The third option is that profits are sufficiently rich that the content providers can afford a 30% reduction in revenue. This is the case with the "app developers" that other commenters have pointed to. Its absolutely not true however with respect to Netflix, Hulu, Amazon/Kindle, etc.
A forth "option" is Apple negotiates. For apps that help realize sales of iOS devices, they might cut a sweeter deal. 5% to 10% might be supportable.
But there is no such thing as a free lunch. Apple wants more money. Unless apps are withdrawn, the money has to come from somewhere. It will either come from a third party's profits, or consumers. Those are the only two choices, at least in the short term.
Of course, Apple is probably playing for the long-term. Having succesfully launched the iPad, and gained enormous tablet marketshare, Apple may have decided to cut out the middleman. Instead of leveraging Netflix, Hulu, Amazon to help push device sales, they may prefer to squeeze them out of the app store, thereby increasing consumer demand for Apple-hosted media services (iBooks, and iTunes subscription-based services). Both of those may stink now, but that's at least partially because publishers and media companies have better (or more established) deals through 3rd parties (the aforementioned Hulu, Netflix, Amazon). If the Kindle app is gone, iBooks will probably be able to sign up more publishers. If Hulu/Netflix are gone, media companies may be willing to let Apple sell subscription services.
Quote:
Originally Posted by Menno
Companies will not offer content in iOS if it doesn't make them money. Netflix doesn't give a crap about the number of subscribers they have, they care about the number of PROFITABLE subscribers they have.
This rule will result in only one of TWO outcomes:
1) Content providers will increase the price across the board to compensate meaning EVERYONE pays more, even those of us without iOS devices.
2) Content providers will drop an now unprofitable platform.
NEITHER option is a net gain for consumers. Do you honestly think that ANY big company can just give up an extra 30% of their revenue? You're assuming that everything will continue the way it has with just the added "benefit" of everything going through itunes. It won't.
Netflix isn't desperate for iOS subscribers. They're desperate for profit. They won't lose money ACROSS THE BOARD to make their user base larger.
Oh come now. Don't you dare suggest that Apple is somehow being exploited or is the victim here. They generate more in profit than oil companies, and is the largest company in terms of market capital in the world. Apple is *not* hurting for cash, here. Don't kid yourself.
Quote:
Thats not going to happen. Publishers have to have the same price. The iPad is not that important to Amazon that they will raise their prices by 43% across the board.
The iPad is not important to Amazon? The iPad sold over 7 million iPads last quarter, the same quarter that Amazon posted record eBook sales that outsold paperback books for the first time ever. Are you seriously suggesting iPad users had no part in that gain? Honestly, ask anyone who uses an iPad for reading and tell me how many of them are not using Kindle.
Quote:
They already have done that - the 43% markup applies to Hulu, Kindle and Netflix ( and the company I worked for until they canned a project).
Apple doesn't have any sort of subscription service for music or videos. That's why Netflix has gotten so popular - the lack of competition from iTunes has given them a huge start, one that has left Apple in the dust and unable to secure any deals with content providers.
So what's the solution? Either get the deals and open your own subscription service, or scrap off the top some of Netflix's revenue as a "finders fee," as though people needed the iPhone to know what Netflix is.
Quote:
They win until everybody abandons the platform because it has bog all books compared to the Android, and far less choice of content providers. Even if the iPad comes in good this year, it wont last.
So again, you're implying that Apple is the underdog here? Please...
Quote:
This is hardball nonsense from Apple at a time when they need to be more agressive about selling hardware and not give a toss about content providers making them rich by adding value to their platform..
Why does Apple need to be aggressive about selling hardware? Android and other tablet sales have yet to sell anywhere near the rate of the iPad, and none worth talking about is able to meet Apple's $499 price point. Unlike phones, they're years ahead of everyone else with little competition in sight.
There is one thing we do agree about - Apple doesn't give a damn about developers or content creators. "Gee, thanks you guys for all your hard work making applications and services that have sold our products for years. We're thrilled that you've standardized a major portion of your business on our platform.... now it's time to pay up."
The third option is that profits are sufficiently rich that the content providers can afford a 30% reduction in revenue. This is the case with the "app developers" that other commenters have pointed to. Its absolutely not true however with respect to Netflix, Hulu, Amazon/Kindle, etc.
A forth "option" is Apple negotiates. For apps that help realize sales of iOS devices, they might cut a sweeter deal. 5% to 10% might be supportable.
But there is no such thing as a free lunch. Apple wants more money. Unless apps are withdrawn, the money has to come from somewhere. It will either come from a third party's profits, or consumers. Those are the only two choices, at least in the short term.
Of course, Apple is probably playing for the long-term. Having succesfully launched the iPad, and gained enormous tablet marketshare, Apple may have decided to cut out the middleman. Instead of leveraging Netflix, Hulu, Amazon to help push device sales, they may prefer to squeeze them out of the app store, thereby increasing consumer demand for Apple-hosted media services (iBooks, and iTunes subscription-based services). Both of those may stink now, but that's at least partially because publishers and media companies have better (or more established) deals through 3rd parties (the aforementioned Hulu, Netflix, Amazon). If the Kindle app is gone, iBooks will probably be able to sign up more publishers. If Hulu/Netflix are gone, media companies may be willing to let Apple sell subscription services.
