Inside subscription content: Apple iPad vs Google One Pass vs Amazon Kindle

Posted:
in iPad edited January 2014
Apple's iOS App Store isn't the only game in town for subscribed digital content. Here's a look at how the plans to court publishers' subscription content by Apple, Amazon's Kindle and Google's One Pass compare.



Apple's iOS subscription Plan



As previously announced, Apple will charge publishers a 30 percent cut of subscription revenue that is sold through iTunes or in app purchases made on iOS devices. The company takes no cut of subscription revenue the publisher lines up on its own, outside of Apple's platform (such as through the publisher's online or direct sales to its established subscribers).



Apple also mandates that publishers must make in app purchases of subscription content an option for their iOS users, and stipulates that they can't charge more for content within iTunes than they do elsewhere to make that option less attractive.



The most difficult hurdle for most publishers, however, isn't the size of the fees Apple charges, as iTunes' highly visible merchandizing is known to provide large volumes of new sales that will more than offset any cut Apple takes.



Instead, most publishers are concerned about Apple's privacy policy, which leaves it up to the customer to decide if he or she wants to forward contact information, including an email address, to the publisher. Publishers are afraid most people won't opt in, depriving them of valuable marketing data and verified subscriber distribution numbers they currently use to sell ad placement to marketers.



Shifting from ads to content



Apple is essentially turning the publishing industry from an ad-centric medium it has long been into a content market identical to the ones it has already set up within iTunes for music, TV, movies and apps. Apple has never supported an ad-based music subscription model, or free TV or movies supported by ads, and has only recently began monetizing free apps with iAd.



While music, movies and apps have a history of being sold directly, newspapers and magazines have long relied upon ads more than subscription or newsstand revenues. In most cases, the newsstand or subscription costs of periodicals has largely only ever served to help pay for distribution, with publishers making most of their revenues from advertising.



That makes Apple's 30 percent cut almost immaterial to publishers, because their iTunes subscription distribution and fulfillment costs are being largely borne by Apple anyway. The problem isn't that Apple is also taking away publishers' ad revenues, because there are no limits or revenue sharing fees placed upon the ads publishers run themselves, just as Apple makes no cut of apps that include ads from Google's AdMob, Millennial Media, or other networks.



The real issue is that publishers are increasingly feeling the heat from advertisers to quantify and enhance the results of their ads. Publishers already have far more information on their subscribers via iPad than they do in the world of printed paper. Just as on the web, iPad publishers (and their ad networks) see users' ad views and clicks, and can record where and when users respond to them.



What publishers are going to be missing under Apple's new plan is the personal data of subscribers who choose not to let the publisher directly market to them in an effort to earn revenues beyond trackable web-like ads and the old print ads before them. Apple has previously established limits on what personal information (including GPS location data) app developers can access and for what reason, in an effort to keep aggressive marketers from unscrupulously "stealing data."



Some publishers are framing this issue as a loss in their ability to tailor content to readers, but it's really about expanding publishers' opportunities to profit from their content by learning more about their customers. Apple is insisting that the customers it brings to publishers via iTunes should not be forced to give up their personal data to the publisher. Essentially, Apple is siding with its customers to ensure the iTunes experience is both unique and satisfactory, because it is the users who will be paying to keep iTunes open.







On page 2 of 3: Subscriptions the Google Way.



Subscriptions the Google Way



In response, Google has announced a One Pass plan with a discounted 10 percent cut it will charge publishers who use it. However, Google's solution is a "lightweight technology implementation" that works more like a PayPal-powered paywall on the web, covering only the billing aspect of subscription content.



Google isn't offering publishers a listing in a visible marketplace, because it doesn't have an equivalent to iTunes. Android Market, unlike Apple's App Store, only gets traffic from the installed base of Android devices that choose to install it. Google doesn't mandate that all Android licensees include its Market, so there are no reliable metrics on the size of this audience. In contrast, every iOS device (160 million) and every Mac and PC desktop copy of iTunes includes Apple's App Store. That's a vast market.



