Wednesday, February 16, 2011

Apple enforcing 30% take on e-reader apps for Amazon/B&N ? Not likely. - Update3

WHAT WOULD APPLE BE SMOKING?  (That image to the left applies only if they'd actually do what is described below.)

See also, UPDATE to include online zines that noted the stress on subscriptions today

 As I write this blog article, I see that AppleInsider is quoting ONLY Apple's wording to publishers of *SUBSCRIPTION* apps and so far I see nothing new, especially anything saying the 30% wording applies to non-subscription legacy apps such as e-reader apps.  At the time I wrote on Feb 1 and Feb 4, Sony had not detailed yet what the billing plans they submitted actually were.

30% of a bookseller's transaction would be 100% of bookseller's take via Apple's Agency Plan, and the e-reader-app bookseller would get nothing.  That makes no sense.

 Would Apple want to guarantee that those interested in reading e-books on a portable device will not choose the iPad for that?  Would they be trying to help Amazon, Barnes & Noble, and Android tablet makers sell their devices?

  Why would I buy an iPad 2 when I know that Android tablet makers will not be charging e-reader vendors 30% of a sale when that is ALL the vendors and e-book sellers will be getting before an Apple fee, thanks to Apple's encouragement of the Agency Plan now used by the Big5 and responsible for raising e-book prices by about 50%?

  In other words, as I said, the online booksellers make 30% on a sale, and Apple would want 100% of that.  That's not possible. AppleInsider's Slash Lane writes that "Legacy apps must comply with Apple's App Store subscription rules by June 30" -- that's the headline.  And the interpretation is:
' Software currently available in the iOS App Store that does not comply with Apple's newly enforced in-app subscription rules, such as the Amazon Kindle or Hulu+ applications, have until June 30 to comply or they could be removed. '
As I wrote February 4, Apple sent the following to subscription publishers and there was concern the policy would be extended to online-bookstore e-book reader apps:
' "For existing apps already in the App Store, we are providing a grace period to bring your app into compliance with this guideline," the letter to publishers from Apple reads. "To ensure your app remains on the App Store, please submit an update that uses the In App Purchase API for purchasing content, by June 30, 2011." '
So, that is old news.  Apple Insider also uses the Digital Daily's interpretation:
' That means applications like Amazon Kindle, Hulu+, and Netflix now have less than four months to add an in-app purchasing option to their App Store software.  And for those content providers, Apple will take a 30 percent cut of all sales made within the application. '

Apple Insider and Digital Daily are applying subscription "30%" rules made for subscription publishers to non-subscription e-book seller apps  As I said before, I think most might understand attempting to dun Sony/BN/Amazon 5% for space in a highly-traffic'd area for one's sales-stand, and even that might be questionable to online booksellers where book-sales margins (expenses etc) are small.

  Such a move would probably hurt Apple in many ways.  Would Apple allow books sold through their device to be priced higher to take care of that 5% or 30%?
  30% (100% of e-book profit) would ensure that all e-reader apps would leave the Apple store.  Maybe Apple wants that? That's pretty doubtful.

Would loyal Apple users pay the premium just to get an e-book on the iPad? Would the booksellers get customer data from sales?

At any rate, there's little doubt that Steve Jobs's Apple would try to get all that it could, but 30% of e-bookseller transaction (100% of seller-profit) would be just irrational.

We'll see. The main question from today's articles would be, "Is Apple Suicidal?" because that's what they'd be, but I think that the percentage-rules cited for subscription-publishers in early Feb are being applied by the article writers to non-subscription e-booksellers.

 Again, might Apple enforce an in-app iBookstore fee for other-vendor e-books?  Sure.  But not 100% of the bookseller's take -- and the wording cited today is still from early February communications.

  Most of us had already said back then that there's a concern that the Sony e-book app rejection and in-app buying option (which differs from the subscription language) will apply to Amazon, B&N, and Sony et al.

Steve Jobs in Press Release from today (prefaced by purpose of Apple statement:
' Apple® today announced a new subscription service available to all publishers of content-based apps on the App Store℠, including magazines, newspapers, video, music, etc. This is the same innovative digital subscription billing service that Apple recently launched with News Corp.’s “The Daily” app...
“Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing,” said Steve Jobs, Apple’s CEO. “All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app.

