FTC looking into Apple subscription terms, while first publishers get on board - Page 4

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!

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.

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.



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



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!



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?

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.

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.

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.

No they have more options.


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


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.

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.


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.

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.

"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.

And let's not forget that Apple lost the Psystar case.

"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.

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.


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.


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.


Except when it doesn't


Yes, numbers are inflexible, but the thing is if you look at them wrong you can draw the wrong conclusions.

Your ignorance is showing as there is no racist comment in the post.

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.

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."

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.

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.

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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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I see that EWTHeckman and Aladdict have been carrying on their deceitful misrepresentations in this thread as well. They aren't stupid, so we can only assume that their intent is to mislead.

Let's review the facts.

1. The App Store is not a fee for service system, so any argument based on the premise that Apple isn't "entitled" to a certain percentage because all they are doing is credit card processing is simply wrong. The App Store is based on revenue sharing, so those attempting to hide revenue by distributing "shell apps" and selling content "out the back door" are cheating the system and violating their contracts.

2. Even with in-app purchasing, it's ludicrous to assume that all sales of content will take place through this mechanism, especially since there are any number of other avenues and platforms through which users may purchase content. This, however, is an assumption that all their arguments and "math" hinge on. But, since the assumption isn't valid, their arguments based on it become entirely invalid.

3. The purpose of Apple's enforcement of this restriction is twofold: to ensure that the iOS user experience doesn't devolve into a lowest common denominator "web browser experience" where users are also subject to things like credit card fraud, and to stop the sort of cheating described above. Any implication that there are other motives at play is disingenuous, at best.

So, while we can only speculate as to their motivations, we can certainly infer that they aren't honestly represented here. Clearly, these and other posters are here to mislead and misrepresent with the hope that, if they repeat their lies often enough and strongly enough, people will start to believe them. It's an old technique that never goes out of style, but it's just that, a technique designed to convince people that something which is not true is.

Yeah, but it is known fact around here that Microsoft is the evil one, even after being tamed and castrated more than once by various regulators in the past

It went down that way more than you ever realized, read on...

They backpedaled because they realized that the most profitable portion of the App Store content -- gaming -- was based on compiled-script code generating development environments like Unity and Carmack's upcoming RAGE engine. The gaming platforms weren't going to compete with the iOS UI nor have any of the feature lags that Apple was using as justification for limiting development environments. It really looks like Apple made a poorly vetted decision up front, and once they started looking at how to accommodate Unity/Rage as good citizens they realized the Obj-C compiled Flash content couldn't get filtered out in any adjustment that allowed Unity/RAGE.

Did Apple eat a little crow, yes. Was it the Feds, maybe a little but not much, it really was Unity/Carmack and the future gaming $$ associated with those platforms that made the business case for Apple to make the quick switch.

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Web apps are especially not ideal for this application, or any application where one may wish to view content in situations where being online may not be possible: on a plane, the subway, etc.

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Good luck with that for the content of entire magazines on mobile devices.

The content resellers will just have to realize the storefront and the reader don't have to be in the same app if they don't want to play in Apples Store and pay the 30%.

It is a choice of do they give the customer extra convenience and reap higher volume, or sell completely externally only and sideload content into their reader?

The smaller publishers have a clear motivation to deal directly with Apple because Amazon is still gouging them for well more than 30%, Apple may actually help those small publishers by prompting Amazon to offer more competitive rates (which I'm sure Amazon doesn't like either). The big publishers get the 30% Amazon rate and Amazon as the reseller will need to study their long-term options for delivery of that content. They are pretty damn good at their business and will make whatever choice is best for their bottom line.

The amount is pretty small and user controlled. Personally I don't allow any HTML5 storage locally at all, most of the time I get 5MB requests when the request does come up.

Yeah, a lot of people have inflated expectations regarding what local storage is going to enable. It's good for saving complex state information when a cookie won't do the job (JSON data) but it's not a virtual hard drive.

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