Google itself is not happy with the low sales of apps in Android Market, a problem it is working to correct with new payment options (including carrier billing for markets where it doesn't accept payments) and a new initiative focused on "weeding out apps that violate Android Market?s terms of service."



Android also lacks an installed base of tablet devices capable of driving subscription sales. The company hopes that new Android 3.0 Honeycomb tablets take off, but at prices like Motorola's $800 Xoom, it will likely be some time before Google can advertise an installed base comparable to Apple's 15 million and counting iPad users. An estimate on the tablet market by Forrester in January says that while tablet sales are expected to double, "the lion's share will be iPads, and despite many would-be competitors that will be released at CES, we see Apple commanding the vast majority of the tablet market through 2012."



So Google is really positioning One Pass at the web, while noting that it also works "in instances where the mobile OS terms permit transactions to take place outside of the app market," which is code for saying it works everywhere WebM does: most of the web, probably its own Android platform, but certainly not on iOS devices. Also like WebM, Google is pushing One Pass as a cheaper alternative for publishers.



The commission was just a red herring



Google isn't just offering a discounted commission to woo subscription content providers, however. The main attraction Google is offering is full access to One Pass users' personal data, with only an opt out option for those who don't want to participate. Just as Apple's subscription model is similar to existing sales in iTunes, Google's new model is based upon its legacy as a web advertiser.



The company has demonstrated little real interest in selling Android apps, preferring instead to have developers use its AdMob mobile ad network to support their work. That's why the developer of Angry Birds called exclusive ad-supported distribution of its app on Android "the Google Way."



The problem for users, apart from privacy concerns, is the the Google Way doesn't really encourage quality content. As is evident both in Android Market and on the web in pages monetized by Google, there's an awful lot of low quality content and a fairly low signal to noise ratio that results when anyone can publish without any limits, but there's little opportunity to actually make any money.



While Apple has frustrated its iOS developers with delays in accordance with its strict app approvals policy, Google frustrates users who are looking for quality content, because it's simply very hard to find in Android Market. That's the main reason why Google's Android Market isn't just behind the App Store in total numbers, but really doesn't even function as a viable market for mobile software outside of a few ported games with the popularity to make money on high volume ad revenue.



Battle of the models



The most troublesome aspect of Google's strategy is that it has already been tried before, unsuccessfully. One Pass is very similar to efforts by publishers themselves, such as Journalism Online Press+, a program led by a former Wall Street Journal executive that's been marketed toward newspapers and magazines over the last year without seeing much interest. Conceptually, users are supposed to fall in line and start paying fees to browse the web that they've been browsing for free all this time. The public does not seem interested in this idea.



If that sounds like Microsoft's attempts to sell PlaysForSure's heavily restricted DRM music to people who were already used to trading MP3s around for free, it's because it is. Apple's plan for subscriptions is much like its original strategy for music: it pairs content with desirable hardware and a market that adds a premium value to the core content. Amazon followed the same model in creating Kindle.



Apple didn't just erect a paywall across music access on the web; it created a real market that offered a differentiated, more attractive music experience that its users were willing to pay nominal fees to use. That's also why Apple is selling access to apps that essentially serve the same purpose as free websites, but don't involve intrusive ads and popups or allow spyware or location tracking, and do meet the minimum standards Apple has set, making them attractive to users willing to pay for premium content. This model has been proven to work in music, TV, movies, apps, and now Apple's banking on it working for subscription-based periodicals, too.



On page 3 of 3: Amazon's third door: the Kindle



Amazon's third door: the Kindle



A third option for publishers selling subscription content is Amazon's Kindle, which beat both Apple and Android to market. Amazon delivers content not just to its own Kindle devices, but also desktop users and both iOS and Android hardware.



Unlike Apple and Google, Amazon does not operate a mobile ad network, making Kindle wholly dependent upon content sales and content subscriptions, the same model Apple is targeting with its own subscription plan. Also like Apple, Amazon sells its own hardware.



