
Dirty Percent - shawndumas
http://daringfireball.net/2011/03/dirty_percent
======
Lewisham
I used to be a big fan of Gruber, but I'm getting increasingly tired of his
"defend Apple at all costs" mentality.

When Apple was the underdog, it all seemed to be about not what was possible,
but what was fair, and what was right. Now it's a "Well, of course Apple would
do that, wouldn't you?"

And he then punts on the biggest question of all:

 _What if Microsoft did this with Windows, and, say, tried to require Apple to
pay them 30 percent for every purchase made through iTunes on Windows? To
that, I say: good luck with that._

Not "well I'd certainly write a slam piece about it", not "well, that would
definitely require competition regulators", not "that would be a dick move."
Just "they couldn't do it anyway, so your hypotheticals mean nothing."

The way I put it (crassly) is "When you're Top Dog, you don't need to play
like a bitch." Which is what Apple is doing, and honestly, they're turning me
off from their products. And that's not about "Oh well, Apple likes to make
money, and why shouldn't they be allowed to?" It's about looking like you're
above it. Brands like Costco and Amazon make a huge chunk of change, but you
don't see them getting into petty stuff like this.

~~~
fleitz
I don't believe Costco publishes their vendor agreements so you really have no
idea how Costco treats their suppliers.

Also, no one complains that Google takes 32% of AdWords.

~~~
natnat
Google takes all of AdWords, since it's on their own site. They take a 32% cut
of AdSense.

The thing is, advertisers could use other channels to put ads up on the web.
They can advertise with Chitika or whatever and get a bigger cut than they
would with Google. They typically don't, because AdSense adds a lot of value
by targeting the ads well. On the other hand, if you want to sell software on
an iOS device, the only way is through the app store. Apple doesn't need to
add any value to protect their 30% cut from competition because they don't
allow competitors.

~~~
ecuzzillo
I think the last argument is misframed. If you want to sell software on a
tablet device, you can do it through Android, iOS, or probably a couple other
ways. Apple's claim, presumably, is that the quality of iOS, the App Store,
and of the hardware that runs iOS, adds at least that much value over Android.
And, given how much more money people make on iOS apps compared to Android
apps, they're probably right.

The argument about subscription issues is related but more complicated.

------
zach
All this talk about Gruber, the fanboy that blindly defends Apple, seems to be
missing one thing, which is why he should be unhappy instead.

John Gruber in general likes the way Apple does things. Right? Not a
controversial position, well understood and, these days, pretty common. So
first off, I'm never surprised when he posts about "here's the thought process
and mechanics behind the way Apple does things" even if that's the top-level
business decisions Apple makes.

So with that understanding, what kind of thing should he naturally be unhappy
about? Things Apple does that are uncharacteristic, bad moves for their users,
or just downright unethical (i.e. knowingly lying to customers). I truly
believe that's it.

Let's toss aside the idea that this move is uncharacteristic (even detractors
say "that's the way Apple likes things.") Second, he's explained how he thinks
these rules seem good for users. And finally, although I know a lot of people
think Apple is doing something unethical, I really don't think John sees
things that idealistically when it comes to these kinds of things.

He did demonstrate some sympathy to criticism that Apple changed their rules,
but I don't think he sees that at all as unethical. He's idealistic about
design but I don't think he's idealistic about business and the marketplace. I
actually don't think he really cares as much about the business angles, but
that's where the interest is these days.

I really don't see any reason he should be unhappy with this plan. I think
he's explained pretty well why he thinks it's a reasonable approach, and given
that evidence I think you need to argue pretty forcefully to suggest he's
being insincere.

------
colinprince
tl;dr

On businesses that can't afford 30%: Too bad, Apple wants to be the middleman

On price matching: Apple won't budge because their competitors (e.g. Amazon)
insist on price matching

On the 30% slice itself: Apple is proposing that publishers (et al) will make
more money at 70% than they'd make at 95% with someone else's business model

On (anti-)competitiveness: Apple is the only one which allows its competitors
to have apps on its devices

Summary: iOS is a closed, controlled console system - more akin to Playstation
or Xbox than to Mac OS X or Windows

~~~
oemera
What I do not understand is why no-one is complaining about Playstation 3 and
Xbox 360 as a closed system but about Apples iOS line.

