FTC looking into Apple subscription terms, while first publishers get on board

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  • ewtheckmanewtheckman Posts: 280member
    Quote:
    Originally Posted by Jcoz View Post


    That's fantastic, now who is willing to go to court and challenge it?



    I am serious, I would like to see it happen and the challenger win.



    I suspect this is probably part of what the FTC will be looking at. If they move on to a full investigation, I expect this be challenged.



    BTW, I don't think it's necessary to have a[n additional] court challenge to be able to argue that it's not valid to base an argument on an assumption that Apple has some presumed "right" to exert absolute control over which apps a customer can install on an iDevice. Apple's loss in the jailbreaking suit is sufficient to demonstrate that no such "right" exists.



    Quote:

    Before apple brings this policy to my mac and I get rid of my iphone and my macbook.



    Yea, the creation of the Mac App Store and the promise to move iOS features to Mac OS 10.7 makes me wonder if this is where Apple is headed for the Mac. I really hope not.
  • jcozjcoz Posts: 251member
    Quote:
    Originally Posted by EWTHeckman View Post


    I suspect this is probably part of what the FTC will be looking at. If they move on to a full investigation, I expect this be challenged.



    BTW, I don't think it's necessary to have a[n additional] court challenge to be able to argue that it's not valid to base an argument on an assumption that Apple has some presumed "right" to exert absolute control over which apps a customer can install on an iDevice. Apple's loss in the jailbreaking suit is sufficient to demonstrate that no such "right" exists.







    Yea, the creation of the Mac App Store and the promise to move iOS features to Mac OS 10.7 makes me wonder if this is where Apple is headed for the Mac. I really hope not.



    I hope that is the case and it is looked into seriously.



    It is disappointing IMO to see this approach tied to the ipad in the first place, I actually really like the mac app store, but as a big storefront, not the ONLY storefront.



    I thought a similar policy would be best on the ipad as well.



    I can't say why exactly I feel its something OK for a phone, I guess I've just never felt limited owning an iphone, being that the screen size is a major limiting factor in and of itself...either way, just seems to be have the potential of being a much more crippling policy on an ipad, let alone a mac.
  • piotpiot Posts: 1,344member
    Quote:
    Originally Posted by EWTHeckman View Post


    That much is correct. Amazon and each publisher negotiated a contract. Amazon provides certain services to the publisher such as an ebook format with certain features, marketing, hosting for the content, tech support to end users, payment processing and so forth. In return, the publisher agrees to provide Amazon with the content in return for a certain amount of money per sale.



    Yes, but you (nor I) know the full terms of that contract. We do know that Amazon reserves the right to distribute that same content on hardware platforms other than the Kindle but we we do not know how that affects the financial terms. Your "certain amount of money" is more probably "a certain percentage". Amazon already deducts a "service charge" before revenue is split so it is quite possible that the revenue split would remain the same... after service costs and Apple's costs have been deducted.





    Quote:

    If either side doesn't like the terms of the contract, then it doesn't get signed.



    Exactly! If you don't think the contract is beneficial to you, don't sign it.





    Quote:

    But the contract is between Amazon and the publisher, not between Apple and publisher. They have no legal right (or moral) right to interpose themselves into that contract.



    If Amazon wants to sell stuff through Apple's store then they sign the contract.

    If a publisher wants to sell stuff through Apple's store then they sign the contract.

    No problemo!





    Quote:

    The only value Apple is "adding" is handling credit card processing, something these companies are already doing themselves.



    Oh for fucks sake! Apple has sold over 160 million iOS devices and is going to sell another 10 million a month, this year! With that 30% Apple cut, Amazon is buying the opportunity to sell direct to those customers. If they don't think it's worth it then they can pull their app.



    Where would you like to open your book store? In John F. Kennedy International Airport or..... a field in Idaho?
  • ewtheckmanewtheckman Posts: 280member
    Quote:
    Originally Posted by piot View Post


    And in a nutshell, you have succinctly pointed out why you don't understand how commerce works.



    Why do sellers HAVE TO receive the same amount!



    Your restatement changes the meaning of my original statement.



    They don't "HAVE" to receive the same amount, but IN ORDER TO receive the same amount where 30% is taken off the top, the selling price must be increased by 43%.



