I think they will adjust their rate too. I'm thinking instead of 30% they might to 15%?
Unlike with App and iAds, Apple doesn't have the overhead from storage and bandwidth costs. They can reduce that 30%.
I've been saying since The Daily announcement that 30% is too much for periodical subscriptions and have suggested pricing in the 5-10% range. I think Apple is stretching the limits of its partner arrangements and, as a shareholder, it worries me. Hopefully, they come to their senses soon.
The iOS market represents a tiny fraction of sales to most of these providers. The iPad is a huge success for a tablet, but it does not produce significant profits to any major media providers yet. If they all pull out, the iPad will be hurt much more than the news companies, movies studios, TV studios, book publishers and other content owners. Consumers will follow the content, and I imagine once they are gone Apple will have a hell of a time getting any of them to come back. In fact I think as of Tuesday, Apple's ability to negotiate content deals has been setback for years. They can't be trusted and that means the big players will play elsewhere.
I don't know how hard it will be for Apple to bring partners back if they act quickly - they still have 100M+ iOS devices out there which content providers will not want to quickly dismiss.
One of the biggest problems for Apple is that they will almost certainly need to adjust their pricing. Instead of being the leader in this area, they will be a follower. Some will think that Apple has lost its edge.
One positive thing for Apple is that using Google's OnePass requires Google Checkout. There are a lot of people who simply refuse to GC (both merchants and customers). Google Checkout has pretty high fees for payment processing which may be on top of the 10% cut.
This is entirely innacurate. You are only dealing with revenues here, and you forget profit margins entirely.
If (In lalaland, sure but if) Amazon for instance has a 40% margin for every e-book (and how I suspect that it does not), the relevant maths are completely different.
A $10 e-book will be sliced to $7 before reaching amazon's coffers. This means that amazon will win $1 for each e-book, not $4, cutting their revenue four-fold.
It means that an e-book sold in iPad is worth 4 times less than sold anywhere else, for amazon.
This is considering a 40% margin. With 50% margin, an iPad book is worth 2.5 times less. But here comes the interesting part: if the margin is 35%, it becomes 8 times less, if the margin is 32%, it becomes 20 times less.
So the real question is, how close to 30% are these corporations' margins? Assuming that they are above such levels of course. The answer will always be "Always too close", because these corporations run at very competitive prices. 30% will always put these companies in the red, or in a very troubling situation.
Even if amazon has a profit in each e-book sold on an iPad this way, they will prefer not to, since selling them in the iPad devaluates them. They will prefer to sell e-books through their online store only, and iPad owners will still buy them there anyway.
I don't think this is correct. I believe the 30% is off the profit, not off the total price.
"[Rhapsody] issued a sharply worded statement Tuesday describing Apple's demand for 30% cut of the 20% it gets from each sale as "economically untenable...."
I don't know how hard it will be for Apple to bring partners back if they act quickly - they still have 100M+ iOS devices out there which content providers will not want to quickly dismiss.
One of the biggest problems for Apple is that they will almost certainly need to adjust their pricing. Instead of being the leader in this area, they will be a follower. Some will think that Apple has lost its edge.
The key is act quickly and I think that means before June. Look at how hard it has been for Apple to negotiate new content deals (have you seen the selection in iBooks?) and then realize a new deal is many times easier to reach than repairing a broken relationship. Once the content providers feel scorned and pull out, they will require some MAJOR concessions from Apple to come back. If the loss of content hurts Apples sales, especially in the tablet space, I would bet against the content coming back for many many years, if ever.
Still, I think a great deal of dammage has been done already. The content providers are uniting against Apple already. All the content not currently available through iTunes or iBooks is now less likely to ever show up there. Why negotiate any deal with Apple when the rules can change 3 or 4 times in the next 3 years? Why invest time and money in an iOS app that could get pulled before it generates enough profit to pay for itself? Why go through the hassel to put your content on iOS if your customers will buy it anyway on some other device? Do you have any idea how much movie, TV and music content the now scorned Sony controlls? Do you think the average consumer would rather do without all that content or live without an Apple product? The history of the Mac should give that answer pretty damn quick. I will go out on a limb anbd say as of this week Apple now has no chance of making big inroads into the TV/living room market. Apple TV is doomed to niche status because it will now never have a majority of the content available to other devices. At least not for the next 5+ years and that will be more than long enough to kill it.