Until the end of 2010, Amazon was charging bloggers, newspapers and periodicals a 70 percent cut of their subscription revenue, a cut more than twice as large as the 30 percent cut Apple is asking. The range of publishers supporting Kindle indicates that the size of the subscription cut taken by the distributor is clearly not at issue for the vast majority of publishers.



Digital delivery charges



One key difference is that Amazon subsidizes Kindle users' 3G connectivity (referred to as Whispernet), an expense it passes on to content publishers. While Amazon has revised its policies to now take a 30 percent cut just like Apple (at least for select publishers; for others, including bloggers, Amazon takes a 70 percent cut), it also charges publishers a delivery fee before taking its cut. Amazon charges 15 cents per megabyte in the US and UK, and 99 cents per megabyte in other countries.



This means that a newspaper that delivered 9MB of data to subscribers per month would be changed $1.35 fee in the US or UK and $8.91 elsewhere. For a newspaper priced at $9.99 per month, the publisher would net either $6.05 (domestic) or just 64 cents (foreign) per subscriber. This compares to a $7 net for publishers from iTunes. These delivery fees are only incurred on Kindle 3G distribution; content delivered via WiFi or through mobile apps do not incur extra fees, because Amazon does not pay anything for delivery.



It appears, however, that under Apple's new in app subscription rules, delivering content through iOS apps, at least for subscriptions sold through iOS in app purchases, will incur a 30 percent cut by Apple. For the hypothetical 9MB newspaper that costs $9.99 per month, this would amount to $3, which is more than Amazon currently charges for 3G Whispernet delivery within the US and UK, but far less than it charges everywhere else.



This delivery fee, inherent in Amazon's Kindle business model, goes up as content grows in size digitally. For that reason, it's being blamed as the reason why newspapers and magazines who use Kindle as a publishing medium avoid the use of graphics. Apple and Google have no similar delivery charges because they deliver content via the Internet, allowing customers to choose whether they want to pay for mobile delivery (or pay for unlimited data service) or whether they want to use existing WiFi or, in the case of iTunes, desktop internet service to obtain their content.



Also unlike Apple and Google, Amazon provides a publisher option for bloggers to sell their content via subscriptions in Kindle. However, Amazon takes a 70 percent cut of the revenue bloggers generate. For newspaper and magazine publishers who do not meet certain requirements, including a 3 hour advanced delivery of content prior to print publishing, Amazon also charges a 70 percent cut. Amazon also does not support free delivery of subscription content via Kindle.



The Amazon Way



Amazon also prices Kindle content itself, leaving publishers out of the loop on how much their own work should cost. Apple similarly set the price of music within iTunes, but it set it once, giving labels a consistent idea of exactly how much they'd make from each sale. Amazon reserves the right to set and change prices at its whim, and also charges delivery fees that may easily eat up most of the value of the subscription, particularly for content that has any graphical content.



A report by PCPro on the subject of Amazon's digital delivery fees noted, "an issue of PCPro with around 150 separate articles, and 100 photos would likely incur delivery costs of 50p-60p [80 cents to $1] an issue. We can pop a magazine in the post to subscribers for significantly less than that."



On the subject of Amazon setting publishers' prices it added, "if Amazon decides to publish PCPro at the bargain price of £1.99 per issue, not only are we taking the hit on the delivery costs, but we?re severely under-cutting our print magazine too. Conversely, if Amazon decides to push for maximum profit ? The Economist costs £9.99 per month on The Kindle store, almost £20 more expensive over the course of 12 months than a print subscription that also gives access to the digital editions (excluding Kindle) ? the publisher gets in the neck from angry customers."



The magazine concluded, "no wonder most newspapers and magazines have decided to play it safe with minimal images, or avoid publishing on The Kindle at all."