I'm not arguing that apple shouldn't be able to profit from apps that sell content for their devices. I believe they should. but at 30% that makes businesses like Netflix and hulu unprofitable, not just "no net gain."
and forcing out kindle in favor for ibooks is a net loss for consumers. It means even MORE of the content is locked into a single ecosystem. With Kindle, I can take my book and read it on my kindle, on my android, or my computer, or my ipod touch.
Of course, Apple is probably playing for the long-term. Having succesfully launched the iPad, and gained enormous tablet marketshare, Apple may have decided to cut out the middleman. Instead of leveraging Netflix, Hulu, Amazon to help push device sales, they may prefer to squeeze them out of the app store, thereby increasing consumer demand for Apple-hosted media services (iBooks, and iTunes subscription-based services). Both of those may stink now, but that's at least partially because publishers and media companies have better (or more established) deals through 3rd parties (the aforementioned Hulu, Netflix, Amazon). If the Kindle app is gone, iBooks will probably be able to sign up more publishers. If Hulu/Netflix are gone, media companies may be willing to let Apple sell subscription services.
Hm, Apple makes a move that either shuts out competition or allows competing services to pay them a large percentage to do business. In doing so, the prices increase across the board, since the same subscription must be in-app as well as outside the app.
Meanwhile, Apple builds its own subscription service, and after driving up the market with their exorbitant fees, they release iTunes subscriptions across all their stores and introduce at a lower rate than the competition, which is simply the same rates that exist today. So, the market responds by lowering their prices to compete with Apple... WHILE STILL PAYING APPLE'S 30% TAX. Those companies become unprofitable, they disappear from the platform, and Apple now has 100% of all the customers on their devices.
Yes, I realize there are so many flaws in my little conspiracy theory, but its not outside the realm of possibilities, yes?
My statement amounts to this. Apple got to those numbers by creating a platform that everyone wanted to be a part of and that consumers had almost limitless choices in regards to software and apps. Sure, Android is open, but it has never been able to make waves on Apple in regards to software and quality....
HOWEVER, this might do it. To think that developers HAVE to comply with Apple's new rules is a misnomer....they don't even have to submit. they can take their app off the iphone all together. With Android's growing market and Windows 7 still a decent developing platform (even though it doesn't have near the foot hold as the other two), I wouldn't be surprised to see netflix, Hulu, Amazon.com give the ol' "screw you" to apple. Now, how much does the value of those 100 of millions of Apple iOs products drop when suddenly the other companies run adds showing that you "can truly get anything and everything you want on our platform".
I just think Apple is making a mistake. I want Hulu. I want Netflix. I like all my Kindle books because iBook selection sucks. Take those away, and there's no need for me to have one of the most popular handsets in the world.
Oh...and my backside...it's sore, but...hey...at least I can read my Kindle books on another device.
FYI, I've already subscribed for my wife and myself to two magazines, yearly subscriptions both; Elle (for the wife), and Popular Science (for me). Elle was like $19 and Pop Sci was like $16.
And note that these are highly interactive magazines that are optimized for the iPad experience. Finally, I was not required to send ANY personal info to either mag.
This is a winning strategy for Apple, and for the consumer. Period. End of discussion.
So, your argument seems to be that iOS users are stupid. Pretty much the same as before but worded differently. Not content with bashing Apple, bash their customers too?
Yep. My friends and associates are the lowest common denominator. iPad is designed by Apple to be easy to use by the most clueless people imaginable. If you want to do any real work, it shackles you with endless hoops to jump through.
Companies will make plenty of money or their business models have bigger problems than this.
Stores that sell content that is owned by others -- rightsholders -- have a very established, predictable business model, with gross margins (before taking out the costs on their end) running between 15% for things like streaming video to 50% for things like physical books. Amazon, like every other ebook seller, including Apple, splits revenue based on the list price (which is set by the publisher) in a 70/30 split, with the publisher receiving 70% of the list price.
So let's take Amazon:
I buy a copy of Mac at Work for $19.99, the list price. The rightsholder gets 70% of that transaction, leaving Amazon with $6.00 to cover its costs, including storage of the file, serving the download of the file (many times if I own multiple Kindle-compatible devices), other associated costs, with whatever remains as its profit. Let's say those costs run up to $0.20 per book, leaving Amazon $5.80 in profits. But now, if that book is sold through an in-app purchase, Amazon is paying the rightsholder $13.99, paying Apple $6.00, and also paying its own costs of $0.20, leaving Amazon $0.20 in the hole for every book sold through the in-app system.
So what would you tell Amazon to do? Apple is demanding *every penny* of Amazon's gross revenue. The publishers, not Amazon, set the list price. Apple's rules preclude Amazon from increasing the cost of the in-app book to cover the costs of Apple's fees.
What would you tell Amazon to do?
The problem isn't Amazon's business model. The problem is that Apple's fee is so high that it absorbs the entire gross revenue Amazon structured into its price, to say nothing of the profits.
