As you’ve doubtless heard by now, yesterday Apple revealed its new fee structure for premium content: all apps that offer premium content outside of the App Store have to also offer it via Apple’s official in -app purchases (this includes Amazon’s Kindle) and Apple takes a 30% cut of all subscriptions. The response has predictably ranged from outrage to approval — my colleague MG Siegler did a thorough piece talking about why this makes sense for Apple and users, even if it may leave developers up in arms. But I’m still having a hard time swallowing it.
My reaction has been one of trepidation. I don’t like where this is headed, and I think that many who consider themselves technophiles are completely dropping the ball by rationalizing what Apple has done.
The first mistake people are making has been to focus on whether or not this move is Apple’s prerogative. Ignoring the rumored antitrust issues, I really don’t think it’s worth considering whether Apple has the right to impose a 30% fee on applications, any more than I question whether Monster Cable has the right to sell their HDMI cables at multi-thousand percent markups, or whether cell carriers have the right to charge exorbitant fees for text messages. But that doesn’t mean they aren’t being obscenely greedy.
Another flawed response is that Apple has the users’ interests at heart — after all, they’re restricting how much user information publishers can gather (and re-sell), and they’re making the in-app purchasing process as simple as possible. Which is great, but that doesn’t explain why Apple is demanding 30% of each purchase. In fact, that 30% cut could hurt users. Users benefit from ease-of-use, but they also benefit from competition. As it stands now, Amazon’s Kindle application will probably be handicapped or removed entirely from iOS, because Apple is effectively eliminating its margins. Which stinks, because the only real alternative — iBooks — is far inferior.
Yes, that’s right: Apple isn’t the best at everything. You can’t read an iBook on anything other than an iPad or iPhone, compared to Kindle which supports a half-dozen other platforms and the E-ink Kindle reader, which is a vastly better reading experience than any backlit display to boot. Oh, and users also stand to lose out on the pricing competition between the two eBook platforms.
Similar comparisons can be made for other services that could potentially compete with Apple’s products: music, movies, TV shows, and so on. I like being able to watch Netflix and Hulu from my iPad, but who knows if they’ll be able to operate now if they’re handing over 30% of subscription fees. Not to mention all the applications that Apple doesn’t compete with, but will get pushed out of the ecosystem anyway because of the 30% fee. How exactly are users winning here?
Another argument from Apple devotees: normal people don’t care about this change and will continue to eat up each new shiny Apple device. MG wrote a post yesterday that spent a lot of time talking about how users will vote with their wallets if they don’t like Apple’s policies (which probably isn’t going to happen). But this proves nothing. Normal people don’t care about a lot of important things — does that mean industry professionals and competitors and pundits should simply agree with the consensus (or lack thereof) of the masses? No.
And finally, there’s the related notion that anyone who doesn’t like Apple’s rules can pick up and move to another platform, like Android. Which is ridiculous. Android and iOS share many similarities, but they’re loaded with subtle (and not-so-subtle) UI differences that intimidate ‘normal’ people. Not to mention the fact that users have built up libraries of dozens of applications and DRM-laden content that won’t transfer between devices. This lock-in effect is only going to become more pronounced as Apple shifts content ownership to the cloud and has users stream the movies they ‘own’ from its own servers.
Which brings us to why I find all of this so alarming. Above all, I don’t like the precedents that Apple continues to set. The App Store has existed for less than three years, and Apple has been drastically changing the rules on the fly, ruining some businesses and hampering others. It took years to reveal its developer guidelines in the first place, and, even when it actually printed some guidelines, it’s continued to arbitrarily change how it’s enforcing them.
I don’t take issue with Apple demanding a small processing fee to handle credit card transactions, but 30% is too much, especially combined with the restriction that publishers can’t change their pricing to adjust to the tax. Not every business will be able to offset the decrease in margins with the increased purchase volume promised by one-click payments. And companies that are in the business of reselling premium content with fixed costs, like MOG or Amazon, don’t have many options.
The App Store isn’t a storefront in the way that Amazon.com or Walmart are — this isn’t just an extravagant affiliate fee. We’re talking about the primary method of app distribution for one of the most important computer operating systems, ever. iOS is still in its infancy, and is going to continue to permeate across Apple products: desktop PCs, laptops, televisions, and whatever else Cupertino cooks up. And as people grow up in households where iOS is computing, it’s going to become harder than ever to get them to switch to less restrictive platforms down the road. Even when, heaven forbid, Apple starts making products that simply aren’t as good as the competition, or publishers and developers try to move to a different platform.
I’m sure this post will invite a throng of Apple advocates to poke holes in my logic, pointing out that Apple should be able to reap the benefits of the userbase and infrastructure it’s spent years building out. So be it. Let’s hope some of these arguments do something to allay the sinking feeling I’ve got in my stomach as I imagine a world where a significant number of the world’s computer users are locked behind a 30% toll being enforced by one of the most monolithic companies around.