WHY is Apple bad for closing a system but Microsoft, Sony and Nintendo are
not? I really do not understand that.

WHY on earth has a cellphone to be open as a OpenSource project? Is there a
reason for that? (Android has open sources but no-one can commit changes. It's
all in Googles hands what comes into the next Android version which doesn't
fit with OpenSource at all)

WHY is taking a 30% cut bad for all developers and Apps? (Jobs said that the
30% cut is not for SASS Apps but only for Newspaper Apps, right?)

Please give me some answers I'm starting to don't understand these discussions
lately.

~~~
CaptainZapp
A console is a _very_ different biest from a mobile communication device, of
which openness and interoperability is hugely advantegous to society.

Thus the line apple is toeing here is a dangerous one.

I wouldn't make the same argument for iPods, iPads or Macs.

------
msg
Grubers gonna grube :(

Talk about burying the lede!

"But leaving aside the revenue split, there are technical limitations as well.
The existing in-app purchasing system in iOS has a technical limit of 3,500
catalog items. I.e. any single app can offer no more than 3,500 items for in-
app purchase. Amazon has hundreds of thousands of Kindle titles.

"Something’s got to give here. I don’t know what, but there must be more news
on this front coming soon. I don’t believe Apple wants to chase competing
e-book platforms off the App Store."

In other words, all the rest of the article, defending the Apple terms, is so
much codswallop. Because Gruber believes that these terms are unacceptable, as
in Dead On Arrival, to major users of in-app purchases and will have to change
shortly to accommodate them.

And once you have figured that out, why not apply this to the other users of
the platform, the rest of these arguments? "Eating margins will chase
applications off iOS" and "Catalog limits are too low for many credible use
cases" apply to many more developers than just Amazon Kindle.

But for some reason these arguments are dissociated from the ones Gruber wants
to make. Instead of putting together the whole picture, he comes to these
major stumbling blocks and writes the equivalent of "Does Not Compute."

------
kondro
I'm pretty much in agreement with everything Gruber said (first time for
everything).

The one thing that really annoys me though is that Apple have decided is that
if you offer a subscription-model outside of the app store, you now have to
offer it at the same cost inside the app store.

Instead of paying 1-4% credit-card transaction fees with 24 hour payment
terms, you now have to potentially pay a 30% app-store transaction fee with
payments taking a month or more if your users decide to take up the option of
paying via the app store.

Now I can see why Apple can't discount their 30% as this is the margin they
seem to give to stores selling iTunes cards (yes, Apple makes nothing on apps
bought with iTunes cards). But to require all apps to be forced to use the in-
app subscription model is just ridiculous. What next? A native SAP client
forced to sell their $100k product through the app store?

~~~
swombat
Steve Jobs has already commented, in an email, that this isn't meant for SaaS
apps:

[http://www.macrumors.com/2011/02/21/steve-jobs-email-
suggest...](http://www.macrumors.com/2011/02/21/steve-jobs-email-suggests-in-
app-subscriptions-dont-apply-to-software-as-a-service/)

~~~
jonknee
For now. They can change that at any point like they did for publishers.

~~~
haraball
I wonder if they are going to do the same for the OS X app store if it gets
popular enough.

------
kmfrk
This feels like Gruber wanted to write an article from Apple's side, and felt
an obligation to do so, but couldn't come up with any arguments nor solutions,
yet still continued to write the piece out of obligation to his cause.