For video streaming services like Hulu, whose gross margins on subscriptions are significantly less than 30%, you end up with a situation where subscribers added through add more and more red ink to the bottom line -- it will *never* be profitable for Hulu to give Apple 30% of the fees from a subscriber that signs up through an in-app system.
Apple's fee is too high. These other companies can't make any money if on top of all their other costs, which consume more than 70% of the price of the goods they sell, they have to pay Apple 30% of the price as well. The math is *IMPOSSIBLE*.
And as a consumer, that pisses me off, because the value I get from my iPad comes, in no small part, from access to Kindle, Netflix and Hulu content. If an iPad was just a device that let me watch video from iTunes Store or books from the iBooks store, it wouldn't be worth having.
Stores that sell content that is owned by others -- rightsholders -- have a very established, predictable business model, with gross margins (before taking out the costs on their end) running between 15% for things like streaming video to 50% for things like physical books. Amazon, like every other ebook seller, including Apple, splits revenue based on the list price (which is set by the publisher) in a 70/30 split, with the publisher receiving 70% of the list price.
So let's take Amazon:
I buy a copy of Mac at Work for $19.99, the list price. The rightsholder gets 70% of that transaction, leaving Amazon with $6.00 to cover its costs, including storage of the file, serving the download of the file (many times if I own multiple Kindle-compatible devices), other associated costs, with whatever remains as its profit. Let's say those costs run up to $0.20 per book, leaving Amazon $5.80 in profits. But now, if that book is sold through an in-app purchase, Amazon is paying the rightsholder $13.99, paying Apple $6.00, and also paying its own costs of $0.20, leaving Amazon $0.20 in the hole for every book sold through the in-app system.
So what would you tell Amazon to do? Apple is demanding *every penny* of Amazon's gross revenue. The publishers, not Amazon, set the list price. Apple's rules preclude Amazon from increasing the cost of the in-app book to cover the costs of Apple's fees.
What would you tell Amazon to do?
The problem isn't Amazon's business model. The problem is that Apple's fee is so high that it absorbs the entire gross revenue Amazon structured into its price, to say nothing of the profits.
For video streaming services like Hulu, whose gross margins on subscriptions are significantly less than 30%, you end up with a situation where subscribers added through add more and more red ink to the bottom line -- it will *never* be profitable for Hulu to give Apple 30% of the fees from a subscriber that signs up through an in-app system.
Apple's fee is too high. These other companies can't make any money if on top of all their other costs, which consume more than 70% of the price of the goods they sell, they have to pay Apple 30% of the price as well. The math is *IMPOSSIBLE*.
And as a consumer, that pisses me off, because the value I get from my iPad comes, in no small part, from access to Kindle, Netflix and Hulu content. If an iPad was just a device that let me watch video from iTunes Store or books from the iBooks store, it wouldn't be worth having.
Well said ALMOST. There are some flaws here. Apple isn't asking for every penny of someone's revenue. Gross Revenue is Cost+Profit and what you said would only be true if you were talking in terms of gross income or gross profit.
I already did. It's also really easy to search for them.
In fact, why don't you provide me with the financial statements of some companies who can easily handle this 30% hit to their revenue.
You say that like it is no big deal. If you made 10 billion dollars in revenue last year, a 3 billion dollars difference is a HUGE deal. You're doing the same amount of work, but only making 70% what you were making before.
And again, we're talking about 30% off PURCHASES, not profit. It's one thing to say Apple gets 30% of whatever profit Amazon makes from the sale of a book, but that's not the case. Say if Amazon sold a $10 book and only made $3 profit from the sale. Well, if you buy through Apple, Apple gets the $3 while Amazon gets $0, and Amazon is still expected to shoulder the servers and bandwidth to deliver that book they made no money on to you.
Why don't you ask Apple if they wouldn't mind giving up 30% of their revenue on the sale of their products and content and see if they don't complain.
FYI, I've already subscribed for my wife and myself to two magazines, yearly subscriptions both; Elle (for the wife), and Popular Science (for me). Elle was like $19 and Pop Sci was like $16.
the original announcement for Pop Sci was $4.99/issue. Are you saying the annual subscripton is $16? That is more reasonable.
You say that like it is no big deal. If you made 10 billion dollars in revenue last year, a 3 billion dollars difference is a HUGE deal. You're doing the same amount of work, but only making 70% what you were making before.
And again, we're talking about 30% off PURCHASES, not profit. It's one thing to say Apple gets 30% of whatever profit Amazon makes from the sale of a book, but that's not the case. Say if Amazon sold a $10 book and only made $3 profit from the sale. Well, if you buy through Apple, Apple gets the $3 while Amazon gets $0, and Amazon is still expected to shoulder the servers and bandwidth to deliver that book they made no money on to you.
Why don't you ask Apple if they wouldn't mind giving up 30% of their revenue on the sale of their products and content and see if they don't complain.
ummm... you're missing the mark entirely. I'm the one who is saying that 30% is far too high. Anonymouse is the one who doesn't understand business.