A three horse race



While Google is getting lots of attention for challenging Apple's subscription policy, it's Amazon that currently has the largest lead. It's also clear that it will be increasingly cheaper for Amazon to deliver content through iTunes, even paying Apple in app fees where necessary, than to continue to pay for Kindle Whispernet delivery, even when it passes most of its "delivery charges" to publishers. Publishers will also prefer to deliver as much data as they want, rather than having expensive per megabyte fees eating up most of their revenue.



Apple's provision to enable publishers to begin selling subscription content to iOS users directly will likely get some initial resistance, just as music labels pushed back on individual song sales, a lack of variable pricing, and the removal of DRM. All the labels eventually joined iTunes simply because it offered them a legitimate market that made them money. They later negotiated with Apple to give up DRM in exchange for variable pricing, but also accepted that song prices were a good idea after all.



Similarly, Apple entered the episodic TV and later movie rental markets with initially just one or two partners. Other studios later jumped on the bandwagon after Apple proved its audience was real and ready to buy their content. Apple also launched its App Store with initial support from small and indie developers, with larger firms, including Microsoft and Adobe, taking longer to join Apple's mobile app market.



Google's publisher-friendly terms are also not without precedent. When Microsoft attempted to take on Apple's iPod, it initially offered labels far more restrictive Windows Media DRM that promised to restrict users' music playback to mobile devices or prevent it from being burned to a CD or expire songs after a period of time.



Apple's appeal to end users trumped that strategy, as individuals simply rejected PlaysForSure devices and bought iPods instead. That holds little hope for Google's attempt to draw publishers to its new tablet platform. Additionally, Google has the same problem as Microsoft in terms of installed base.



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Comments

  • Reply 1 of 90
    Why not have content providers offer incentives to get subscribers to share their information?
  • Reply 2 of 90
    addaboxaddabox Posts: 12,660member
    I have an idea. How about we use this thread to discuss the relative merits of the three subscription models described, instead of spending a lot of time railing against Apple Insider and its hideous bias and horrible standards of journalism etc etc.



    If there's something in the article that you fell is factually incorrect, go ahead and put your correction out there with a link to back it up. No need for lengthy tirades and sarcasm. Just cite your objection and move on.



    To me the significant point of differentiation is that Apple is actually making it better for their customers while risking alienating publishers. They appear to banking on the entrenched market for iOS to force the publishers hand.



    Google, OTOH, true to character, is happy to oblige their corporate partners by handing over user data.



    I think it's undeniably true that a simple one click subscribe unsubscribe system using my iTunes account, and which doesn't send along my info to various entities for use in targeted marketing, is a better experience for me than what Google is offering. Naturally, Apple will be pilloried for being control freaks, but I'm not sure why I should be siding with content providers over my interests.
  • Reply 3 of 90
    Quote:
    Originally Posted by addabox View Post


    To me the significant point of differentiation is that Apple is actually making it better for their customers while risking alienating publishers. They appear to banking on the entrenched market for iOS to force the publishers hand.



    ..., but I'm not sure why I should be siding with content providers over my interests.



    I think what you are missing is that an iPad or an iPhone is a general-purpose device, a computer, that you buy and own.



    Apple wants to take a 30% cut on any purchases you make with your device, even if you make those purchases through a third-party application.



    If Microsoft or Dell did this, then Apple would need to cough up 30% of everything they sold through the version of iTunes running on Windows, which is an OS, just like iOS. iTunes is a third party app running on Windows. Windows is not curated, so Microsoft does not get a dime.



    Put another way, Apple by this move is declaring iOS is not to be a curated OS. Rather, they are saying that each iOS device is a Point of Sale that belongs to Apple.
  • Reply 4 of 90
    Apple has chosen to put the user first.



    Google has chosen to put publishing dinosaurs first, with ads thrown in and your privacy as a commodity.



    The choice is clear.
  • Reply 5 of 90
    djsherlydjsherly Posts: 1,016member
    I think the privacy horse has bolted. Now I'm not saying that people should play open misere with their personal data, but how much more are you really giving up by supplying email, zip codes, etc.