We believe that this innovative subscription service will provide publishers with a brand new opportunity to expand digital access to their content onto the iPad, iPod touch and iPhone, delighting both new and existing subscribers.” '

In response to the Sony rejection on its e-reader app, Trudy Muller said:
' "We have not changed our developer terms or guidelines," Apple spokesperson Trudy Muller told Ars. "We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase." '

Computerworld *interpreted* a response from Trudy Muller today as applying to Amazon/B&N e-book sales through their device-apps.
' Apple today unveiled the details of its App Store subscription plan, and confirmed that it will demand its usual 30% from publishers who sell content within their apps. '

  [Note the word 'content' for subscription content, later interpreted as e-book content.]
[Computerworld goes on, below, to describe what subscription-content providers must do and then interprets it as a general requirement for Amazon's general content (the current Kindle apps don't yet do blogs or periodicals but someday may and would likely be separate apps that are subscription apps, and subscription rules would then apply to them at that time though not precisely the 30% for publishers, who are not re-sellers and who still 'earn' the other 70%).]

[Computerworld goes on to interpret the Apple statement about subscription-apps to include one-time e-book apps situation too.]
 'Publishers and content sellers must remove any links within their apps to outside-the-App Store purchasing options, Apple said, a requirement that means must eliminate the link to the Kindle Store that it currently provides in its iPhone, iPod Touch and iPad apps.'

  [Later on, Computerworld reports on Trudy Muller's response to their questions about today's press release on subscription content. ]

' Later Tuesday, Apple spokeswoman Trudy Muller confirmed that those rules apply not only to newspaper and magazine publishers, but also to content sellers like, which offers a Kindle app for the iPhone, iPod Touch and iPad.'

[ All emphases mine. ] '

The concern today has to do with interpreting "content sellers" to mean e-book content sellers as well as "subscription-content sellers" in connection with a press release focused on subscription-apps.

Now, Apple's Trudy Muller may have meant e-book apps too, but she answered in the context of the subscription-content press release.  If she does mean Amazon and B&N e-books also, it contradicts what she said about the Sony e-reader app two weeks ago and it means that the e-reader apps will leave Apple or charge 143% on top of the book price (if Apple allows) and no one would use Apple's iBookstore for these other vendors' e-books unless they were iPad loyalists in the extreme, willing to cover Apple's added fee for the books.

UPDATE - 5:40 PM same day (Original post 2/15/11, 2:41 PM)
Mashable's Christina Warren does draw attention to the fact that the focus of today's announcement was on subscriptions.  Here is her take on that aspect:
' Earlier this month, the Sony Reader app for iOS was reportedly not accepted into the App Store because it violated some of Apple’s policies.  At the time, it was unclear if the cited policy violations would extend to other e-book applications like those from Amazon and Barnes & Noble.

Because Apple’s latest remarks concentrate on subscription content, it still isn’t clear to us if these new provisions also apply to other types of apps.  We don’t know if this means that applications — like Amazon’s Kindle app that sell purchases a la carte — must now remove links to outside web stores.
  The Kindle app for iOS received an update Monday and, for the record, the link to the Amazon Kindle website is still in the app. '

UPDATE2 - Here's another way to look at some differences that must be taken into consideration for any vending-stand fee coming down the pike.

  30% of an EBOOK SELLER's transaction is 100% of the seller's take/
  30% of a PUBLISHER's transaction is 30% of the publisher's take.

Also, read Mike Perry's thoughtful analysis in two parts in the comments area

UPDATE3 - Here's The Telegraph (UK) on Subscription vs "One-Off"
Shane Richmond, Head of Technology for Telegraph Media Group, writes today:
' ...That has led to speculation about what this will mean for an app such as Amazon’s Kindle app, which provides a link to purchase from Amazon’s website.  It may be that Apple intends to force ebook retailers to offer ebooks for sale within their apps and take 30 per cent of thosee sale. That would force ebook retailers to raise their prices or lose money.  Maybe that’s what will happen.

However, that’s not what Apple has announced today.  This is about subscription not sales of one-off products.  If you’re a publisher and you want to allow people to subscribe to your publication then you must offer the same subscription price within your app as you offer on your website and Apple will take 30 per cent of the in-app subscriptions. '

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  1. Post 1: Thanks for the excellent analysis. It is possible that Apple's execs really are clueless. It wouldn't be the first time and Apple is a secretive and almost paranoid world. It's also possible that Apple is testing how much they can get away with. Discussions about Apple taking 30% might make us breath a sigh of relief when Apple announces that it is taking 'only' 10%.

