The ripple effect from the Apple announcement on their 30% cut of subscription services is still going strong. Firstly, it is obvious that Apple has every right to do this.
The Readability folk wrote an Open Letter that plainly states:
To be clear, we believe you have every right to push forward such a policy. In our view, it’s your hardware and your channel and you can put forth any policy you like. But to impose this course on any web service or web application that delivers any value outside of iOS will only discourage smaller ventures like ours to invest in iOS apps for our services.
This is the heart of the matter for me. John Gruber started to poke holds in the article:
Maybe I’m missing something, but these guys claiming to be surprised and disappointed by Apple’s insistence on a 30 percent cut of subscriptions when their own business model is to take a 30 percent cut of subscriptions strikes me as rich. And how can they claim that Readability isn’t “serving up content”? That’s exactly what Readability does. What they’re pissed about is that Apple has the stronger hand. Readability needs Apple to publish an app in the App Store. Apple doesn’t need Readability.
This side steps the main issue. It isn’t about the right to take the 30%. The problem is that some of the companies don’t have a business model that fits this change. It especially hurts models that pass money back to another entity. Even a pure model such as 37signals Basecamp would need to do the math on what 30% of their monthly fees would mean to their bottom line. Add to the fact that the iOS price has to the lowest means that all prices may have to change.
And then there is the infrastructure. You can imagine that it would take some effort for Amazon to build an in-app purchasing system, and this is work that takes away from building out other infrastructure. I know, they should just suck it up.
However, at a time where iOS and Android competition is at its strongest, Apple makes a change that alienates developers and businesses. Apple has always had an interesting relationship with developers. There was the 3.3.1 issue, and the general fact that they are very closed. However, even with all of that, developers could understand it. The 30% though feels like too much greed. Oh, come on, I hear you say. How much does the retail chain charge you as the middle man? This is a great deal! “Apple has brought back the shrinkwrapped software business!”
30% is changing the tide though. Many of these companies will be looking much more strongly at other platforms, and investing in those platforms (Android, Web, and maybe others).
John thinks that “Apple doesn’t need Readability.” It isn’t about not having one app. The balance in the ecosystem is changing. Many of the Big Apps will be investing more elsewhere than before.
Maybe this will blow over and the iOS ecosystem is so strong that it doesn’t really matter. Maybe Apple will see that it has gotten “too greedy” (not that they don’t have the right, but that it isn’t worth the hit to the ecosystem) and will lower the % or make other changes for different types of subscriptions.
It will be interesting to see. It definitely feels like there is a disturbance in the force.
Update
Chris Leydon has commented saying that:
We have no issue whatsoever with Apple taking a 30% from our app… they just won’t provide us for the means to do it and inadvertently lock us out from the app store.
A bulk of the TinyGrab post goes into detail on how they break various infringement numbers and how, because of limitations in the AppStore, they can’t do business there. One key item is the fact that you don’t get info on the purchaser (and thus without having that connection you can’t do things like offer free access via another app), as well as other items around “rental” and unlocking features. If you want to get creative (or just offer simple use cases for your users!) with the way that you do business, you may not be able to work within the Apple system.
February 21st, 2011 at 3:30 pm
Hello,
My name’s Chris Leydon and I’m the founder of TinyGrab.
It seems as though you missed my point on our blog post about TinyGrab’s position on the new App Store polices. We have no issue whatsoever with Apple taking a 30% from our app… they just won’t provide us for the means to do it and inadvertently lock us out from the app store.
The issue isn’t the percentage, it’s the flawed system.
Best wishes,
Chris Leydon
TinyGrab Project Manager
February 21st, 2011 at 4:16 pm
I don’t think it’s much of a disturbance, because not much changes for the typical App Developer who sells paid apps. If you have a paid app, Apple handles all the sales stuff for you (everyone who ever tried dealing with credit cards knows how big of a pain that is) and provides a reasonably useful marketing channel if you make it on their front page. 30% on paid apps is certainly acceptable (although it would be interesting to see what competition could do). The issue here is free apps that offer subscriptions like Magazines. Apple makes the point that free apps don’t generate money, which is understandable (although one can argue that it helps selling devices and other paid apps). Magazines argue that 30% is too much of a cut, which I can also understand (although if I compare subscription to newsstand prices I have to wonder about he difference). So it seems that Magazine Subscriptions will die out on iOS, which naturally upsets the industry that is already fighting with Magazines dying out in the real world. They are a bit desperate to finally find a way to monetize on the internet, and Apple denies it to them.
