Read all about it – Apple’s landgrab in the app content market

Douglas recently joked that I have embraced the “iPayTooMuch” lifestyle, and it is true that I am a fan of easy to use software and hardware that “just works”.

However, in the interests of showing that I do not agree with everything coming out of Cupertino, I thought I would comment on the recent furore over Apple’s new “in-app subscription” requirements for iOS (iPhone/iPad etc) apps that allow the user to consume paid for content such as ebooks, music, newspapers and magazines.

What it’s all about?
For those of you who missed the press coverage of this a couple of weeks ago, Apple has attempted to use its control of the iOS ecosphere to grab a share of the revenue for content purchased for consumption in apps. Apples’s new policy requires that such apps must offer an in-app facility to allow content purchases using only the user’s iTunes account (in return for which, Apple takes a 30% cut).

Purchasing content by other means (through another website or whatever) is still permitted, but as those other means cannot be promoted in the app itself, and the in-app price (including Apple’s 30% cut) must be the same as the non-in-app price, it is hard to see why consumers would choose anything other than the “easy” in-app purchase route.

The developer’s perspective
Brodies’ TIO Group client and producer of the Eucalyptus ebook reader app, Jamie Montgomerie, has written a really interesting blog on this that summarises (from a developer’s point of view) why this is a “bad thing”.

As Jamie points out, margins in this market are already tight, and there simply isn’t enough cash around to allow Apple to take a 30% cut. This is particularly the case where developers have given away an app (or sold it at a reduced price) and were depending on revenue from in-app sales.

Isn’t this just the same as buying music from iTunes?
You may say that this is no different to the purchase of music through iTunes, but there are two immediate differences that spring to mind:

  • firstly, this policy applies across the board to all types of content. Newspapers and magazines are distributed by numerous competing organisations. In contrast, the music industry is dominated by a small number of large players, each of whom will have negotiated their own deal for Apple for sales through iTunes (and I bet that Apple is not getting the full 30%).
  • secondly, the iPod has always been closely tied to the iTunes ecosystem, and purchasing music from iTunes predates the App Store. In contrast, to date the App Store has offered an open environment for purchasing and consuming other types of content from third parties. Indeed, music streaming apps like Spotify currently allow you to link through to the Spotify website to buy a song from Spotify. Under the new policy, Apple will expect a 30% cut of Spotify’s revenues from such sales. If that happens then Spotify will no longer be able to compete on price with Apple’s own iTunes, losing a valuable revenue stream.

Competition concerns
So what will happen?

It will partly depend on the response from developers (to develop or not develop for iOS?) and the response from consumers (as Jamie says, “I hope you like [Apple’s own ebook reader] iBooks“).

And that may be the issue here. The European Commisssion yesterday announced an investigation into the ebook market and the dominant position of publishers. This investigation appears to focus on the fact that ebooks are generally sold on an agency model (with the publisher setting the price, as opposed to the printed market where there is far more competition as retailers act as distributors and can choose their own price) and alleged cartel behaviour, but shows that the Commission is already taking a interest in the lack of competition in this market.

Given that Apple’s policy change effectively gives it a cut of all content sold for use on iOS apps (whether it is bought through iTunes or otherwise – eg from the Amazon/Kindle store), it may make it almost impossible for anyone to undercut [ie compete] with content sold by Apple through iTunes. If this happens then iTunes and the Apple apps are likely to become the predominant ebook/music/video players and content sources on iOS devices to the exclusion of innovative products and services that have (to date) been allowed to flourish. It sounds a bit like the Microsoft Internet Explorer/Windows Media Player battle all over again.

That might be little bit more Apple dominance than the Commission is prepared to swallow.

*Not sent from my iPad 2.

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