So, the big Apple news yesterday was that Apple released subscription billing capability into the App Store. This is actually really cool in many ways. It allows magazine publishers to easily distribute to iOS devices. It also allows some cool opportunities for web entrepreneurs to do subscription services on iOS devices.
Problem is, Apple ruined it by getting greedy and acting arrogant.
Here are the bullet points:
- App developers pay Apple 30% of all sales through the App Store. This includes recurring billing.
- Apple says that apps can no longer have links to outside stores in their apps.
- Apple now dictates that, if you offer subscriptions outside of the App Store that go into an iOS app, then you must also offer it inside the App Store at the same or lower price (and hence pay Apple 30%)
Alright, #1 I get. I mean, Apple’s 30% share is pretty steep, but it is nothing new and it is just the cost of doing business with Apple. There is no doubt that Apple has created a huge economic ecosystem inside the App Store, and they get to set those terms whether you like it or not.
#2 is greedy. The most well-known application affected by this will be the Amazon Kindle app. With that app, you buy books by clicking a link which takes you to Amazon.com to buy the book. Then, once bought, it delivers wirelessly to your Kindle app. According to the new rules, you can’t do that anymore. They’re forcing Amazon to go through the App Store and pay Apple 30%.
It is important to point out here that:
- Amazon is not using Apple’s billing system. They’re using their own. Therefore, it isn’t costing Apple anything.
- Amazon is simply opening a link in a web browser.
As for #3, it is likened to price fixing, and that’s something that has already sparked antitrust issues. Apple is reaching out and telling other companies how to price their stuff by saying that they MUST offer the same (or lesser) rate inside the App Store. In other words, Apple is demanding their cut. All because of the choice of hardware of the end user.
There are numerous apps affected by this:
- Amazon Kindle
- Hulu
- Netflix
- Rhapsody (who is already fighting back)
- many others, I’m sure.
Basically, Apple is proclaiming that if it takes place on hardware they built, they want a cut of all the action that takes place on it. And let me remind you that 30% is a SKY HIGH cut, MUCH more than the usual 2.5% credit card fees. A forced 30% to Apple economically prohibits many services from being accessible on an iOS device because these companies already operate on low margins.
Plus, many publishers acquire tons of marketing information from their subscribers base. With Apple’s model, Apple keeps all those customers and the publishers gets no information at all. It is just completely prohibitive no matter how you slice it.
Who Owns Your Device?
I’m even going to break it down further: Who owns your iPad or iPhone?
Users (like me) bought it fair and square. I decide to run apps on it to interface with the things that I use. If I can’t do that, I have no reason to own one.
We already have to put up with a restricted device that only works on the App Store restrictions. People (like me) have to jailbreak the damn thing in order to make our device do things which Apple should have thought of. Apple is always fighting efforts to jailbreak – even though I own the device and paid plenty for it.
These new App Store restrictions make it feel like RENT. And from a landlord which changes the rules anytime it suits them.
What’s next? They’re going demand 30% of my own business revenue because I use a Mac?!
Why I Bought An iPad
I bought one in order to access the stuff I use. Others do as well. Apps like Kindle and Netflix have brought TONS of business to Apple. Now, Apple rewards them by saying “screw you, pay us”.
I choose to buy books from Amazon, and now Apple is making it harder. I choose to have a Netflix subscription, and now Apple is making it harder.
Economically, I could easily see some of these major companies and publishers pull out of the App Store. Which diminishes my need to own something like an iPad.
Simply put, if that happens, I will not buy another iOS device. Because my reason is gone.
Apple Bows To Capitalism
There will be those who blindly jump on the “Apple is evil” bandwagon. And, no, they’re not evil. They’re just successful.
People keep buying iOS devices. Simply put, Apple has mastered the art of making money, and developers left and right are trying to cash in on that. Many have, too. The App Store is a simple system to build on, but it doesn’t mean Apple should be able to FORCE companies to use it.
At the end of the day, capitalism rules. Apple will change if people start taking their business elsewhere.
Personally, I hope to see more companies fight Apple on this. I like Apple, for the most part. I think their hardware is awesome. But, this move is indicative of a level of arrogance that is beyond the level of common sense.