    What businesses MUST do in order to stay in business is sell their products and/or services at something higher than their costs.



    For example, Amazon is willing to keep only 30% of the selling price of books which meet a certain criteria, one of which is that the book costs $9.99 or less. To simplify the math I'll round that up to $10.



    This means that for every one of these $10 books, Amazon keeps $3 and sends the other $7 to the publisher. Out of that $3.00, Amazon has to pay the credit card processing company somewhere between 1.5% and 2.8% of the original $10. Let's assume Amazon gets a really good rate and only has to pay 1.5%. That leaves $2.85 for Amazon to pay for the servers used to host the book, commercial software they use, internet connectivity, employees for tech support, server support, software development, managers, health insurance for employees, taxes, etc.



    Now if Apple takes 30% right off the top for that sale, Amazon doesn't have to pay credit card fees. So they've saved $0.15 and Apple gives them a check for $7.00. After Amazon pays the publisher their $7.00 cut, that leaves Amazon a whole $0.00 to pay for the servers they still need because they're hosting the book, the software they purchase, their employees and expenses, internet connections, taxes, etc.



    In other words, their net profit on that sale is less than zero. There is just no way a business can survive by consistently selling a product at a loss.



    Now lets assume that Amazon's net profit (after costs) is 1/3rd of their take. That makes their profit $1 before Apple gets involved. (My understanding is that this is quite good, but these are just rounded guestimates for the sake of example.) So let's say that Amazon is nice and decides to accept just half the profit they were making before Apple's new rules. In other words, they decide to accept a $0.50 profit on a book they used to make $1.00 on.



    That means they're initial costs are $7.00 publisher payment, $1.85 Amazon costs, and $0.50 profit. (There's no CC fee since Apple carries that cost, so Amazon saves 15 cents in this scenario.) That means for Amazon to make HALF the profit they used to make, they MUST now to raise the price of that $10 book to $13.36.



    Congratulations, your $10 book now costs $3.36 more than it used to. The company doing most of the work is getting half the profit it used to get. What value did Apple add to the process? Was it worth the extra money for Apple to get involved?



    Now, I'm well aware that Amazon is not going to be selling all their books through an iOS app. I'm also well aware that Amazon's take on some books is higher. (I'd be willing to bet that those higher take books pay enough of Amazon's costs that it makes the 30% books possible.) Furthermore, I'm well aware that not all iOS app users will actually do their purchases within the app.



    On the other hand, given that Apple wants these three things:



    1) Apps must contain that ability to purchase via Apple



    2) Apps cannot contain links to resellers' sites to make purchases



    3) In app purchases cannot cost more than direct purchases,



    It seems entirely reasonable to me that the average iOS user will see absolutely no advantage to manually going to the resellers' site to make a purchase, and will instead opt to go the quick and easy route of just using the in app purchase. In fact, it would totally surprise me if less than 80% of iOS eligible purchases were made outside of apps.



    In order to keep from going out of business because they're losing too much money, businesses which stay in the App Store will be forced to raise their prices based on what percentage of sales they expect to get via iOS devices.



    In the example I gave, if 80% of those book sales came via iOS devices, of which 80% were placed in app (64% of all sales), the price would have to be raised to about $11.97 for everybody just so Amazon could continue to receive half the profit they get now. If only 30% of sales came via iOS devices, Amazon would still have to raise the price of that book to $10.66 just get back to half their previous profit.



    No matter how you shake it, even customers who don't use iOS devices wind up paying more because of Apple's actions, even if the reseller is willing to give up how much profit they get. That is, of course, unless the reseller pulls out all-together, in which case, that very expensive (and very nice) iDevice just became quite a bit less nice.
  • ewtheckmanewtheckman Posts: 280member
    Quote:
    Originally Posted by piot View Post


    Oh for fucks sake! Apple has sold over 160 million iOS devices and is going to sell another 10 million a month, this year! With that 30% Apple cut, Amazon is buying the opportunity to sell direct to those customers. If they don't think it's worth it then they can pull their app.



    Where would you like to open your book store? In John F. Kennedy International Airport or..... a field in Idaho?



    Sigh?



    I've already been over this. Go back and read my comments. Amazon (and other content providers) help Apple sell hardware.



