Apple unveils subscriptions for iOS App Store, bans links to out-of-app purchases - Page 4

Exactly! Don't offer your product via iTunes or the App Store and see where your business is in 5 yrs? I love how Apple is not allowed to make money b/c people buy things b/c of their superior hardware and system?

Questions...

Do you think the publishers will accept 30% less if the eBook was purchased through iTunes rather than directly though the Amazon store?

Wouldn't it be more like a purchase through Apple leaves the publisher with $7 and Amazon with $0?

Surely the publishers established eBook pricing based on cost analysis of the profit they receive selling a hard copy book vs selling an eBook with Amazon's 30% cut.

I see three options:
1. Publishers raise the price of eBooks to cover the Apple tax
2. Amazon display a "please visit our website to buy a book" on the purchase page of the iOS Kindle app
3. Publishers do another cost analysis of the profit they receive selling a hard copy book vs selling an eBook with Amazon's 30% cut as well as Apple's 30% cut and potentially pull books from the iOS Kindle store.

Hey, I have a better idea. Why not let Microsoft charge 70% for every app they host on XBLA.

Oh, apparently they do!

C.

Yes, Amazon and Kindle have their own store. Let them use that.


Too bad that the whole of the iOS ecosystem constitutes the storefront and you are wrong.


The iOS ecosystem is not a natural resource but one constructed by Apple. Therefore Apple is not acting as a rentier.


Amazon maybe. Skype? Why on earth for? Because you chicken littles are claiming the sky is falling? When Apple forbade 3rd party dev tools/scripting people were screaming it would make Unity and other game engines go away. It didn't. They were simply spreading FUD.

Just like you are doing now. If anyone should get modded it's trolls like you.

Where did you get that 5% margin figure? Please provide your source. Amazon pays publishers 70% after deducting "delivery costs" from the sales price (for books between $2.99 and $9.99). Amazon cut gets as high as 65% for other price rage. Please refer to their website.

PS. Skype and the others you mentioned above are not content providers. They are service providers. I doubt this rule applies to them.

How many iPods and iPhones less would Apple have sold if Microsoft had blocked iTunes on Windows? A very significant proportion. If MS had asked for a percentage for each iPod/iPhone synced on Windows, how would that have looked?

The hosting part is irrelevant. Any grocery store could care less how much Pepsi spends on it warehouses. The iPad provides the customer for the publisher, just as the grocery store provides the the customer for Pepsi. Remember, every product in the grocery store has to pay the grocer for the shelf space. No one gets to put their product in on the shelf for free. Try and round up several million customers for any product, see how much it costs you. Trust me, any business would gladly pay 30% cut to gather such an audience. This is a battle over personal info that is gathered from subscriptions which is way more valuable than the measly subscription revenues.

You are missing the part about pricing. Apple is demanding defacto controll of the pricing through other retail channels. They have a right to charge whatever premium they want for content sold through their store, but they have no right to set a price floor for the content sold at other stores.

This crap is going to drive content off the iOS platform and content availability will impact consumer decisions. They guys at Google must be cheering. Verizon iPhone, who cares now?

There have been a lot of good arguments for and against the 30% cut. But for those of you who argue that subscription prices will go up are undercutting the power of 100+ million iOS users. There is no way that prices will go up, if they do people won't buy the product. Apple is not the one that's holding the publishers hostage. We are.

Anytime a new method of distribution comes out it's typically more expensive than it's predecessor. That's not likely to happen in this case cause of the shear number of votes that will be continually cast. Whatever apple charges is not of my concern as I am not paying for it.

So the whole "iTunes/App Store" name is just a massive cover up for their rentier operation?

They planned from the beginning to use the word "store" to fool the public into thinking they offer some types of goods... online goods... for people to... purchase...

But they've fooled us all!!!

Apple Rentier: You should start a conspiracy site.

You do understand the difference between curated and open platforms?

Windows and OS X are open. XBox and iPad are curated.

C.

Netflix, Amazon, Hulu, etc would be fine without the App Store. Apple shouldn't stomp on the toes connected to the hands that feed them. The iPhone needs high profile apps, if they leave, many customers will follow them.

Who is this "producer" that is selling at a loss, or losing money?