    I suspect the answer is not much. As Eric Schmidt has said - and to paraphrase - the web knows more about you than probably you do.
  • Reply 6 of 90
    mstonemstone Posts: 11,510member
    Has anyone figured out how one manages their subscriptions through iTunes? I was unable to find that admin section in my account.
  • Reply 7 of 90
    Once again inadequate research for a "feature" article.







    http://googleblog.blogspot.com/2011/...to-manage.html



    Quote:

    German publishers Axel Springer AG, Focus Online (Tomorrow Focus) and Stern.de joined Eric at Humboldt University today as some of our first Google One Pass partners. Other publishers already signed up include Media General, NouvelObs, Bonnier?s Popular Science, Prisa and Rust Communications.



  • Reply 8 of 90
    Quote:
    Originally Posted by Alonso Perez View Post


    I think what you are missing is that an iPad or an iPhone is a general-purpose device, a computer, that you buy and own.



    Apple wants to take a 30% cut on any purchases you make with your device, even if you make those purchases through a third-party application.



    If Microsoft or Dell did this, then Apple would need to cough up 30% of everything they sold through the version of iTunes running on Windows, which is an OS, just like iOS. iTunes is a third party app running on Windows. Windows is not curated, so Microsoft does not get a dime.



    Put another way, Apple by this move is declaring iOS is not to be a curated OS. Rather, they are saying that each iOS device is a Point of Sale that belongs to Apple.



    I see what you are trying to say, but that is not an accurate analogy. iTunes and the App Store are the platform - not iOS itself.



    For example - you want to access Pop. Sci. online, you have two choices. You can use your iOS browser (Safari) and navigate to the website and purchase access directly there. Or, you can go to iTunes/The App Store and download the Pop. Sci. app and pay for a subscription through the app, which you gained access to through iTunes/App Store. iOS isn't the marketplace, iTunes/App Store is the marketplace.



    Apple wants a cut of the business it generates through its marketplace (And rightly so). iTunes/App Store IS a Point of Sale that belongs to Apple. I think you are trying to say that by extension, every iOS device is also dragged under the iTunes/App Store umbrella and essentially becomes a POS owned by Apple. While practically speaking this often becomes the case (as the user experience is just better), it is technically not so.



    Please correct me if I'm wrong.
  • Reply 9 of 90
    Quote:
    Originally Posted by MyopicPaideia View Post


    I see what you are trying to say, but that is not an accurate analogy. iTunes and the App Store are the platform - not iOS itself.



    For example - you want to access Pop. Sci. online, you have two choices. You can use your iOS browser (Safari) and navigate to the website and purchase access directly there. Or, you can go to iTunes/The App Store and download the Pop. Sci. app and pay for a subscription through the app, which you gained access to through iTunes/App Store. iOS isn't the marketplace, iTunes/App Store is the marketplace.



    Apple wants a cut of the business it generates through its marketplace (And rightly so). iTunes/App Store IS a Point of Sale that belongs to Apple. I think you are trying to say that by extension, every iOS device is also dragged under the iTunes/App Store umbrella and essentially becomes a POS owned by Apple. While practically speaking this often becomes the case (as the user experience is just better), it is technically not so.



    Please correct me if I'm wrong.



    If Apple allows sideloading apps then you're right. But right now Apple doesn't allow you to install apps except from Apple's app store, which basically bundles the iOS platform with the app store.
  • Reply 10 of 90
    Quote:
    Originally Posted by Alonso Perez View Post


    I think what you are missing is that an iPad or an iPhone is a general-purpose device, a computer, that you buy and own.



    Apple wants to take a 30% cut on any purchases you make with your device, even if you make those purchases through a third-party application.



    If Microsoft or Dell did this, then Apple would need to cough up 30% of everything they sold through the version of iTunes running on Windows, which is an OS, just like iOS. iTunes is a third party app running on Windows. Windows is not curated, so Microsoft does not get a dime.