------
zavulon
Some Gruber's articles feature a lot of insight, and are highly enjoyable. And
some of his articles may be easily dismissed as blatant fanboyism.
Unfortunately, this is an example one of the latter and not the former. I
stopped reading after the second blatant "pull-it-out-his-ass" assumption he
makes about the "complainers".

------
ryanwaggoner
_Apple doesn’t give a damn about companies with business models that can’t
afford a 70/30 split. Apple’s running a competitive business; competition is
cold and hard._

These two statements are fundamentally at odds; it's highly unlikely that
Apple is making more money from App Store purchases / subscriptions than from
iOS hardware sales. Consequently, for Apple to be competitive, they need to
offer as much value as possible to the user, so that more users will end up on
their platform. Since many of the most popular apps are business models that
can't afford a 70/30 split, Apple damn well better care about them. If I can't
get Kindle, Netflix, Hulu, Dropbox, etc, etc. on an iPhone/iPad, I won't buy
another one. Period.

~~~
Stormbringer
I think that in their quarterly financial calls they've consistently reported
the iTunes store as running "about break even". They don't sound unhappy about
it, so presumably they're on the positive side of break even rather than on
the negative side.

The following Dickens quote springs to mind: _"Income, twenty shillings a
week, expenditure, twenty shillings and sixpence; result, misery. Income,
twenty shillings a week, expenditure, nineteen shillings and sixpence; result,
happiness."_

However if Apple cut back to say 25% then it might mean that they are
subsidising people's use of the store. This would be bad for Apple because
they would be losing money. Boo hoo. On the other hand, if they were losing
money with one hand in order to (as you suggest) gain it with the other, then
they would open themselves to questions of dumping, price fixing, abuse of
monopoly etc.

Selling at below cost is a typical strategy to keep new entrants out of the
market, and so would be evil. But apparently taking 30% is evil too, so it
doesn't matter what they do, somebody is going to be unhappy with them.

------
erikstarck
I just know one thing: the moment Kindle is removed from the app store, I'm
selling my iPad.

~~~
pederb72
I'd love for Amazon to remove the DRM from their books, and just sell books in
epub format which can be read on any device without a Kindle app. That would
solve Amazon's problem with iOS/Apple, and also be an ideal solution for end
users. EDIT: what I mean is, music is now sold without DRM. Why do we still
need DRM for ebooks? I'd love to be able to just put all my ebooks in a
Dropbox folder, and not depend on Amazon to create an app for every platform
where I want to read my books.

~~~
lwhi
But if you'd like Amazon to make a concession as large as this, surely Apple
should be asked to make a few concessions too?

Both companies sell IP - and both rely on a various forms of DRM to enforce
scarcity. I think selling IP will eventually be seen as a fruitless (and
unsustainable) pursuit - but for the time being this is a way both these
companies are making a profit selling digital goods.

~~~
pederb72
As far as I can remember, Apple/Steve Jobs talked the music industry into
dropping DRM on music. As the leading ebooks store Amazon should be the one to
push to remove DRM from books.

~~~
lwhi
Well, I'm still waiting for the day when I can drag and drop one of these DRM
free MP3s onto an iPod (without having to shackle my device to my computer via
iTunes).

It's not exactly freedom in the best sense of the word ;)

Are iBooks DRM free? I don't think so ...

~~~
pederb72
The Dropbox app on iOS can play mp3 files so you don't have to use iTunes to
sync your music.