"[Rhapsody] issued a sharply worded statement Tuesday describing Apple's demand for 30% cut of the 20% it gets from each sale as "economically untenable...."
I believe you are misreading what Rhapsody was saying. 20% minus 30% equals negative 10% which is why it is economically untenable.
I thought Google was all about stealing content... Weren't they scanning books? I'm confused.
Yes and paying royalties on those books. There were issues over the size of the royalties, who got them and issues with the contracts with the content owners having potential antitrust anti competitive implications, but Google did not "steal" the content.
You know what happens when the price of diesel fuel rises? The trucking companies pass that on to the distributors and the retailers as added cost, and that gets pass on to the consumer. When Netflix had to pay more for Blu-Ray discs, they passed that on to the consumer as a monthly surcharge. Any increase in the cost of doing business is spread around.
And I don't know how Netflix got dragged into this since they aren't charging a fee per rental, but a subscription to use the service.
Apple will lose this battle and quickly. And it might even be the war. I'm thinking of Amazon in particular. For me, Kindle is the key app and if Amazon pulls Kindle from the app store the iPad becomes a doorstop.
Apples Bookstore is a joke, and Apple doesn't have the clout to get the same of books on to their site that Amazon has.
There is no way Apple can now save face either. It will be seen as an emperor with no clothes.
meh, never used Kindle, don't have the App, almost bought some music from Amazon but after downloading and installing some crap software on my MacBook, I found I couldn't buy it where I live anyway.
I'll think you'll find that "Kindle" isn't a dealbreaker for a lot of people.
PS I'll buy your iPad off you, $10 for a doorstop seems reasonable, although a bit high, maybe $5 seeing as I can get a brick for less than a dollar.
I don't know how hard it will be for Apple to bring partners back if they act quickly - they still have 100M+ iOS devices out there which content providers will not want to quickly dismiss.
One of the biggest problems for Apple is that they will almost certainly need to adjust their pricing. Instead of being the leader in this area, they will be a follower. Some will think that Apple has lost its edge.
A company will drop iOS in a HEARTBEAT if Apple makes it impossible to make a profit, no matter how many users there are.
Sure, they'll try and work something out with Apple, but if apple sticks with this, they'll lose companies. 100+ net loss customers isn't something any company would accept apple's terms to keep.
If I let you open a store on my block, and I told you 100 people would buy from you everyday it sounds great. Then I tell you that I'll take 30% off the top of each sale and your margins are only 20%.
You know what happens when the price of diesel fuel rises? The trucking companies pass that on to the distributors and the retailers as added cost, and that gets pass on to the consumer. When Netflix had to pay more for Blu-Ray discs, they passed that on to the consumer as a monthly surcharge. Any increase in the cost of doing business is spread around.
And I don't know how Netflix got dragged into this since they aren't charging a fee per rental, but a subscription to use the service.
Because A company isn't going to increase the prices for everyone else by 43% just so they stop losing money.
Not only would sales on that platform DECREASE, but they would plummet on other platforms.
This isn't a cost of doing business. This is like a road truckers travel suddenly putting a surcharge on the sale price of EVERYTHING that truck is carrying. What will the truckers do? They'll find another path to consumers. They WON'T eat the costs.
Hey, if I can get content like Harpers, the New Yorker, The Atlantic and other mags I subscribe to on Android but not Apple, then bye-bye Apple for my content delivery.
Writer to publisher, "hey what happened to all those books I was selling to iOS devices".
Publisher to writer, "Amazon pulled Kindle from iOS so we are no longer selling your book to 100 million iOS device users, oh sorry about the paycut by the way."
Writer to publisher, "Why aren't my books in iBooks?"
Publisher to writer, "umm, err, umm, I'm going through a tunnel, click...."
Writer to publisher, "hey what happened to all those books I was selling to iOS devices".