Stores that sell content that is owned by others -- rightsholders -- have a very established, predictable business model, with gross margins (before taking out the costs on their end) running between 15% for things like streaming video to 50% for things like physical books. Amazon, like every other ebook seller, including Apple, splits revenue based on the list price (which is set by the publisher) in a 70/30 split, with the publisher receiving 70% of the list price.
So let's take Amazon:
I buy a copy of Mac at Work for $19.99, the list price. The rightsholder gets 70% of that transaction, leaving Amazon with $6.00 to cover its costs, including storage of the file, serving the download of the file (many times if I own multiple Kindle-compatible devices), other associated costs, with whatever remains as its profit. Let's say those costs run up to $0.20 per book, leaving Amazon $5.80 in profits. But now, if that book is sold through an in-app purchase, Amazon is paying the rightsholder $13.99, paying Apple $6.00, and also paying its own costs of $0.20, leaving Amazon $0.20 in the hole for every book sold through the in-app system.
So what would you tell Amazon to do? Apple is demanding *every penny* of Amazon's gross revenue. The publishers, not Amazon, set the list price. Apple's rules preclude Amazon from increasing the cost of the in-app book to cover the costs of Apple's fees.
What would you tell Amazon to do?
The problem isn't Amazon's business model. The problem is that Apple's fee is so high that it absorbs the entire gross revenue Amazon structured into its price, to say nothing of the profits.
For video streaming services like Hulu, whose gross margins on subscriptions are significantly less than 30%, you end up with a situation where subscribers added through add more and more red ink to the bottom line -- it will *never* be profitable for Hulu to give Apple 30% of the fees from a subscriber that signs up through an in-app system.
Apple's fee is too high. These other companies can't make any money if on top of all their other costs, which consume more than 70% of the price of the goods they sell, they have to pay Apple 30% of the price as well. The math is *IMPOSSIBLE*.
And as a consumer, that pisses me off, because the value I get from my iPad comes, in no small part, from access to Kindle, Netflix and Hulu content. If an iPad was just a device that let me watch video from iTunes Store or books from the iBooks store, it wouldn't be worth having.
First of all, Amazon is a RESELLER. In case you hadn't noticed, so is Apple (iBooks). The PUBLISHER can choose to sell the book through Apple's iBook app. Screw Amazon if they can't compete. And yes, screw Apple if THEY can't compete!
Same with Hulu, etcetera.
Besides, Amazon can still put their reader on the iPad. They just can't sell books through it come June unless they're willing to pay Apple's price - which they won't. So?
Flip it around: Can you buy an iBook on the Kindle? No? How about an iBook reader? Hey, at least Apple lets you read a Kindle book on an iPad!
Apple's tired of carrying the water for its competition. Guess what? THEY HAVE THAT RIGHT.
Amazon, like every other ebook seller, including Apple, splits revenue based on the list price (which is set by the publisher) in a 70/30 split, with the publisher receiving 70% of the list price.
This isn't true. Amazon takes 65% as standard. They introduced a 70/30 split to respond to Apple's App Store pricing but it has restrictions and only applies to books under $9.99. If a publisher takes the 70/30 split they have to meet the following conditions:
- The author or publisher-supplied list price must be between $2.99 and $9.99.
- This list price must be at least 20 percent below the lowest physical list price for the physical book.
- The title is made available for sale in all geographies for which the author or publisher has rights.
- Books must be offered at or below price parity with competition, including physical book prices.
ummm... you're missing the mark entirely. I'm the one who is saying that 30% is far too high. Anonymouse is the one who doesn't understand business.
I think it comes down to whether or not you define Apple as a distributor/reseller of content. If you do then the 30% isn't that bad. Many resellers mark up merchandise even 50% from the wholesale price. I'm not sure what the markup is for books, magazines or music in particular but a typical reseller gets merchandise for a substantial discount and then marks it up.
In this case the problem arises when the distributor is a re-distributor, then the merchandise gets marked up twice. Since Amazon is the reseller of the publisher and the Apple is the reseller of Amazon, there is one too many middle men .
I think it comes down to whether or not you define Apple as a distributor/reseller of content. If you do then the 30% isn't that bad. Many resellers mark up merchandise even 50% from the wholesale price. I'm not sure what the markup is for books, magazines or music in particular but a typical resellers gets merchandise for a substantial discount and then marks it up.
In this case the problem arises when the distributor is a re-distributor, then the merchandise gets marked up twice. Since Amazon is the reseller of the publisher and the Apple is the reseller of Amazon, there is one too many middle men .
Exactly. Which won't happen. All that means is that, come June, you won't be able to click on a button in the Kindle app and launch to the Amazon store. Big deal.
Comments
Perhaps you forgot how to write. But, why don't you provide some of their income statements to back up your assertion.
See above. or the post a few above this one where I gave the same link.
Apple updated their wording so that this implies that it will affect one off purchases (amazon) as well.
This means for every book sold through the app, amazon will LOSE MONEY. There is no way they can offer a service on the platform with those terms.
The third option is that profits are sufficiently rich that the content providers can afford a 30% reduction in revenue. This is the case with the "app developers" that other commenters have pointed to. Its absolutely not true however with respect to Netflix, Hulu, Amazon/Kindle, etc.