    Put another way, Apple by this move is declaring iOS is not to be a curated OS. Rather, they are saying that each iOS device is a Point of Sale that belongs to Apple.



    iOS devices are not general purpose computing platforms. They work more like video game consoles, where users similarly can only get software from on source (licensed titles) and can not run homebrew content. (Actually you can run your own apps on iOS, and they have an open web browser, but other apps are tied to the platform and its rules.)



    Apple doesn't have iTunes on the PSP or Wii or Xbox, but if it wanted to, it would legitimately have to pay the vendor to do that. And I doubt Microsoft would welcome iTunes' encroachment on their Xbox, for obvious reasons.



    If Apple didn't also have an open platform, and if other vendors didn't also operate closed platforms, this might be a more difficult concept to understand.



    But with that perspective, there's no difficult thing to understand about why Apple wants to get a piece of commercial content being sold via its Cocoa platform.



    It's still free for publishers to set up a paywall website, and let iOS users navigate there and log in, but if publishers want to use Apple's store and platform, Apple wants a cut. And the reason you pay a cut is because somebody is offering you a valuable venue. Which is why they will once they see the money.



    It's like Apple owns a venue, and wants a cut of the alcohol sold, and also a cut of the door receipts of party promoters. It also doesn't want people selling drugs (that it doesn't get a cut from) in part because it is stuck dealing with customers on drugs causing problems.



    Hope that helps.
  • Reply 11 of 90
    Quote:
    Originally Posted by sciwiz View Post


    Once again inadequate research for a "feature" article.







    http://googleblog.blogspot.com/2011/...to-manage.html



    Well are they currently available titles, or just vapor talk in the same category as Microsoft's Office apps for Symbian?
  • Reply 12 of 90
    hirohiro Posts: 2,663member
    Quote:
    Originally Posted by drobforever View Post


    If Apple allows sideloading apps then you're right. But right now Apple doesn't allow you to install apps except from Apple's app store, which basically bundles the iOS platform with the app store.



    While Apple doesn't allow sideloading Apps, they do allow sideloading content which is what the whole new marketplace policies are about. So I think your point is met from a business standpoint.
  • Reply 13 of 90
    Thanks, I really enjoyed the article. I had no idea how the Kindle operated with the 3G; quite interesting.
  • Reply 14 of 90
    addaboxaddabox Posts: 12,660member
    Quote:
    Originally Posted by Alonso Perez View Post


    I think what you are missing is that an iPad or an iPhone is a general-purpose device, a computer, that you buy and own.



    Apple wants to take a 30% cut on any purchases you make with your device, even if you make those purchases through a third-party application.



    If Microsoft or Dell did this, then Apple would need to cough up 30% of everything they sold through the version of iTunes running on Windows, which is an OS, just like iOS. iTunes is a third party app running on Windows. Windows is not curated, so Microsoft does not get a dime.



    Put another way, Apple by this move is declaring iOS is not to be a curated OS. Rather, they are saying that each iOS device is a Point of Sale that belongs to Apple.



    How does that affect me?



    You're making an argument for the sanctity of content provider profits as if that somehow interferes with my use of an iOS device or should trouble me. It doesn't. I don't really care what anyone gets paid, as long as the cost to me is reasonable and the process is simple. Apple is providing both.



    Honestly, why on earth should I care what Apple's cut is? Why should you? When you buy something at a brick and mortar store do you demand to know how the profits in the supply chain are allocated and become indignant if, in your judgement, the store is taking too much? That would only matter if the goods were overpriced. If subscriptions on the iTunes store cost significantly more than via other channels, then I'll care. Baring that, your histrionics strike me as bizarre.
  • Reply 15 of 90
    Amazon's delivery fees are expensive but maybe they should allow content providers to allow wifi vs 3G content versions.



    In any case...



    Quote:

    Google's publisher-friendly terms are also not without precedent. When Microsoft attempted to take on Apple's iPod, it initially offered labels far more restrictive Windows Media DRM that promised to restrict users' music playback to mobile devices or prevent it from being burned to a CD or expire songs after a period of time.