In the case of eBooks / Kindle App, you have the author, and then the producer may be the person who turns the manuscript into digital ebook form. That could be the same person these days.

Then you have the retailers -- Amazon and Apple.

Amazon was doing no favors for the authors and "producers". Amazon had been getting people used to paying 9.99 for an eBook. OK, nice for us. BUT, Amazon was keeping 60-70% of this!

Apple, said that 12.99 - 14.99 is more "fair" for a product like a book (since it is much more involved than one song). Retailers traditionally get about 40% markup. Apple said retailers, like itself and Amazon, should be happy with 30%.

Of course, Amazon is pissed -- they don't get to exercise their monopoly anymore, and all their publishers are trying to renegotiate with them to get Amazon to take 30% instead of 70%!

So, let's say Apple and Amazon each get 30% of the price of those sold through iTunes. They each get 4.50 of a 15-dollar book. That leaves 6 to share between the author and the producer. That's much better for the author/producer than 30% of a 10-dollar book! Who's the bad guy here? Not Apple.

There are options for competition; outside the app:
1) Amazon can try to get 60% or 70% of the books it sells outside iTunes. Naughty! It probably won't get away with that again!
2) It can get 40% like a normal retailer. Win for Amazon, gain for the producer/author, and no loss for the consumer.
3) It can keep getting 30% -- Win for Author and producer, and Amazon is a good guy.
4) It can lower prices to 10 bucks and take 40%, and author and producer STILL get 6 bucks. Win for consumer, and this may make people go through the slightly less convenient hassle of buying outside the app and leaving details with Amazon.

Amazon has choices! If it uses Apple platform for extra sales, it can jolly well share and/or compress it's own margins a little. Why should it make just as much, or more (because Apple bears some weight), when it sells books on the iPad and iPhone?

In the case of Magazines, the publisher can try out this new business model, or not. They have a ready market of 160 million who are highly likely to want to read stuff on their iDevice -- if it is simple and price competitive. If Newsweek wants to charge 3 bucks a week to cover this 30%, and Time costs 2 bucks per week, then Newsweek may lose out.

The margins are likely not 30% or less on intangibles, so the producer does not have to "raise prices". The producer is not going to be selling at a loss. Subscriptions is one area you can make up costs in volume. How is selling millions more subscriptions at a couple bucks less, going to cost the producer more than he nets? The Magazine issue is either produced or not produced, the app is produced or not produced -- there are no physical materials. It doesn't take more paper or more ink or more trucks to sell 2 million digital subscriptions than it does to sell 1 million. After producing the issue and selling a certain number of subscriptions to cover costs of writing and coding, then everything else is gravy.

So, it is fair that Apple is charging for the advantage of using the platform it developed (software, hardware and ecosystem) and providing access to its users.
• These are intangibles -- digital copies of something that would be produced anyway.
• Amazon and publishers are selling more by using iOS than they would if they did it alone. Therefore, there is MORE MONEY all around to pay producers and authors.
• The magazine publishers don't have to create an iApp.

You guys are assuming Amazon gets 30% of the list price. Amazon gets between 30% to 65% from the retail price LESS delivery cost. To me that means Amazon is getting their 30% after Apple gets their cut.

Please read this.

No need to insult yourself...have some self esteem!

Seriously though, if the publishers don't like it, they can create a store, then create a product to consume their content, then create the software for the hardware, then create their apps, then pay the credit card fees for people buying their content and then they can keep their 30%. Which one do you think is cheaper?

Or to use another example, would you open up a donut shop and then let someone else sell their kolaches in your store and take 100% of the profits back? No, because you deserve to get paid for having the store, having the system and space in place to sell their kolaches and getting some money back to pay the bills when the customers use a credit card.

I know publishers, and this one fact dominates their thinking:
Given a choice, they'd rather have two million dollars than one million dollars.

They don't care about percentages. All they care about is their take at the end of the day.

If book publishers want the additional revenue that iPad customers are generating, they will find a way to make the business model work.

C.

What? Are you being sarcastic? Expenses are expenses and profits are profits. It doesn't matter where a product is sold, it's not like these things do not really exist. Just because it's "online" does not mean there isn't some building with employees using tools to sell a product.

Pull all 3rd party content from iOS and iTunes and see where Apple is in 5 years.