    In the latter case, we as customers are expected to forget that Apple is bringing nothing of substance to an ebook purchase. Yes, Apple makes the iDevice/iOS. But it makes a nice profit from what we pay to cover that expense. Charging for work done by others (Amazon, the publisher and especially the author) makes no sense. By that reasoning, when a lawyer is working on his MacBook Pro and billing clients $300/hour, Apple should be claiming 10% or $30/hour or even 30% and $90/hour.

    Keep in mind that Steve Jobs remarks about 30% versus nothing for periodical subscriptions are in the context of an App Store subscription versus an online offer from the publisher. Apple's betting most people will come through them and in any case Apple is providing the entire store experience: information, billing and download, however that customer makes the purchase. Apple is earning its slice.

    But Amazon and Sony customers aren't coming to an ebook purchase through the App Store. They're coming through an Amazon or Sony app that Amazon or Sony has created and using a store that's also their own creation. Why impose 'pay us' conditions on retailers who're providing the total purchase experience with no help from Apple?

    That brings up an aspect of the supposed purchase through Apple that's left me utterly confounded. Is an ebook in-app purchase from Amazon via Apple going to mirror a purchase from Amazon's store with the same book data, sample copies, and reader reviews?

    * If so, then Apple will need to create and mirror via their own online Amazon store all the complexities of Amazon's website and pull the data from Amazon continually, an excruciating difficult and expensive task and one Apple has shown no indication of undertaking.

    * If not, if somehow a purchase-in-progress is simply tagged so all the retailer profits from this sale go to Apple, but with everything else, including the credit billing and file download being handled by Amazon, then it's so grossly unfair, it's difficult to imagine anyone, much less a retailing giant like Amazon, agreeing to participate. Amazon would be wiser to exploit its already almost 300% price advantage (iPad v. Kindle 3) and simply cut prices a bit more, stealing the ebook market utterly away from Apple.

    [More follows]

  2. Post 2: What do I think? I believe Apple execs are victims of their success. They live in an echo chamber and often listen only to themselves. They are trapped in the past. They think they're bringing the iTunes Store to this situation when they're not. The original iPods saw the world only via iTunes and the iTunes Store, making Apple a real gatekeeper and one that justify access fees.

    But when Apple opened up iPhones to apps that can create their own independent and complex links to the Internet, Apple ceased to be a gatekeeper. That's why they look like strange and greedy bullies to the rest of us when try to reinstate that gatekeeper role in a contrived fashion by blocking apps (like Sony's) from iPhones and iPads.

    Note the difference between the music business and ebooks. Amazon, Sony and others aren't expecting anything from Apple but app placement on iPhones and iPads. They're providing everything else. Apple's role is now trivial. Their gatekeeping has become so severely limited that they have no justification for charging tolls at all. Everyone instinctively knows that but those in Apple's executive suite.

    Apple execs give no evidence they realize just how radically the game has changed. By allowing Internet-capable apps on iPhones, they gave up their right to demand tolls for the content those apps want to pull in.

    For a parallel, recall the 1980s, when Soviet leaders attempted to open up their society just enough to make it competitive, economically and militarily, with the US. Once those doors were open, they found themselves unable to shut them again.

    That's Apple's situation. The sooner they realize that, the better it will be for everyone.

    --Michael W. Perry, Seattle

  3. All very good points, Michael. I've linked to your posts from the main blog entry.

    I would differ only in that Apple provides enormous exposure via the iPhone, iPod Touch and iPad (for now -- the competition is preparing to storm the barricades). For the spot the app may have in a good 'location,' Apple might be able to convince vendors that 5% of e-book transaction might be doable. Or not.

    The presence of the e-reader apps has been used as a sales tool for the iPad certainly, so they get their benefits from it too, clearly. But soon, Kindle will be on webOS (when it's out) and available for any Android tablet already. And Apple knows this.

    That Amazon is crafty.

  4. I am amused by the cries of greed all over the net about this, what do people think the free enterprise system is built on, human kindness?

    Frankly this is no surprise. Those companies that produce the hardware devices only will always be at a disadvantage against those that produce both hardware and platform content. Apple is as determined as Amazon to be either producer of content or the universal tollbooth all content providers must pass through.

