Originally Posted by lightknight
Not. It would be fair if the cost to producer was the same (eg, prices 30% higher for in-app purchases).
Right now, a customer renewing his bill must go on the site or use Apple's system, in which case the producer loses 30%. Since this essentially means the producer is either selling at a loss on the in app sales OR increasing his overall prices, what do you think happens? Yes, right: price increase for the consumer.
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.