They are not a RETAIL store offering physical goods. It is an ONLINE store offering digital merchandise. The profit margins of retail stores and online stores are unrelated, just like the profit margins of gar bars, restaurants and real estate are unrelated. You can't assume that profit margins are the same across different markets and industries. I think it's a pretty simple concept.

You clearly are misinformed on the economics of these businesses. In many cases that 30% is going to have a huge impact on profit.

If Amazon is forced into these rules I bet you will see the Kindle app disappear from the App store. It would be more cost effective for Amazon to give iOS users Kindle hardware then to give Apple a 30% cut of the sales.

Being an Apple user is like living in a crime ridden neighborhood when a gang moves in and promises to clean it up. At first it is great, but then the gang starts wanting more and more for their services and soon the neighborhood is worse off.

I would encourage everyone to avoid these in-app purchases and subscriptions.

I would also like to point out the quote in my sig. It seems Steve's views on users are quite clear. They are money machines to suck dry, pure and simple.

-kpluck

Yes, I understand. But there are varying degrees and iOS is has just moved one step further away from an open platform. Which they have the right to do but as somebody who has invested significant amounts of money (devices, apps) into a platform, I am not happy if the original model gets shifted further into a direction that makes it less attractive.
So, as a customer I am not happy and as a shareholder I am not happy either (because they are starting to cut into their own flesh).

I don't agree. Amazon can keep doing whatever it wants here. They may be required to add in-app purchasing, but maybe not as they're already here. It hasn't been made clear whether they will be grandfathered in or not, along with B&N and others.

Besides, Amazon requires difficult terms from publishers who work with them, and they don't allow outside purchasing whatsoever. In addition, you can't get the Nook on the Kindle, or iBooks. I think you should be more concerned about that. Apple is allowing competition to their own services, while other companies are not. Sony is ticked at Apple, but I don't see them allowing anyone else on their book readers.

I also think it's amusing for other reasons. Before iBooks, Amazon was well known for losing money on every e-book they sold. They were paying up to $14 per book, but selling them for $9.99. This isn't a very good business model. It was obvious to me that something had to give at some point.

While they were building up their e-book business with cheap books, they could afford the small losses. But once the business became big, they wouldn't be able to. At some point in time, they would have hit the publishers with a huge drop in payments, and the publishers wouldn't be able to do anything about it. We can see that now, because recently, Amazon announced that they were selling more e-books than paper books of all kinds. Publishers would be screwed, because they can't afford to lose that much business. If B&N did that as well, that would be a big blow to their businesses.

What Apple did was actually better for publishers, but a couple don't seem to understand that, and are still withholding their publications from the iBookstore. I guess they are naive about Amazon's intentions still.

So I don't feel for Amazon here. They've been strong-arming the publishing industry, and Apple stopped that. We'll see what happens, but I'm willing to bet that it will work out.

I think you need to reverse your question, how much does MS lose if the don't allow the iPhone to work with their OS? The Zune isn't exactly drawing lots of customers. How many new Mac owners over the past few years were introduced to Apple because the iPhone?

But it is "online" so there is no store, the product just magically appears, lol.

One thing has nothing to do with another. windows isn't a store. If you're going to use an analogy, use one that is actually real.

Does an Apple computer share the same profit margin as an HP computer? No. If you can't compare profit margins within an industry why would one assume that the profit margin on the sale of a pair of jeans would be the same as one sale of Angry Birds, or in this case a subscription app in the app store?

I never said there were no costs involved in running an online business, I said the profit margins are different and can't be directly compared.

I go back and forth on this. I'm not a lawyer, but I was a publishing executive. Initally, this didn't sound legal to me -- it sounds like price fixing. There were many distribution type deals I was involved with where we were warned that we could not discuss selling price; we could only discuss at what price we were selling to the distributor at. The distributor could sell for whatever price they wanted. But maybe it's not really price fixing because the publisher is setting the price in both cases and if the publisher was permitted to charge more in the Apple store (or less outside it), they could game the system to send everyone to their website to avoid paying Apple the 30%.

Now since that time, the Supreme Court has ruled that manufacturers can enforce minimum prices (not just minimum advertised prices), but that wouldn't apply in this Apple case -- the Court ruling is more of a publisher/Amazon type relationship case.