iBooks having DRM is (IMO) a problem with the publishing industry, just as DRM
on music used to be a problem with the music industry. I want Amazon, and
Apple, to push the publishing industry into dropping DRM on books.

~~~
lwhi
I think I'd like to be able to pay an author directly - that would be my ideal
solution; and an ebook should necessarily cost less than a paper book. But I
agree - removal of DRM should be a target.

The MP3 tip's a good one - thanks.

------
kenjackson
Gruber shows his colors here:

 _This is what galls some: Apple is doing this because they can, and no other
company is in a position to do it._

People aren't bothered simply because other companies can't do this. If
Google, MS, RIM, Amazon, and HP all did the same thing people wouldn't say,
"Great... everyone can do it!"

People are upset that Apple can do it, and they _are_.

People have long told me that Apple is a benevolent company. They point to the
PC market and say, "Apple never did what MS did". And my retort was always,
they couldn't, but if they could they probably would have.

Now we're seeing it play out. If Apple could squeeze Intel or Dell or Compaq
they would have. Apple's benefit though is they're not a monopoly, and likely
won't be one. But to the extent that they've captured a large share of
disposable income they will drain their partners for every last cent. Because
as Gruber has stated, Apple doesn't need you, but you sure need them.

------
saturdaysaint
I think Gruber is ignoring the competitive disadvantage Apple is putting
themselves in by shutting out the "middle man" apps. Kindle, Spotify and
Netflix are deeply entrenched, best-of-breed services - consumers have deep
investment with their Kindle devices, Netflix accounts, etc. These are not
minor points. People will give up their Kindles and use iBooks the day they
uninstall iTunes and start using a Zune.

So Android, which is already very feature competitive and may have a bigger
install base, could have no competitor in distributing a range of very
popular, rapidly growing services. Vic Gundotra must be grinning ear to ear.

~~~
alanh
No, Gruber has stated that he does not believe Apple is ignorant of the
consequences of taking 30% of Kindle sales or Netflix subscriptions via iOS —
after all, Apple built Netflix support directly into AppleTV. He believes the
company has probably been in talks with Amazon, Netflix, and similar companies
for some time.

~~~
kenjackson
There's a lesson here. Build your brand inside of iOS and you're screwed.
Apple can choke you. Build it outside of iOS and you have a chance to have
reasonable terms. As nice as iOS is, w/o middlemen, established outside of
iOS, like Kindle and Netflix -- it probably gets killed by Android.

~~~
shaggyfrog
That lesson is not limited to "iOS" and "Apple". If you place the financial
future of your company solely to $PLATFORM, then $PLATFORM_OWNER will always
present a risk. That's why the smart companies also get their services running
on $PLATFORM_B, $PLATFORM_C and $PLATFORM_D.

------
BenoitEssiambre
" (Going further, many charge cards offer cash back on each purchase — they
can do this because the cash-back percentage refunded to the customer is less
than the transaction processing fee paid by the retailer.)

So the same-price rule is good for the user, and good for Apple."

This type of arrangement is not good for users and is very anti-competitive.

Banks often offer reward points worth 1% of a purchase in exchange for the use
of their credit cards which incurs something like a 3% fee on merchants. The
merchants have to increase their prices to maintain their margins but since
they are contractually obligated not to charge credit card users more, price
is increased for everyone. Even those who avoid credit cards end up paying the
banks for other's use of them. If fact those who use the cards pay a little
less for than those who don't because they get the 1% kickback. Next time you
spend $500 of airmiles or reward points, know that you imposed $1500 worth of
fees on customers likely not even using the service. The bank gave you a $500
kickback and pocketed $1000.

This scheme basically amounts to imposing a tax on everyone and it's enabled
by the one percent reward points along with the price matching rule.

It's the same situation when selling on iOS. In order to pay for Apple's fees
and maintain competitive margins, merchants will have to increase the prices
of their products across the board, even when they are sold completely outside
the Apple ecosystem. This means that if Amazon keeps their Kindle app in iOS,
Amazon will have to increase prices _on every devices_ and when someone
purchases a book on an Amazon device, through Amazon only, they will be
indirectly paying a portion of the sale to Apple. That, IMO, is screwed up.
This type of rule is illegal in many countries (at least with regards to
credit cards) because it is clearly anti-competitive.

------
morganw
"Kindle doesn’t use subscriptions. Kindle offers purchases." The Kindle app
doesn't support subscriptions, but the Kindle device does.