A forth "option" is Apple negotiates. For apps that help realize sales of iOS devices, they might cut a sweeter deal. 5% to 10% might be supportable.
But there is no such thing as a free lunch. Apple wants more money. Unless apps are withdrawn, the money has to come from somewhere. It will either come from a third party's profits, or consumers. Those are the only two choices, at least in the short term.
Of course, Apple is probably playing for the long-term. Having succesfully launched the iPad, and gained enormous tablet marketshare, Apple may have decided to cut out the middleman. Instead of leveraging Netflix, Hulu, Amazon to help push device sales, they may prefer to squeeze them out of the app store, thereby increasing consumer demand for Apple-hosted media services (iBooks, and iTunes subscription-based services). Both of those may stink now, but that's at least partially because publishers and media companies have better (or more established) deals through 3rd parties (the aforementioned Hulu, Netflix, Amazon). If the Kindle app is gone, iBooks will probably be able to sign up more publishers. If Hulu/Netflix are gone, media companies may be willing to let Apple sell subscription services.
Companies will not offer content in iOS if it doesn't make them money. Netflix doesn't give a crap about the number of subscribers they have, they care about the number of PROFITABLE subscribers they have.
This rule will result in only one of TWO outcomes:
1) Content providers will increase the price across the board to compensate meaning EVERYONE pays more, even those of us without iOS devices.
2) Content providers will drop an now unprofitable platform.
NEITHER option is a net gain for consumers. Do you honestly think that ANY big company can just give up an extra 30% of their revenue? You're assuming that everything will continue the way it has with just the added "benefit" of everything going through itunes. It won't.
Netflix isn't desperate for iOS subscribers. They're desperate for profit. They won't lose money ACROSS THE BOARD to make their user base larger.
This is Apple against the world.
Oh come now. Don't you dare suggest that Apple is somehow being exploited or is the victim here. They generate more in profit than oil companies, and is the largest company in terms of market capital in the world. Apple is *not* hurting for cash, here. Don't kid yourself.
Thats not going to happen. Publishers have to have the same price. The iPad is not that important to Amazon that they will raise their prices by 43% across the board.
The iPad is not important to Amazon? The iPad sold over 7 million iPads last quarter, the same quarter that Amazon posted record eBook sales that outsold paperback books for the first time ever. Are you seriously suggesting iPad users had no part in that gain? Honestly, ask anyone who uses an iPad for reading and tell me how many of them are not using Kindle.
They already have done that - the 43% markup applies to Hulu, Kindle and Netflix ( and the company I worked for until they canned a project).
Apple doesn't have any sort of subscription service for music or videos. That's why Netflix has gotten so popular - the lack of competition from iTunes has given them a huge start, one that has left Apple in the dust and unable to secure any deals with content providers.
So what's the solution? Either get the deals and open your own subscription service, or scrap off the top some of Netflix's revenue as a "finders fee," as though people needed the iPhone to know what Netflix is.
They win until everybody abandons the platform because it has bog all books compared to the Android, and far less choice of content providers. Even if the iPad comes in good this year, it wont last.
So again, you're implying that Apple is the underdog here? Please...
This is hardball nonsense from Apple at a time when they need to be more agressive about selling hardware and not give a toss about content providers making them rich by adding value to their platform..
Why does Apple need to be aggressive about selling hardware? Android and other tablet sales have yet to sell anywhere near the rate of the iPad, and none worth talking about is able to meet Apple's $499 price point. Unlike phones, they're years ahead of everyone else with little competition in sight.
There is one thing we do agree about - Apple doesn't give a damn about developers or content creators. "Gee, thanks you guys for all your hard work making applications and services that have sold our products for years. We're thrilled that you've standardized a major portion of your business on our platform.... now it's time to pay up."
You have two of the options right.
The third option is that profits are sufficiently rich that the content providers can afford a 30% reduction in revenue. This is the case with the "app developers" that other commenters have pointed to. Its absolutely not true however with respect to Netflix, Hulu, Amazon/Kindle, etc.
A forth "option" is Apple negotiates. For apps that help realize sales of iOS devices, they might cut a sweeter deal. 5% to 10% might be supportable.
But there is no such thing as a free lunch. Apple wants more money. Unless apps are withdrawn, the money has to come from somewhere. It will either come from a third party's profits, or consumers. Those are the only two choices, at least in the short term.
Of course, Apple is probably playing for the long-term. Having succesfully launched the iPad, and gained enormous tablet marketshare, Apple may have decided to cut out the middleman. Instead of leveraging Netflix, Hulu, Amazon to help push device sales, they may prefer to squeeze them out of the app store, thereby increasing consumer demand for Apple-hosted media services (iBooks, and iTunes subscription-based services). Both of those may stink now, but that's at least partially because publishers and media companies have better (or more established) deals through 3rd parties (the aforementioned Hulu, Netflix, Amazon). If the Kindle app is gone, iBooks will probably be able to sign up more publishers. If Hulu/Netflix are gone, media companies may be willing to let Apple sell subscription services.