On the other hand, "most favored nation" clauses are frequently embedded in contracts - "you can't sell to anyone else for less than you sell to us", but even that doesn't really apply in the Apple case.

Legalities can be complex, but my opinion is that the publishers could challenge the clause where they can't sell for less than it's sold for in the Apple store, on a price-fixing basis, although most price-fixing cases have to do with the manufacturer trying to fix the price. (They can't challenge the 30% on a legal basis.)

While it's a different case, independent booksellers successfully sued publishers about 20 years ago because the publishers were selling to the chains for less money than they were selling to the independents. The courts ruled that everyone had to get the same price, based on the number of units of the same title in the same order. I remember this because I was working for a very large e-commerce vendor and we expected huge distributor discounts based on annual sales, but they would only give us discounts based on the value of each separate order.

My opinion on what Apple is doing is split. In the case where the sole purpose of the App is to sell a subscription (let's say a "Sports Illustrated" app), I think Apple deserves their cut. Maybe it's not 30%, but they definitely deserve more than whatever their credit card service fees are. After all, the only purpose of the App is to sell the subscription.

In the cases where the subscription is incidental to the app, then maybe Apple deserves less on the subscription or the "extras". But the problem in that model is that it makes everything subject to interpretation. With Apple demanding 30% of everything, it keeps it simple and consistent.

Thank you for agreeing it's a store.

Now, if you don't want to sell your goods or shop in it: Kindly go away.

It's never been open.

Actually I am seeing more and more content come to the platform, at it evolves into a mature and reliable device with a massive audience.

I am not seeing the opposite.

C.

Apple DOES say it's magical quite often

But they weren't sellling anything

You aren't aware of the way all of these other stores are set up. Amazon demands that they have the best pricing. It's in the contracts publishers sign with them. This has been documented publicly. Apple is demanding that they get the same or better pricing. That seems fair enough.

Apple is not demanding control of pricing out of the apps store. They are requiring that pricing in the apps store be no higher. That's very different.

Windows is a platform, iOS is a platform.

Have you read anything I posted or are you just cherry picking quotes?

Please try again, Publishers make money from advertising, (apple gets 0.0% of it) and not from the price of a subscription. By the warped arguments made by some, apple should have a right to some of that ad money too! Apple is not taking 30% of the publishers' profits, merely 30% of what they charge for the magazine. You see, there are these people who pay the publisher to put in these things called ads. These ads, just like on tv and the like are where the profits come from, not from just selling a magazine. It is fine if you want to argue against this, just do it in a informed and/or honest manner.

The Kindle App is toast! There is no way they are going to give Apple 30% of their revenue and if they can't charge a higher price for books purchased through In-App to offset it they won't make any money on In-App sales. Apple will probably turn towards publishers directly and do deals to increase the range of books through iBooks thereby cutting out Amazon.

No, it has always been a mix, ie, all apps were screened by Apple but as long as you stuck to an overall sensible set of rules, you could get in for free (or almost free, $99/year).
People overall liked this mix. If the mix had been different from the beginning, eg, no free apps allowed, iOS would have had somewhat less of an appeal.
The mixed has been changed by this announcement.

Well, I, and apparently Apple, disagree with you on that point, which is simply wishful thinking on your part. Content will go to where the users (buyers) are, and that is, and will continue to be iOS. (It's certainly not Android where the vocal users all seem to believe they are entitled to everything for free.)

It's amazing just how much misunderstanding is going on here.

Apple clearly stated that if they didn't bring the customer in, they wouldn't get anything. All those subscribers will be giving these companies 100% of their payments. Only if someone subscribes within Apple's system will Apple get their cut. The resolution is easy, get subs to continue to subscribe they way they always have. Any incremental subs from the iTunes or app store are adds to that. This isn't a problem, because these companies have specials anyway, where they give away big amounts.

They won't leave.

But is Apple fair in charging 30%?

Doesn't iBooks gain an advantage if Amazon is forced to mark up their books to accommodate Apple's 30% fee, when they are fully capable of handling the transaction themselves? It's an abuse of market position. At the very least, we the customers will pay more than we are now and Apple will have a bigger profit on their books.