February 21st, 2011 at 5:02 pm
3% or 30% – if this sort of midstream change was pulled on a consumer, it would be called a bait-and-switch scam, and be subject to a fine or prosecution. Yet somehow, the Grubers of the world are a-ok with this as long as it is Apple jabbing the worm on the hook.
February 21st, 2011 at 6:50 pm
No one is forcing customers to only buy their content subs through in-app purchasing, and Apple hasn’t said that outside-purchased content can’t be view in-app(as long as the same option is give at the same price within the app).
Nothing is stopping app publishers from messaging to their customers and potential customers that they can get a better deal on the web site and still view that content on their iOS devices.
It surprises me that people continually expect another business to make sure that their own business model is sustainable. Gruber is right. Apple doesn’t need Readability, or any other app developer.
February 21st, 2011 at 7:27 pm
Hey Dion,
Count me among those who are sad about this change. The 3.3.1 thing made me seriously question whether to invest in iOS as a developer or user, but when they updated the terms I thought it reflected some awareness on the part of those making the guidelines that it’s in everyone’s best interest to keep the App Store rules reasonable. But this new 30%-of-all-subscription-revenue thing is actually even worse.
I can think of two possible explanations: One, that they didn’t think through the various business models of subscription services, and realize that 30% of revenue amounts to 100% or more of profits in many cases. (This is unlike charging for apps, where Apple is providing a real service as distributor, and the marginal cost of each app sale is close to zero, leaving 70% of profits for the developer). Given the kind of financial expertise at Apple, though, it’s hard to believe they didn’t know what they were doing. That leaves the second, more cynical, explanation: that they are purposely pushing content-based subscription services out of the App store.
In the end it doesn’t really matter to me which explanation is correct. The only thing that matters is that iOS is a platform controlled by a capricious central authority that doesn’t care about destroying businesses that developers have invested a lot of time in. Unless your app is extremely safe – games, or simple apps that don’t push the limits of the platform in any way – developing for iOS is a very risky investment.
I’m honestly sad about this. Up until now I felt like iOS was clearly the best platform. I’m not a big Android fan – the UI leaves me cold, and the new tron-inspired stuff in Honeycomb strikes me as astonishingly bad. And Microsoft is Microsoft. I’m finding myself rooting for HP WebOS. Maybe I’ll trade in my iPhone 4 for a Pre 3.
February 21st, 2011 at 7:54 pm
I don’t think the true impact of the new policy has been felt yet…
I’m thinking that there are likely many people (like myself) who use the Kindle app on both my iPhone and iPad. If the Kindle app (which was updated recently!) gets rejected from the App Store, that could be the start of the Rebellion.
February 22nd, 2011 at 1:11 am
“Nothing is stopping app publishers from messaging to their customers and potential customers that they can get a better deal on the web site and still view that content on their iOS devices.”
Well, yes, something does stop publishers from giving customers a better deal on the website. The explicit requirement that the in-app price must be the same or lower than the best price you can get via any other platform does.
February 22nd, 2011 at 1:00 pm
@Tony — “Nothing is stopping app publishers from messaging to their customers and potential customers that they can get a better deal on the web site”. Actually there is something stopping publishers from doing that: AAPL. The AAPL policy is that you must offer things at the same price in-app and anywhere else. So you can’t offer a better deal on your website than you offer in-app. And you can’t make outside-of-app the only way to get content.
You are correct that AAPL thinks that they do not need content providers like Netflix, Hulu, Amazon Kindle, etc. However, if you think the fact that they offer competing services is a coincidence, then I would say you are naive. Also, I think Dion is right on that folks like Netflix and Amazon *have* to invest heavily in Android, even if they didn’t want to. AAPL has really given them little choice. And that sure seems like hubris.