    What does this obsession with PlaysForSure have to do with Google when they allow access on their platform + the web? We will have to see the actual results of their content before deciding this. If you access it and it has no ads or content, what's the diff btw them and apple? Maybe publishers don't need or want their content hosted on apple for a 20% cut.



    What did apple do to make "premium" "differentiated, more attractive music experience"? All they did was start selling music online. Whoopdy doo.



    Well, whatever. It still is too early to tell how it pans out.
  • Reply 16 of 90
    Quote:
    Originally Posted by Hiro View Post


    While Apple doesn't allow sideloading Apps, they do allow sideloading content which is what the whole new marketplace policies are about. So I think your point is met from a business standpoint.



    Actually this new policy is about subscription of content, and there's no way to sideload "a subscription", unless through an app environment in which you consume the content you subscribed through the app. Of course, there's webapp but that doesn't run digital content well unless Apple can improve the Safari browser to a certain point or when html5 evolves to a certain point (neither of which would happen in the next few years).
  • Reply 17 of 90
    If Microsoft had tried to charge a 30% toll booth fee for content displayed on Windows, Apple would have mocked them for being greedy. Having been an Apple fan and user for years, its sad to see Apple heading down the same greedy path.



    Apple doesn't allow apps other than those approved by them to be loaded on iOS devices meaning that I have zero choices for using an iOS device and getting the content or apps I want. My choices to protest their Draconian software and commerce policies are: don't use the well-designed hardware? This is the near opposite of the 'openness' that Apple supposedly embraces as a company.



    And for the altruistic who think that Apple are protecting their interests by not sharing marketing data with publishers... did you ever wonder why the your iTunes app and music suggestions seem to be based on other stuff you've bought from Apple? Apple has ZERO problem using previous purchase information to get you to purchase more stuff from them.



    Has anybody done a Steve Jobs/Bill Gates mashup yet?
  • Reply 18 of 90
    Great analysis!



    I'm starting to understand why Apple's 30% take isn't an issue with periodicals. If the subscription price is only 20% of the cost of production, then Apple's charge is only 6% of their total cost, not bad when Apple is handling the billing and distribution. But I do wonder what will happen if a popular magazine charges virtually nothing for subscriptions and makes its profits on the advertising a huge circulation brings in. If it included lots of color pictures, Apple, who is now making almost nothing, could end up getting burned by all the data charges and demands on their servers. I assume in that case, Apple's going to be making money on its own ads in the magazine, but that assumes it can start to attract advertisers.



    But there is a serious problem if Apple attempts to transfer its periodical model into the world of ebooks. I know, because that's the field I'm in. Books don't have ads and there are strong indications that the public would either reject books with ads completely or make a great effort to avoid looking at those ads, resulting in little ad revenue. People browse magazines, so ads aren't that disruptive. They immerse themselves in books, so ads are a gross nuisance.



    Also, unlike magazines, book publishers depended totally on what they get at wholesale for their books. Don't forget that, because it is the critical factor in this debate. For distribution through Apple's iBookstore, that 30% charge doesn't matter. That's what Amazon is also taking for their sales, distribution and billing. That's fine. For printed books, the publisher may be keeping 25% of the retail price, so getting 70% of retail price is great. That's one reason why ebooks can sell for less.



    The trouble comes when Apple wants to grab 30% of the retail price not just when an ebook is sold through their iBookstore but when it is sold through Amazon, B&N, or Sony apps. In those cases, the ebook is still being processed by Amazon or the others, so they're still earning their 30% legitimately. But Apple is reaping a 30% income for handling a 3% credit card processing fee. That is what is grotesque.



    Given that each of the other online bookstores has substantial costs, those vendors will have to pass along all or most of that 30% charge to me. In a free market, I'd simply raise my Apple price by 30%, so my profit from books sold through Apple is the same as for books sold through Amazon. That would be fair. If Apple wants to get fat profits from doing nothing, then Apple will have to contend with low sales.