I'm not arguing that apple shouldn't be able to profit from apps that sell content for their devices. I believe they should. but at 30% that makes businesses like Netflix and hulu unprofitable, not just "no net gain."
and forcing out kindle in favor for ibooks is a net loss for consumers. It means even MORE of the content is locked into a single ecosystem. With Kindle, I can take my book and read it on my kindle, on my android, or my computer, or my ipod touch.
Of course, Apple is probably playing for the long-term. Having succesfully launched the iPad, and gained enormous tablet marketshare, Apple may have decided to cut out the middleman. Instead of leveraging Netflix, Hulu, Amazon to help push device sales, they may prefer to squeeze them out of the app store, thereby increasing consumer demand for Apple-hosted media services (iBooks, and iTunes subscription-based services). Both of those may stink now, but that's at least partially because publishers and media companies have better (or more established) deals through 3rd parties (the aforementioned Hulu, Netflix, Amazon). If the Kindle app is gone, iBooks will probably be able to sign up more publishers. If Hulu/Netflix are gone, media companies may be willing to let Apple sell subscription services.
Hm, Apple makes a move that either shuts out competition or allows competing services to pay them a large percentage to do business. In doing so, the prices increase across the board, since the same subscription must be in-app as well as outside the app.
Meanwhile, Apple builds its own subscription service, and after driving up the market with their exorbitant fees, they release iTunes subscriptions across all their stores and introduce at a lower rate than the competition, which is simply the same rates that exist today. So, the market responds by lowering their prices to compete with Apple... WHILE STILL PAYING APPLE'S 30% TAX. Those companies become unprofitable, they disappear from the platform, and Apple now has 100% of all the customers on their devices.
Yes, I realize there are so many flaws in my little conspiracy theory, but its not outside the realm of possibilities, yes?
My statement amounts to this. Apple got to those numbers by creating a platform that everyone wanted to be a part of and that consumers had almost limitless choices in regards to software and apps. Sure, Android is open, but it has never been able to make waves on Apple in regards to software and quality....
HOWEVER, this might do it. To think that developers HAVE to comply with Apple's new rules is a misnomer....they don't even have to submit. they can take their app off the iphone all together. With Android's growing market and Windows 7 still a decent developing platform (even though it doesn't have near the foot hold as the other two), I wouldn't be surprised to see netflix, Hulu, Amazon.com give the ol' "screw you" to apple. Now, how much does the value of those 100 of millions of Apple iOs products drop when suddenly the other companies run adds showing that you "can truly get anything and everything you want on our platform".
I just think Apple is making a mistake. I want Hulu. I want Netflix. I like all my Kindle books because iBook selection sucks. Take those away, and there's no need for me to have one of the most popular handsets in the world.
Oh...and my backside...it's sore, but...hey...at least I can read my Kindle books on another device.
FYI, I've already subscribed for my wife and myself to two magazines, yearly subscriptions both; Elle (for the wife), and Popular Science (for me). Elle was like $19 and Pop Sci was like $16.
And note that these are highly interactive magazines that are optimized for the iPad experience. Finally, I was not required to send ANY personal info to either mag.
This is a winning strategy for Apple, and for the consumer. Period. End of discussion.
So, your argument seems to be that iOS users are stupid. Pretty much the same as before but worded differently. Not content with bashing Apple, bash their customers too?
Yep. My friends and associates are the lowest common denominator. iPad is designed by Apple to be easy to use by the most clueless people imaginable. If you want to do any real work, it shackles you with endless hoops to jump through.
Companies will make plenty of money or their business models have bigger problems than this.
Stores that sell content that is owned by others -- rightsholders -- have a very established, predictable business model, with gross margins (before taking out the costs on their end) running between 15% for things like streaming video to 50% for things like physical books. Amazon, like every other ebook seller, including Apple, splits revenue based on the list price (which is set by the publisher) in a 70/30 split, with the publisher receiving 70% of the list price.
So let's take Amazon:
I buy a copy of Mac at Work for $19.99, the list price. The rightsholder gets 70% of that transaction, leaving Amazon with $6.00 to cover its costs, including storage of the file, serving the download of the file (many times if I own multiple Kindle-compatible devices), other associated costs, with whatever remains as its profit. Let's say those costs run up to $0.20 per book, leaving Amazon $5.80 in profits. But now, if that book is sold through an in-app purchase, Amazon is paying the rightsholder $13.99, paying Apple $6.00, and also paying its own costs of $0.20, leaving Amazon $0.20 in the hole for every book sold through the in-app system.
So what would you tell Amazon to do? Apple is demanding *every penny* of Amazon's gross revenue. The publishers, not Amazon, set the list price. Apple's rules preclude Amazon from increasing the cost of the in-app book to cover the costs of Apple's fees.
What would you tell Amazon to do?
The problem isn't Amazon's business model. The problem is that Apple's fee is so high that it absorbs the entire gross revenue Amazon structured into its price, to say nothing of the profits.
For video streaming services like Hulu, whose gross margins on subscriptions are significantly less than 30%, you end up with a situation where subscribers added through add more and more red ink to the bottom line -- it will *never* be profitable for Hulu to give Apple 30% of the fees from a subscriber that signs up through an in-app system.