    I am not Apple's slave. They do not own me. They have no right to attempt to exert total control over who I choose to purchase content from.



    If you want me to reargue the points again, I refuse. They're already in writing for you to read at your leisure.
  • aiaddictaiaddict Posts: 487member
    Quote:
    Originally Posted by EWTHeckman View Post


    No matter how you shake it, even customers who don't use iOS devices wind up paying more because of Apple's actions, even if the reseller is willing to give up how much profit they get. That is, of course, unless the reseller pulls out all-together, in which case, that very expensive (and very nice) iDevice just became quite a bit less nice.



    And that in a nutshell is why this is attracting regulatory attention and why is could lead to legislative action. Apple's abuse their iOS marketshare is likely to raise prices for ALL consumers so I don't see how anyone can defend it as right even if current law allows to possibly be legal.
  • piotpiot Posts: 1,344member
    Quote:
    Originally Posted by EWTHeckman View Post


    If content resellers are getting screwed, they have only two options:



    No they have more options.



    Quote:

    1) Pull out of the platform/go out of business. In this case, users lose access to the content. This is the users getting screwed.



    Why would they go out of business. Amazon and Netflix (for example) had pretty good businesses before Apple came along.



    Quote:

    2) Raise prices on their content for EVERYONE they sell to. This is users getting screwed, even non-iOS users.



    Raising prices will almost inevitably result in lost sales. One has to hope that these people are better at running their business than some of the folk here.



    3) Try and negotiate with Apple. Problem here is we may never know if that occurs.



    4) Suck up that 30% hit and watch the additional revenue from Apple's (soon to be) hundreds of millions of customers, roll in. Yes, I agree, that is not a done deal... but it's certainly worth a punt.



    4) Build a better platform.
  • ewtheckmanewtheckman Posts: 280member
    Quote:
    Originally Posted by piot View Post


    hy would they go out of business. Amazon and Netflix (for example) had pretty good businesses before Apple came along.



    Of course I don't think Amazon or Netflix will go out of business. I would only expect small developers who are dependent on Apple, don't have the margin to absorb the loss of revenue and can't raise to prices to go out of business. Either way, iOS users lose access to the content.



    The point is that if they decide to not raise prices, they can not and will not sell at a loss, leaving the only option to pull out of the platform.



    Quote:

    4) Suck up that 30% hit and watch the additional revenue from Apple's (soon to be) hundreds of millions of customers, roll in. Yes, I agree, that is not a done deal... but it's certainly worth a punt.



    This is only possible if they had sufficient margin to begin with. A recent thread included links to Netflix's numbers. They don't have enough margin to simply absorb 30% off the top without giving up almost all their profit. I sincerely doubt that Amazon can absorb such a massive new cost either.



    Please tell me that you realize that losses on each sale cannot be made up in volume!



    This option leads right back into option 1 or 2.



    Did you read through all the math? Funny thing about numbers. They tend to be inflexible.
  • nhtnht Posts: 3,039member
    Quote:
    Originally Posted by Sky King View Post


    It's time for we the people to demand that government stop trying to regulate business. If the publishers choose to accept Apple's terms, that is their business. If they choose to reject or continue to negotiate. But there could be nothing worse than a bureaucrat in the government sticking his nose in to stuff he does not understand.



    Why on earth do we the people permit government bureaucrats who do not have the cojones to start or operate a business to regulate anything.



    Time to dump Obama and his regulators.



    Can mods please move these posts to Political Outsider and hit idiots who troll politics here with a 10000 day ban or when their IQ hits double digits whichever comes first?



    No, I don't care which side of the political divide you come in on. I don't want to hear it and my ignore list is getting pretty damn big.
  • mikeysbistromikeysbistro Posts: 22member
    Quote:
    Originally Posted by Jcoz View Post


    Price fixing is an agreement between COMPETITORS. Thats the whole point I'm making.



    "Competitors" is not part of the definition of price fixing. Black's Law Dictionary, 7th Edition, defines price fixing as an "artificial setting or maintenance of prices at a certain level contrary to the workings of the free market". So anyone can be guilty of price fixing, whether or not they are competitors.
  • piotpiot Posts: 1,344member
    Quote:
    Originally Posted by EWTHeckman View Post


    Apple may claim they have that right, even in their licensing, but I'm pretty sure such a right does not actually exist.