It opens a huge opportunity for competitors. Today, Google has responded with their own new payment system which provides a lot more control to publishers. This is a huge boost to Android.
I might be an iPad guy (for now), but I want some stiff competition. So, come on, Google! I hope Android starts looking awesome on tablets and I hope the new Web OS Touchpad does well. I hope they start pricing competitively and start kicking Apple’s butt. Apple is making it easy. Don’t blow it!
Because the iPad has had tablet dominance for too long now, and selfish moves like the one the company made yesterday show it.
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Apple isn’t evil. Just like Microsoft isn’t/wasn’t evil. However, I think they’re reaching a “too big for their britches” tipping point that MS tripped on years ago. Especially when their customer base is much more rabid and will complain about their BS.
Microsoft was evil: http://en.wikipedia.org/wiki/United_States_v._Microsoft
Apple needs a smack from the FTC something fierce.
I say let economics figure it out. And it will. There’s no guarantee for Apple that this won’t backfire on them in a huge way – in the pocketbook.
But, I’m not so sure the FTC is the way to go. Of course, I’m pretty libertarian and pretty much think the gov’t screws up everything they get involved in.
All the more reason to for consumers to consider an Android device. People do have a choice now and will have even more choices and therefore more competition for Apple in the future. In the end, those who provide the best products for the lowest price win the most money.
Android has already won the platform war, and its just going to get a bigger lead. The deal here is the apps, and Apple currently dominates on that front.
Apple are evil. Closed source, proprietary, restricted hardware. Building themselves a monopoly to exploit. Be aware and don’t become a victim – pass on the other side of the road.
Just one more reason that I will never buy anything Apple. Not that I expect my statement will have much effect. I have always shrugged off Apple products because of their price. I realize that Apple does make quality products. To use an analogy, BMW and Mercedes Benz make better cars than the one that I drive, but I’m not will to pay their price. And I’m certainly not going to buy a car from any manufacturer that requires me to use their dealers to service it (I’m not insinuating that BMW or Mercedes Benz do that).
Just my 2¢
Bob
As a Mac user myself, I can’t say I blame you. In my case, I’m willing to pay the price for a Mac because I actually think its a better system for what I need. But, what Apple just did with their App Store has the potential to make iOS not nearly as friendly an environment as a Mac.
I was just issued an iPhone 32GB today to learn for support purposes. Besides it’s slick interface I don’t really care for it. Many of the apps I use for free on Android cost $.99 or more in the app store, so I won’t buy them. I also noticed straight off that several things I do with one-click access on the Android take me several more clicks to do on the iphone, which is a loss of productivity and signals to me that Google is getting the UI right. One complete annoyance is the lack of portal to portal routing on the iPhone maps, I mean it has it, but no where near as cool as my Android. I also don’t like when I’m typing something in the iphone and I want to go back and change a word or correct a spelling error, I can’t easily click in the spot where I want to make the change like I can on the Android. All in all I’d rather stick with the Android, it just works better for me.
Android has some things that are better than iOS (like it’s notification system). But, I think iOS is more polished in other things. And, my Android is actually a lot more buggy in many ways than my old iPhone 3G was.
But, everybody’s experience is different, I guess.
Dris-
Thank you for staying objective. I’d like to see you post more here, especially on the Mac vs. the world (never ending) argument because you’ve lived both as a PC user and now a Mac user. It’s not about a flame war, it’s about taking an unbiased view of pros and cons. This article illustrates a huge portion of many users’ disdain for Apple: their ridiculous policies.
And about your Iphone preference: I’d really like to see you take a shot at the HTC Evo. I don’t see (or weight) the flaws the way you do, and I’m a huge fan.
Dave,
You always seem to manage to say something that makes me wince, but this time around I’m in total agreement. I’d like to say though, I lay a lot of this business model attitude at the feet of Microsoft. I believe they have ALWAYS believed that we peons only rent their software, and have NO real rights to do anything with it. I just don’t believe activation is about piracy-its about control. That’s the attitude that allows Apple to think it is entitled to do anything it pleases with the device that you “own”.
I especially like your last two paragraphs since that is what I have been saying since before I actually bought my iPad-its ok for now, but as soon as I see a truly competitive Android device-I’m gone.