Publisher to writer, "Amazon pulled Kindle from iOS so we are no longer selling your book to 100 million iOS device users, oh sorry about the paycut by the way."
Writer to publisher, "Why aren't my books in iBooks?"
Publisher to writer, "umm, err, umm, I'm going through a tunnel, click...."
The problem is with Apple's "Our price must be the lowest price" model, it's going to be difficult for publishers to sign with iBooks and keep their agreements with other ebook developers. BTW, Kindle reaches significantly more customers than iBooks does. If what Apple was offering through iBooks was attractive, publishers would ALREADY BE THERE.
By forcing publishers to use their services, Apple's admitting that the market deemed them the inferior choice.
The problem is with Apple's "Our price must be the lowest price" model, it's going to be difficult for publishers to sign with iBooks and keep their agreements with other ebook developers. BTW, Kindle reaches significantly more customers than iBooks does. If what Apple was offering through iBooks was attractive, publishers would ALREADY BE THERE.
By forcing publishers to use their services, Apple's admitting that the market deemed them the inferior choice.
Amazon has much worse terms for Kindle and same with Barnes and Noble for Nook. Publishers actually have to pay a fee each time a book is downloaded to a kindle device or Nook device. That is in addition to the 60% they used to keep but Amazon has only recently relaxed on. You people crying fowl here need to read up. Google's option tethers you to the internet and a browser to get at the content you've purchased.
Right, and what we are saying is that we think that in July, Kindle and Netflix will click "Do Not Agree" and the apps will leave the App store.
I think your nuts.
Kindle and Netflix probably have the majority of their sales, and will likely continue to have the majority of their sales outside of the in-app purchase model and thus outside the 30% cut.
And for the subs landed inside the iOS ecosystem, 30% is a paltry amount to pay for a new subscriber. Do some googling to see how much the average magazine spends to attract new subscribers. Those who are acting like Apple is taking some huge cut are demonstrating just how little of business they truly understand.
Comments
I think they will adjust their rate too. I'm thinking instead of 30% they might to 15%?
Unlike with App and iAds, Apple doesn't have the overhead from storage and bandwidth costs. They can reduce that 30%.
I've been saying since The Daily announcement that 30% is too much for periodical subscriptions and have suggested pricing in the 5-10% range. I think Apple is stretching the limits of its partner arrangements and, as a shareholder, it worries me. Hopefully, they come to their senses soon.
The iOS market represents a tiny fraction of sales to most of these providers. The iPad is a huge success for a tablet, but it does not produce significant profits to any major media providers yet. If they all pull out, the iPad will be hurt much more than the news companies, movies studios, TV studios, book publishers and other content owners. Consumers will follow the content, and I imagine once they are gone Apple will have a hell of a time getting any of them to come back. In fact I think as of Tuesday, Apple's ability to negotiate content deals has been setback for years. They can't be trusted and that means the big players will play elsewhere.
I don't know how hard it will be for Apple to bring partners back if they act quickly - they still have 100M+ iOS devices out there which content providers will not want to quickly dismiss.
One of the biggest problems for Apple is that they will almost certainly need to adjust their pricing. Instead of being the leader in this area, they will be a follower. Some will think that Apple has lost its edge.
This is entirely innacurate. You are only dealing with revenues here, and you forget profit margins entirely.
If (In lalaland, sure but if) Amazon for instance has a 40% margin for every e-book (and how I suspect that it does not), the relevant maths are completely different.
A $10 e-book will be sliced to $7 before reaching amazon's coffers. This means that amazon will win $1 for each e-book, not $4, cutting their revenue four-fold.
It means that an e-book sold in iPad is worth 4 times less than sold anywhere else, for amazon.
This is considering a 40% margin. With 50% margin, an iPad book is worth 2.5 times less. But here comes the interesting part: if the margin is 35%, it becomes 8 times less, if the margin is 32%, it becomes 20 times less.
So the real question is, how close to 30% are these corporations' margins? Assuming that they are above such levels of course. The answer will always be "Always too close", because these corporations run at very competitive prices. 30% will always put these companies in the red, or in a very troubling situation.