    First of all, I recall reading that Apple lost a suit over jailbreaking the iOS. That suggests that Apple does not actually have a right to control what applications are run on iOS devices once they've been sold. (Ah, here it is.)



    Second, there is established law that illegal terms in contracts cannot be enforced. Though I doubt an "Our App Store Only" clause has been tested in court, or that there's an actual law making such license terms actively illegal, such a clause asserts a claim over someone else's property (a customer's iDevice) which the above lawsuit said Apple cannot assert. Therefore, it seems unlikely that such a clause could survive a court challenge.



    And let's not forget that Apple lost the Psystar case.
  • piotpiot Posts: 1,344member
    "General Pricing Rule: By our General Pricing rule, you must always ensure that the item price and total price of an item you list on Amazon.com are at or below the item price and total price at which you offer and/or sell the item via any other online sales channel. Effectively prohibiting you from offering any kind of discount to customers elsewhere* "



    Surely this must be illegal ?

    And if it isn't... Then we must create a new law so that it becomes illegal.

    String em up I say... String em up!





    * OK I admit. I made up that last sentence.
  • hirohiro Posts: 2,663member
    Quote:
    Originally Posted by EWTHeckman View Post


    Of course I don't think Amazon or Netflix will go out of business. I would only expect small developers who are dependent on Apple, don't have the margin to absorb the loss of revenue and can't raise to prices to go out of business. Either way, iOS users lose access to the content.



    This makes zero sense. The publishers subscription prices have nothing to do with developers, let alone small developers. Only those selling subscriptions, music or books are affected at all. Small developers are nowhere in there. It is a false problem.



    Quote:

    A recent thread included links to Netflix's numbers. They don't have enough margin to simply absorb 30% off the top without giving up almost all their profit. I sincerely doubt that Amazon can absorb such a massive new cost either.



    Netflix is in direct competition with the video portion of the iTunes Store. Why should Apple give them a sweetheart deal? As there are many other means of viewing Netflix content other than iPads, that makes it difficult to claim anti-trust. So your argument here runs out of steam too.



    Quote:

    Please tell me that you realize that losses on each sale cannot be made up in volume!



    Well since Netflix doesn't sell content on a pass-thru basis, their cost structure isn't as fixed as you think it is. They probably can make out like bandits based on volume,or at least maintain profitability.



    Quote:

    This option leads right back into option 1 or 2.



    Except when it doesn't



    Quote:

    Did you read through all the math? Funny thing about numbers. They tend to be inflexible.



    Yes, numbers are inflexible, but the thing is if you look at them wrong you can draw the wrong conclusions.
  • realisticrealistic Posts: 1,111member
    Quote:
    Originally Posted by Sky King View Post


    It's time for we the people to demand that government stop trying to regulate business. If the publishers choose to accept Apple's terms, that is their business. If they choose to reject or continue to negotiate. But there could be nothing worse than a bureaucrat in the government sticking his nose in to stuff he does not understand.



    Why on earth do we the people permit government bureaucrats who do not have the cojones to start or operate a business to regulate anything.



    Time to dump Obama and his regulators.



    Quote:
    Originally Posted by MacVicta View Post


    The racism displayed in this post is remarkable. I'm disappointed that Apple Insider would allow such rightwing filth to be posted on their website.



    Your ignorance is showing as there is no racist comment in the post.
  • realisticrealistic Posts: 1,111member
    Quote:
    Originally Posted by AIaddict View Post


    BINGO! We have a winner in post #1!



    The banning links to outside content is not great either but probably acceptable depending on how strict they are in their definitions and enforcement. The price fixing is across the line in a big way. If the iTunes store with single click is so much better that it is worth a 30% fee, than let it compete on its own terms and let customers decide. By putting in the price restriction, Apple is admiting upfront that their service is worth the same or less than other retail channels which then begs the question why the content providers should have to pay for it.



    I don't see price fixing in any fashion, if anything I see Apple's policy as a benefit to the consumer. A consumer can shop Apple's store and feel confident that the price they pay will be the best offered.
  • realisticrealistic Posts: 1,111member
    Quote:
    Originally Posted by EWTHeckman View Post


    Apple may claim they have that right, even in their licensing, but I'm pretty sure such a right does not actually exist.