    But Apple wants to prohibit me from doing that. They want my cost for selling to Amazon's Kindle apps on iPads to be twice that of selling to Apple's iBooks apps on iPads, even though the reader experience is the same. That's where they're likely to get in deep legal trouble, since it is obviously a ploy to drive away competition.



    They also want my income from selling the same Kindle ebook to be a substantial 30% less when a customer buys it on an iPad than when they buy it on their Mac/PC but designate it to be downloaded to an iPad. In the latter case, it's the same book being installed on the same device, so why is it providing a radically different income for the publisher? It isn't just hard to come up with a rational basis for that strange corporate policy. It's impossible.



    I can offer an example. I spent over a year working on a book called Chesterton On War and Peace. It's quite long (448 pages), heavily commented, and describes someone who was warning that Hitler in power meant a European war in 1932, well before Churchill took up the alarm. Given the time and work I put into it, the $24.95 retail price is a steal. Suppose I create an ebook version and price it at $10. Here's what my income would be like for various versions and means of sale:



    * Sold on Amazon's webpage or a Kindle for Kindles and Kindle apps on any device, I get $7.00

    --Apple does nothing and gets nothing.



    * Sold on the iBookstore for iBooks on iPads and iPhones, I get $7.00

    --Apple handles all the distribution, billing and display while getting $3.00, just like Amazon above.



    *Sold on an iPad for the Kindle app on that iPad or any other device, I get $4.00

    --Apple does nothing but process the billing and yet gets $6.00



    Note just how crazy that scheme is. Apple iBookstore scheme is fair. They earn what Amazon is earning. But notice the third case, where Apple earns twice as much when it does almost nothing as when it is running its own online store. That's where Apple is likely to get in deep, deep trouble with the federal government. There's no rationale basis for that difference except as an attempt by Apple to crush its competition.
  • Reply 19 of 90
    alfiejralfiejr Posts: 1,524member
    Quote:
    Originally Posted by Alonso Perez View Post


    I think what you are missing is that an iPad or an iPhone is a general-purpose device, a computer, that you buy and own.



    Apple wants to take a 30% cut on any purchases you make with your device, even if you make those purchases through a third-party application.



    If Microsoft or Dell did this, then Apple would need to cough up 30% of everything they sold through the version of iTunes running on Windows, which is an OS, just like iOS. iTunes is a third party app running on Windows. Windows is not curated, so Microsoft does not get a dime.



    Put another way, Apple by this move is declaring iOS is not to be a curated OS. Rather, they are saying that each iOS device is a Point of Sale that belongs to Apple.



    yeah, that's right. you buy the iOS product, you buy the whole Apple package.



    with respect, take it or leave it.



    if you don't like it, either jailbreak your Apple device, or, for heaven's sake just don't buy it at all! get something else. there are alternatives. no one is twisting your arm.



    Google is selling a package too, just a different kind, and in cahoots with the telcos to boot. same for Amazon. so will MS/Nokia, if they ever pull their sh*t together. and HP. and Samsung. this is the way business works. sorry to break the bad news ...



    there is the dream of Linux and open source software and all that. it's admirable. but it does not produce successful commercial products. efforts to produce a true open source Linux smartphone have all failed (Android is a complete fraud when attempting to pose as such).
  • Reply 20 of 90
    alfiejralfiejr Posts: 1,524member
    Quote:
    Originally Posted by Inkling View Post


    .*Sold on an iPad for the Kindle app on that iPad or any other device, I get $4.00

    --Apple does nothing but process the billing and yet gets $6.00.



    don't you mean Apple gets $3 and Amazon gets $3 and you get $4?



    obviously not the best of the three options for you. but as a practical matter, most buying Kindle books will get them on the Amazon or Kindle device website anyway, even if they might read them later on an iPad via the Kindle app. and the rest of the iPad owners are going to buy your book via iBooks. so i doubt you will get hit by many of this double-billed 3rd option.



    the way you still come out way ahead is having many millions more iPad owners to sell your book to than you ever would via Kindle alone.
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