Apple's fee is too high. These other companies can't make any money if on top of all their other costs, which consume more than 70% of the price of the goods they sell, they have to pay Apple 30% of the price as well. The math is *IMPOSSIBLE*.
And as a consumer, that pisses me off, because the value I get from my iPad comes, in no small part, from access to Kindle, Netflix and Hulu content. If an iPad was just a device that let me watch video from iTunes Store or books from the iBooks store, it wouldn't be worth having.
I already did. It's also really easy to search for them.
In fact, why don't you provide me with the financial statements of some companies who can easily handle this 30% hit to their revenue.
Well, it's your claim, support it with actual documents.
Well, it's your claim, support it with actual documents.
See the post DIRECTLY above the one you just quoted. or see fireball's response.
This isn't rocket science we're talking about here. It's simple math.
Cost+Markup=Revenue
You add apple's tax and it's coming directly from your markup which is almost always significantly less than 30%
Stores that sell content that is owned by others -- rightsholders -- have a very established, predictable business model, with gross margins (before taking out the costs on their end) running between 15% for things like streaming video to 50% for things like physical books. Amazon, like every other ebook seller, including Apple, splits revenue based on the list price (which is set by the publisher) in a 70/30 split, with the publisher receiving 70% of the list price.
So let's take Amazon:
I buy a copy of Mac at Work for $19.99, the list price. The rightsholder gets 70% of that transaction, leaving Amazon with $6.00 to cover its costs, including storage of the file, serving the download of the file (many times if I own multiple Kindle-compatible devices), other associated costs, with whatever remains as its profit. Let's say those costs run up to $0.20 per book, leaving Amazon $5.80 in profits. But now, if that book is sold through an in-app purchase, Amazon is paying the rightsholder $13.99, paying Apple $6.00, and also paying its own costs of $0.20, leaving Amazon $0.20 in the hole for every book sold through the in-app system.
So what would you tell Amazon to do? Apple is demanding *every penny* of Amazon's gross revenue. The publishers, not Amazon, set the list price. Apple's rules preclude Amazon from increasing the cost of the in-app book to cover the costs of Apple's fees.
What would you tell Amazon to do?
The problem isn't Amazon's business model. The problem is that Apple's fee is so high that it absorbs the entire gross revenue Amazon structured into its price, to say nothing of the profits.
For video streaming services like Hulu, whose gross margins on subscriptions are significantly less than 30%, you end up with a situation where subscribers added through add more and more red ink to the bottom line -- it will *never* be profitable for Hulu to give Apple 30% of the fees from a subscriber that signs up through an in-app system.
Apple's fee is too high. These other companies can't make any money if on top of all their other costs, which consume more than 70% of the price of the goods they sell, they have to pay Apple 30% of the price as well. The math is *IMPOSSIBLE*.
And as a consumer, that pisses me off, because the value I get from my iPad comes, in no small part, from access to Kindle, Netflix and Hulu content. If an iPad was just a device that let me watch video from iTunes Store or books from the iBooks store, it wouldn't be worth having.
Well said ALMOST. There are some flaws here. Apple isn't asking for every penny of someone's revenue. Gross Revenue is Cost+Profit and what you said would only be true if you were talking in terms of gross income or gross profit.
I already did. It's also really easy to search for them.
In fact, why don't you provide me with the financial statements of some companies who can easily handle this 30% hit to their revenue.
You say that like it is no big deal. If you made 10 billion dollars in revenue last year, a 3 billion dollars difference is a HUGE deal. You're doing the same amount of work, but only making 70% what you were making before.
And again, we're talking about 30% off PURCHASES, not profit. It's one thing to say Apple gets 30% of whatever profit Amazon makes from the sale of a book, but that's not the case. Say if Amazon sold a $10 book and only made $3 profit from the sale. Well, if you buy through Apple, Apple gets the $3 while Amazon gets $0, and Amazon is still expected to shoulder the servers and bandwidth to deliver that book they made no money on to you.
Why don't you ask Apple if they wouldn't mind giving up 30% of their revenue on the sale of their products and content and see if they don't complain.
FYI, I've already subscribed for my wife and myself to two magazines, yearly subscriptions both; Elle (for the wife), and Popular Science (for me). Elle was like $19 and Pop Sci was like $16.
the original announcement for Pop Sci was $4.99/issue. Are you saying the annual subscripton is $16? That is more reasonable.
You say that like it is no big deal. If you made 10 billion dollars in revenue last year, a 3 billion dollars difference is a HUGE deal. You're doing the same amount of work, but only making 70% what you were making before.
And again, we're talking about 30% off PURCHASES, not profit. It's one thing to say Apple gets 30% of whatever profit Amazon makes from the sale of a book, but that's not the case. Say if Amazon sold a $10 book and only made $3 profit from the sale. Well, if you buy through Apple, Apple gets the $3 while Amazon gets $0, and Amazon is still expected to shoulder the servers and bandwidth to deliver that book they made no money on to you.