    First of all, I recall reading that Apple lost a suit over jailbreaking the iOS. That suggests that Apple does not actually have a right to control what applications are run on iOS devices once they've been sold. (Ah, here it is.)



    Second, there is established law that illegal terms in contracts cannot be enforced. Though I doubt an "Our App Store Only" clause has been tested in court, or that there's an actual law making such license terms actively illegal, such a clause asserts a claim over someone else's property (a customer's iDevice) which the above lawsuit said Apple cannot assert. Therefore, it seems unlikely that such a clause could survive a court challenge.



    There was no lawsuit. "The decision to allow the practice commonly known as "jailbreaking" is one of a handful of new exemptions from a 1998 federal law that prohibits people from bypassing technical measures that companies put on their products to prevent unauthorized use of copyright-protected material. The Library of Congress, which oversees the Copyright Office, reviews and authorizes exemptions every three years to ensure that the law does not prevent certain non-infringing uses of copyright-protected works."
  • realisticrealistic Posts: 1,111member
    Quote:
    Originally Posted by EWTHeckman View Post


    ...



    Second, there is established law that illegal terms in contracts cannot be enforced. Though I doubt an "Our App Store Only" clause has been tested in court, or that there's an actual law making such license terms actively illegal, such a clause asserts a claim over someone else's property (a customer's iDevice) which the above lawsuit said Apple cannot assert. Therefore, it seems unlikely that such a clause could survive a court challenge.



    First, the lawsuit you refer to never happened. Second, how does Apple's app store have or make any claim over someone else's property? If you bought an iDevice you bought it to use with Apple's app store not somebody else's. If someone bought an iDevice to use with other stores which Apple openly doesn't support then that person is a fool. Don't like Apple's iOS ecosystem then buy another company's product.
  • hirohiro Posts: 2,663member
    Quote:
    Originally Posted by EWTHeckman View Post


    Apple may claim they have that right, even in their licensing, but I'm pretty sure such a right does not actually exist.



    First of all, I recall reading that Apple lost a suit over jailbreaking the iOS. That suggests that Apple does not actually have a right to control what applications are run on iOS devices once they've been sold. (Ah, here it is.)



    Second, there is established law that illegal terms in contracts cannot be enforced. Though I doubt an "Our App Store Only" clause has been tested in court, or that there's an actual law making such license terms actively illegal, such a clause asserts a claim over someone else's property (a customer's iDevice) which the above lawsuit said Apple cannot assert. Therefore, it seems unlikely that such a clause could survive a court challenge.



    Quote:
    Originally Posted by Realistic View Post


    There was no lawsuit. "The decision to allow the practice commonly known as "jailbreaking" is one of a handful of new exemptions from a 1998 federal law that prohibits people from bypassing technical measures that companies put on their products to prevent unauthorized use of copyright-protected material. The Library of Congress, which oversees the Copyright Office, reviews and authorizes exemptions every three years to ensure that the law does not prevent certain non-infringing uses of copyright-protected works."



    And a second point on the jailbreaking issue is that the only thing the Library of Congress ruling means is that Jailbreaking is not criminal, not that Apple must allow it. Now being that jailbreaking isn't criminal that also means Apple would have a very difficult time suing the jailbreakers in most instances. But there isn't anything in there that says what Apple can and can not to, only (indirectly) what the police can not do, which is arrest jailbreakers because it is legally allowed.
  • macrulezmacrulez Posts: 2,455member
    deleted
  • hirohiro Posts: 2,663member
    Quote:
    Originally Posted by MacRulez View Post


    That's the beauty of the posts here: when numbers like that come out, they write "See? Apple owns this market!" But when the feds come calling, suddenly it's "But Apple doesn't own this market."



    The feds aren't going to do anything. They responded to a first day complaint with a "We'll evaluate it" response. Last time with the Developer restrictions the FTC the followed the lead of the Europeans who dropped the Dev restrictions anti-trust investigation fairly quickly and without any appreciable comment. I wouldn't expect anything else, especially since the Europeans already said this past week a vertical market of a single device doesn't qualify for anti-trust status. They will be back if Apple tries to use an iPad advantage to kill other tablets unfairly, but until then Apple rules the roost because their store is their store, not a separate market.
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