    It makes no business sense to boost rivals via your own device for free. In the long run Amazon is a clear competitor to Apple in digital content and quite possibly soon hardware.

    To the argument that people will abandon the ipad...Colour me skeptical. The mainly Android tablets offering 'universal' access will most likely fall in two camps. The really cheap clones already on offer, and the high end costing somewhat more than Apple. It is already starting to look like matching the pricing of the iPad will be difficult for the hardware only manufacturers.

    Platform plus content is the future for all digital. Apple is clearly trying to muscle into territory so far owned by others, not least Amazon.

  5. 30% from subscription publishers with Apple providing exposure and the publishers retaining 70% doesn't surprise me.

    I think the outcry was more over the idea that the 30% would also apply in July to e-reader apps and e-books, a situation in which the bookseller gets only 30% of the sale in the first place (thanks to the Agency plan).

    I really don't see much basis for the fast-spreading interpretation of 30% from e-book app vendors and it's not supportable because, as I've said, that's 100% of bookseller margin.

    I do believe it's not uncalled-for to negotiate some kind of lower fee for exposure available on the devices, but it's also a reality that Apple mentioned taking the e-reader feature further now, but they are not really competitive in the e-book market, partially from lack of interest in pursuing that.

    As a result, the draw of the iPad for avid readers was the ability to read their e-books for other devices on the iPad -- it made it the only device where that was possible. Android changes that. And Apple may change that.

    Apple 'protects' its customers and gives them only the apps that are good for them (and giving the device more stability) but many today don't want to be that protected or told what is good for them, especially when their friends are enjoying other apps that are not available to them.

    I think a lot has to do with trust of a company. Today there was a lot of distrust, due to lack of clarity in my view. Apple was the symbol of breaking the tyranny of The Man and now it seems to be becoming The Man to those who want more control of what they can put on their devices and all are concerned about costs added to what they have.

    You're right -- both Apple and Amazon are very competitive businesses. But their customers will also have certain expectations, and sometimes the line between normal competitive practices and a sense of over-control are hard to understand.

    People love police protection but don't want to be told what they can and can't do. Missing basic features (USB ports, memory card slots) make them more vulnerable and appearing to be withholding the features. I've always thought the lack of a simple USB port was due to maximizing battery power though - the priority.

    WebOS will do real multitasking while the iPad is going to suspended apps. Everyone but Apple will provide Flash support but eventually HTML5 will help, if Apple can hold out that long. But things are happening very fast.

    Thanks for the thoughts.

  6. It seems to me that a kindle format best seller is not the same thing as an epub version of the same thing. If I have to choose between buying from Amazon and buying from Apple, the one from Apple will not work unless Apple converts to kindle format or it gets kindle files from Amazon. Neither of these things seems very likely. Maybe Apple can enforce an interpretation of not getting its books from Amazon, but it's not necessarily a slam dunk.

    Regards, Don

  7. Don,
    What Apple would do, once it sets details for e-book apps (rather than for subscription-apps as they did yesterday), is process the payment IN the Apple store tbut it would be for the Kindle book, not for an iStore ePub book.

    Hope that helps.

  8. I am a Kindle and iPad user and have to disagree with the comment that users won't NOT buy the iPad 2 over this.

    Amazon has two choices if Apple maintains a hard line on this. Get off the iOS or raise prices. I can only comment on how they will affect me. I'm a gadget gal and an avid reader.

    If they raise prices, I won't be buying as many books. I already avoid most books that are over $10, and am finding joy in the lower prices of the independents. Random house sometimes gets my $12/13, but NONE of the agency-model pubs do. Prior to the Kindle, I didnt blink at buying a book at hardcover pricing, but having that fight in public over what is a book LICENSE only made me hyper-aware of ebook pricing. And not in a good way.

    If Amazon pulls it's iOS software, I most certainly will reconsider buying a iPad 2. I read a lot on my iPad when away from the house and unable to take my Kindle. It's probably about 40% of my total iPad use. So if Amazon (and Netflix?) go, I'll just have a device for Twitter, email and Internet. Frankly, I can go back to my laptop for all of those-OR BUY A DIFFERENT DEVICE.

    Also, even if Amazon and Apple work something out, I can't see myself ever buying something in-app that I can get from the company's website. But now that rule won't just apply to Amazon books, it'll apply to every app I use.