Why don't you ask Apple if they wouldn't mind giving up 30% of their revenue on the sale of their products and content and see if they don't complain.
ummm... you're missing the mark entirely. I'm the one who is saying that 30% is far too high. Anonymouse is the one who doesn't understand business.
the original announcement for Pop Sci was $4.99/issue. Are you saying the annual subscripton is $16? That is more reasonable.
Yes, the annual subscription is about $16 ($15.xx, don't remember the exact number).
Stores that sell content that is owned by others -- rightsholders -- have a very established, predictable business model, with gross margins (before taking out the costs on their end) running between 15% for things like streaming video to 50% for things like physical books. Amazon, like every other ebook seller, including Apple, splits revenue based on the list price (which is set by the publisher) in a 70/30 split, with the publisher receiving 70% of the list price.
So let's take Amazon:
I buy a copy of Mac at Work for $19.99, the list price. The rightsholder gets 70% of that transaction, leaving Amazon with $6.00 to cover its costs, including storage of the file, serving the download of the file (many times if I own multiple Kindle-compatible devices), other associated costs, with whatever remains as its profit. Let's say those costs run up to $0.20 per book, leaving Amazon $5.80 in profits. But now, if that book is sold through an in-app purchase, Amazon is paying the rightsholder $13.99, paying Apple $6.00, and also paying its own costs of $0.20, leaving Amazon $0.20 in the hole for every book sold through the in-app system.
So what would you tell Amazon to do? Apple is demanding *every penny* of Amazon's gross revenue. The publishers, not Amazon, set the list price. Apple's rules preclude Amazon from increasing the cost of the in-app book to cover the costs of Apple's fees.
What would you tell Amazon to do?
The problem isn't Amazon's business model. The problem is that Apple's fee is so high that it absorbs the entire gross revenue Amazon structured into its price, to say nothing of the profits.
For video streaming services like Hulu, whose gross margins on subscriptions are significantly less than 30%, you end up with a situation where subscribers added through add more and more red ink to the bottom line -- it will *never* be profitable for Hulu to give Apple 30% of the fees from a subscriber that signs up through an in-app system.
Apple's fee is too high. These other companies can't make any money if on top of all their other costs, which consume more than 70% of the price of the goods they sell, they have to pay Apple 30% of the price as well. The math is *IMPOSSIBLE*.
And as a consumer, that pisses me off, because the value I get from my iPad comes, in no small part, from access to Kindle, Netflix and Hulu content. If an iPad was just a device that let me watch video from iTunes Store or books from the iBooks store, it wouldn't be worth having.
First of all, Amazon is a RESELLER. In case you hadn't noticed, so is Apple (iBooks). The PUBLISHER can choose to sell the book through Apple's iBook app. Screw Amazon if they can't compete. And yes, screw Apple if THEY can't compete!
Same with Hulu, etcetera.
Besides, Amazon can still put their reader on the iPad. They just can't sell books through it come June unless they're willing to pay Apple's price - which they won't. So?
Flip it around: Can you buy an iBook on the Kindle? No? How about an iBook reader? Hey, at least Apple lets you read a Kindle book on an iPad!
Apple's tired of carrying the water for its competition. Guess what? THEY HAVE THAT RIGHT.
Amazon, like every other ebook seller, including Apple, splits revenue based on the list price (which is set by the publisher) in a 70/30 split, with the publisher receiving 70% of the list price.
This isn't true. Amazon takes 65% as standard. They introduced a 70/30 split to respond to Apple's App Store pricing but it has restrictions and only applies to books under $9.99. If a publisher takes the 70/30 split they have to meet the following conditions:
- The author or publisher-supplied list price must be between $2.99 and $9.99.
- This list price must be at least 20 percent below the lowest physical list price for the physical book.
- The title is made available for sale in all geographies for which the author or publisher has rights.
- Books must be offered at or below price parity with competition, including physical book prices.
http://www.businessinsider.com/henry...-option-2010-1
I suspect most books are still sold under the old model.
ummm... you're missing the mark entirely. I'm the one who is saying that 30% is far too high. Anonymouse is the one who doesn't understand business.
I think it comes down to whether or not you define Apple as a distributor/reseller of content. If you do then the 30% isn't that bad. Many resellers mark up merchandise even 50% from the wholesale price. I'm not sure what the markup is for books, magazines or music in particular but a typical reseller gets merchandise for a substantial discount and then marks it up.
In this case the problem arises when the distributor is a re-distributor, then the merchandise gets marked up twice. Since Amazon is the reseller of the publisher and the Apple is the reseller of Amazon, there is one too many middle men .
I think it comes down to whether or not you define Apple as a distributor/reseller of content. If you do then the 30% isn't that bad. Many resellers mark up merchandise even 50% from the wholesale price. I'm not sure what the markup is for books, magazines or music in particular but a typical resellers gets merchandise for a substantial discount and then marks it up.
In this case the problem arises when the distributor is a re-distributor, then the merchandise gets marked up twice. Since Amazon is the reseller of the publisher and the Apple is the reseller of Amazon, there is one too many middle men .
Exactly. Which won't happen. All that means is that, come June, you won't be able to click on a button in the Kindle app and launch to the Amazon store. Big deal.