. For media companies, that kind of information is a huge part of how they sell their content to advertisers, by showing that they are reaching the right demographics and therefore that their content is worth buying.

Then Apple did the same kind of thing that it just did with Sony: It reportedly told newspaper companies that they would no longer be able to give their readers a free subscription to their content through their iPad app. Instead, they would have to sign them up for a regular subscription via the app. Just as with the Sony deal, the obvious intent was to shut off a potential escape route by which media companies could provide access to their content, and thereby avoid the 30-percent door charge at the Apple store. Frédéric Filloux summed this up nicely in a recent post on the Monday Note blog.

The Landlord Will Get His Share

That Apple is doing any of this shouldn’t come as any surprise. What’s the point of controlling a platform like the iPhone and the iPad if you can’t force people to pay you a carrying charge for hosting their content and connecting them with their customers? Allowing Sony or the New York Times to either give away their content for free or to sell it under their own terms and keep the proceeds doesn’t make any sense; it would be like a shopping mall owner giving tenants space for free, then allowing them to send shoppers out to the parking lot to finish a transaction, so they wouldn’t have to pay the mall owner his share of the proceeds. Whatever happens, Apple will get its cut.

Call it a deal with the devil or whatever you want, but Apple is the one that came up with devices that are so appealing, and a content-distribution model that is so effective, that it has sold 10 billion apps in less than three years, and created a whole generation of users who look to it for content such as newspapers, magazines, e-books and games. Putting your eggs in Apple’s basket is a great way to get them to market — but just remember who owns the basket, and who you have to pay for carrying it, and who controls the route to your customer. Meanwhile, over in the corner stands Google, waving frantically.

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Post and thumbnail courtesy of Flickr user Bill Jacobus

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