Even if amazon has a profit in each e-book sold on an iPad this way, they will prefer not to, since selling them in the iPad devaluates them. They will prefer to sell e-books through their online store only, and iPad owners will still buy them there anyway.
I don't think this is correct. I believe the 30% is off the profit, not off the total price.
See here: http://tech.fortune.cnn.com/2011/02/...ve-a-monopoly/
Specifically, this statement:
"[Rhapsody] issued a sharply worded statement Tuesday describing Apple's demand for 30% cut of the 20% it gets from each sale as "economically untenable...."
I don't know how hard it will be for Apple to bring partners back if they act quickly - they still have 100M+ iOS devices out there which content providers will not want to quickly dismiss.
One of the biggest problems for Apple is that they will almost certainly need to adjust their pricing. Instead of being the leader in this area, they will be a follower. Some will think that Apple has lost its edge.
The key is act quickly and I think that means before June. Look at how hard it has been for Apple to negotiate new content deals (have you seen the selection in iBooks?) and then realize a new deal is many times easier to reach than repairing a broken relationship. Once the content providers feel scorned and pull out, they will require some MAJOR concessions from Apple to come back. If the loss of content hurts Apples sales, especially in the tablet space, I would bet against the content coming back for many many years, if ever.
Still, I think a great deal of dammage has been done already. The content providers are uniting against Apple already. All the content not currently available through iTunes or iBooks is now less likely to ever show up there. Why negotiate any deal with Apple when the rules can change 3 or 4 times in the next 3 years? Why invest time and money in an iOS app that could get pulled before it generates enough profit to pay for itself? Why go through the hassel to put your content on iOS if your customers will buy it anyway on some other device? Do you have any idea how much movie, TV and music content the now scorned Sony controlls? Do you think the average consumer would rather do without all that content or live without an Apple product? The history of the Mac should give that answer pretty damn quick. I will go out on a limb anbd say as of this week Apple now has no chance of making big inroads into the TV/living room market. Apple TV is doomed to niche status because it will now never have a majority of the content available to other devices. At least not for the next 5+ years and that will be more than long enough to kill it.
I don't think this is correct. I believe the 30% is off the profit, not off the total price.
See here: http://tech.fortune.cnn.com/2011/02/...ve-a-monopoly/
Specifically, this statement:
"[Rhapsody] issued a sharply worded statement Tuesday describing Apple's demand for 30% cut of the 20% it gets from each sale as "economically untenable...."
I believe you are misreading what Rhapsody was saying. 20% minus 30% equals negative 10% which is why it is economically untenable.
I thought Google was all about stealing content... Weren't they scanning books? I'm confused.
Yes and paying royalties on those books. There were issues over the size of the royalties, who got them and issues with the contracts with the content owners having potential antitrust anti competitive implications, but Google did not "steal" the content.
People keep crying fowl without examining the alternatives.
Good bye Kindle, Netflix for iPad.
Why?
You know what happens when the price of diesel fuel rises? The trucking companies pass that on to the distributors and the retailers as added cost, and that gets pass on to the consumer. When Netflix had to pay more for Blu-Ray discs, they passed that on to the consumer as a monthly surcharge. Any increase in the cost of doing business is spread around.
And I don't know how Netflix got dragged into this since they aren't charging a fee per rental, but a subscription to use the service.
Apple will lose this battle and quickly. And it might even be the war. I'm thinking of Amazon in particular. For me, Kindle is the key app and if Amazon pulls Kindle from the app store the iPad becomes a doorstop.
Apples Bookstore is a joke, and Apple doesn't have the clout to get the same of books on to their site that Amazon has.
There is no way Apple can now save face either. It will be seen as an emperor with no clothes.
meh, never used Kindle, don't have the App, almost bought some music from Amazon but after downloading and installing some crap software on my MacBook, I found I couldn't buy it where I live anyway.
I'll think you'll find that "Kindle" isn't a dealbreaker for a lot of people.
PS I'll buy your iPad off you, $10 for a doorstop seems reasonable, although a bit high, maybe $5 seeing as I can get a brick for less than a dollar.