  9. What is likely to happen (assuming that Apple creates trouble in spite of your Update #3) is that the Kindle app on apple devices will become a reader-only app.

    In other words, no purchases possible (except perhaps free books). Patrons will be asked to buy their books either on desktops/laptops or on kindles (if they own one). The apple app will only *sync* the books onto the iphone/ipad.

  10. Hi Andrys, Any news on when the next model of Kindle after Kindle 3 may be released? P

  11. Apple apparently is okay with the confusion this is causing, or they would have clarified matters by now. It may be that they hope to strengthen their negotiating position so it will seem very reasonable when they announce this is a misunderstanding and they only want a 10% commission on ereader books.

    For apps and products that have little or no existence outside Apple ecosystem, I think 30% is reasonable, but I think 30% is absurd for products such as Netflix or Amazon books that have a strong identity and existence outside Apple.

    I am typing this response on my iPad, and I own a iPod Touch in addition to my Android phone and my Windows computer, so I'm not especially brand-biased, but this uncertainty is deterring me from buying anymore Apple App store products for fear of future imperialistic Apple behavior. I'm not sure what the future holds, and I'm leery of spending more money to be at risk in the Apple ecosystem.

  12. Hi, Jazz -
    I recognize the icon and know that you love using both products, and because of your delight in the iPad I was thinking of looking seriously at iPad II (the first one had too many missing things from me that my 10" netbook has and I happen to love using that netbook).

    I was also thinking of finally getting an iPhone since they are now on Verizon.

    Unfortunately, I would be signing for 2 years and then limited to older technology but it's still an idea though I'm drawn by Galaxy and Motorola Droid ones too. My current cellphone is over 4 yrs old.

    But knowing Apple plans to take a cut in e-books that may be too big for Amazon or B&N to absorb, I'm hesitating while being drawn to the Android-app freedom. And I'm sure I'm not alone in that.

    Ditto on all this drivigin up book prices, when they had already been raised due to the Agency plan.
    Can we get a more unattractive option?

    You're right about becoming super aware about what the e-book licensing means and all the limitations that comes with that but especially with the conditions set by the Big5. I feel they have, long-range, lost quite a bit with the retro tactics.

    If Netflix is available on other systems but not on the iPad, that will hurt Apple's sales bigtime. I already enjoy Netflix on my netbook and on HDTV and it's an addiction and becoming "basic" as an option these days. I've been willing to pay the monthly on that for unlimited streaming.

    Re Amazon and Apple working it out -- from what Apple told Sony re its e-reader app, they'd be able to leave a link in to buy from Sony's bookstore but if they do, they would also need to put in a link to buy it direct from Apple while in the app, from Apple, with Apple getting whatever percentage.

    If Apple allows the reading app *IF* the bookseller provides no link to its own site, then (from what I understand) the bookseller would not need provide the option to buy the book from Apple's mechanisms. It'll be interesting to see if they do that.

    I still feel Apple has a right to ask something for the space in a highly-traffic'd area (their devices) if there is a link to the seller's own store in the app, but only a very small percentage, since 30% is the total that other online stores even get, while already needing to keep their prices high (turning off their customers) to match the pricing set by Apple and the Big 5.

    It's the worst kind of PR for Apple to wait to clarify this, even if only to say later that the 30% of course doesn't apply to one-off book sales where that is the total earned by the bookseller -- that the percentage would be far lower.

    They left in the idea that they COULD choose to leave that high a percentage idea, in everyone's minds. And by that they reminded us they could do this with every app, as you say.

  13. Albert,
    I agree, but that's assuming Apple will "approve" such an app, for reading-only. I think they'd be wiser to rather than see the reader-apps not be there.

    I've no idea at all on any 6" Kindle beyond the Kindle 3 at this point but I don't expect any since they just started selling these in August and it's very successful right now, and I've seen ads for it almost daily on TV, so money has been invested in people going for this model.

    I'd like to see the software for the webkit browser be mproved though, for reasons I've given in some blog entries.

    I'd like an official copy/paste method (rather than the one a few of us provide as 'undocumented') and a way to flip ahead or backwards a certain percentage of papers as we had with Kindle 1 (I think it's 5%).

  14. Well, for the purposes of this piece, it’s about how Google made their big announcement only days after Apple. When it comes to content sellers, there are other options like Murdoch’s The Daily, a new kind of subscription newspaper for the iPad.


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