I don't know how hard it will be for Apple to bring partners back if they act quickly - they still have 100M+ iOS devices out there which content providers will not want to quickly dismiss.
One of the biggest problems for Apple is that they will almost certainly need to adjust their pricing. Instead of being the leader in this area, they will be a follower. Some will think that Apple has lost its edge.
A company will drop iOS in a HEARTBEAT if Apple makes it impossible to make a profit, no matter how many users there are.
Sure, they'll try and work something out with Apple, but if apple sticks with this, they'll lose companies. 100+ net loss customers isn't something any company would accept apple's terms to keep.
If I let you open a store on my block, and I told you 100 people would buy from you everyday it sounds great. Then I tell you that I'll take 30% off the top of each sale and your margins are only 20%.
What would you do?
Why?
You know what happens when the price of diesel fuel rises? The trucking companies pass that on to the distributors and the retailers as added cost, and that gets pass on to the consumer. When Netflix had to pay more for Blu-Ray discs, they passed that on to the consumer as a monthly surcharge. Any increase in the cost of doing business is spread around.
And I don't know how Netflix got dragged into this since they aren't charging a fee per rental, but a subscription to use the service.
Because A company isn't going to increase the prices for everyone else by 43% just so they stop losing money.
Not only would sales on that platform DECREASE, but they would plummet on other platforms.
This isn't a cost of doing business. This is like a road truckers travel suddenly putting a surcharge on the sale price of EVERYTHING that truck is carrying. What will the truckers do? They'll find another path to consumers. They WON'T eat the costs.
Hey, if I can get content like Harpers, the New Yorker, The Atlantic and other mags I subscribe to on Android but not Apple, then bye-bye Apple for my content delivery.
You'll get them for free with tons of ads.
Publisher to writer, "Amazon pulled Kindle from iOS so we are no longer selling your book to 100 million iOS device users, oh sorry about the paycut by the way."
Writer to publisher, "Why aren't my books in iBooks?"
Publisher to writer, "umm, err, umm, I'm going through a tunnel, click...."
Writer to publisher, "hey what happened to all those books I was selling to iOS devices".
Publisher to writer, "Amazon pulled Kindle from iOS so we are no longer selling your book to 100 million iOS device users, oh sorry about the paycut by the way."
Writer to publisher, "Why aren't my books in iBooks?"
Publisher to writer, "umm, err, umm, I'm going through a tunnel, click...."
The problem is with Apple's "Our price must be the lowest price" model, it's going to be difficult for publishers to sign with iBooks and keep their agreements with other ebook developers. BTW, Kindle reaches significantly more customers than iBooks does. If what Apple was offering through iBooks was attractive, publishers would ALREADY BE THERE.
By forcing publishers to use their services, Apple's admitting that the market deemed them the inferior choice.
The problem is with Apple's "Our price must be the lowest price" model, it's going to be difficult for publishers to sign with iBooks and keep their agreements with other ebook developers. BTW, Kindle reaches significantly more customers than iBooks does. If what Apple was offering through iBooks was attractive, publishers would ALREADY BE THERE.
By forcing publishers to use their services, Apple's admitting that the market deemed them the inferior choice.
See Amazon's term, they do the same.
See Amazon's term, they do the same.
Amazon has much worse terms for Kindle and same with Barnes and Noble for Nook. Publishers actually have to pay a fee each time a book is downloaded to a kindle device or Nook device. That is in addition to the 60% they used to keep but Amazon has only recently relaxed on. You people crying fowl here need to read up. Google's option tethers you to the internet and a browser to get at the content you've purchased.
Right, and what we are saying is that we think that in July, Kindle and Netflix will click "Do Not Agree" and the apps will leave the App store.
I think your nuts.
Kindle and Netflix probably have the majority of their sales, and will likely continue to have the majority of their sales outside of the in-app purchase model and thus outside the 30% cut.
And for the subs landed inside the iOS ecosystem, 30% is a paltry amount to pay for a new subscriber. Do some googling to see how much the average magazine spends to attract new subscribers. Those who are acting like Apple is taking some huge cut are demonstrating just how little of business they truly understand.