$35.88/year for the New Yorker (47 issues/year) on (B&W) Kindle vs.
$234.53/year in the New Yorker iPad app and about $50/year for the paper
version which comes with access to the archive on the web.

[http://www.amazon.com/The-New-
Yorker/dp/B001O2SCKI/ref=sr_1_...](http://www.amazon.com/The-New-
Yorker/dp/B001O2SCKI/ref=sr_1_1?ie=UTF8&m=AG56TWVU5XWC2&s=digital-
text&qid=1299034473&sr=1-1)

The xfinity iPad app now offers "Play Now" so it's not just a fancy remote
control, but a content delivery app with a monthly subscription handled
outside the app.

[http://paidcontent.org/article/419-first-look-comcast-
xfinit...](http://paidcontent.org/article/419-first-look-comcast-xfinity-
flips-the-switch-on-ipad-streaming/)

------
protomyth
> APPLE SHOULD NOT REQUIRE APPS TO OFFER IN-APP SUBSCRIPTIONS

I really don't buy the relation to the initial offering of apps, but I
admittedly think this is one of two big problems with this whole scheme. For
one, Apple is not providing an end-to-end solution by hosting the content and
cannot really keep track of all the SKUs with their current system. Never mind
and SaaS providers not getting hosting out of that 30%. The economics and
mechanism of app delivery are different than content delivery.

I think Apple should say that if you provide no link to your purchase /
subscribing site, then you don't have to use IAP. In other words, if your app
downloads content for your account, but doesn't allow in-app sales or link to
out-of-app sales, then all is well.

------
ajg1977
_Apple doesn’t give a damn about companies with business models that can’t
afford a 70/30 split. Apple’s running a competitive business; competition is
cold and hard._

 _Why not allow developers and publishers to set their own prices for in-app
subscriptions? One reason: Apple wants its customers to get the best price_

So on one hand competition is good, natural, and everyone benefits. But on the
other, companies shouldn't be be able to compete with Apple's built-in
subscription system?

------
zach
Rhapsody, Sony and Instapaper were all geared up for the old subscription
rules. That loud noise you hear from them is from the grinding of gears.
They'll get back up to speed, but they sure had to downshift when they weren't
ready to. They may not be able to take the same road they were expecting to,
though.

I think one outcome you're going to see from publishers is that there will be
separate plans for iOS users. Before, there was naturally only one option and
the App Store app was just a client to the same subscription. Now, I can see
where it makes a lot more sense to have an a la carte iOS subscription for
these publishers.

------
mortenjorck
_One reason: Apple wants its customers to get the best price — and, to know
that they’re getting the best price whenever they buy a subscription through
an app. It’s a confidence in the brand thing: with Apple’s rules, users know
they’re getting the best price..._

So just like all the iPhone cases, laptop bags, headphones, and external hard
drives at the Apple Store, then.

------
Stormbringer
Funnily enough, one of the people on HN screaming the loudest about this 30%
was essentially trying to cut Apple out of any revenue at all.

What they were doing for their app was giving it away as a free download, then
charging a one off subscription. Ta Da! No $ for Apple. Apple closes this
loophole, and this guy starts screaming blue murder.

I've got very little sympathy for anyone like him who is just trying to rort
the system and get something for nothing.

\----

All the people screaming about Apple's 30% cut should just pack up, shut up,
and go to Android where Google will take a 32% cut of their ad revenue. Vote
with your feet peeps.

------
vacri
I don't like Apple's business practises and never have, but this 70/30 split
furore is hilarious to someone who has worked in retail and supply before. It
is entirely normal for a retailer (apple) to take this kind of split in the
retail price and the supplier/wholesaler to take 70%. In the retail industry I
worked in, the retailer took a 35-40% portion.

This split is yawningly normal in retail. What's not normal is the huge
numbers of "one-person" wholesalers... who have very little in the way of
business experience and see that split as a "tax" rather than payment for a
service.

~~~
Stormbringer
Thank you. There are plenty of legitimate things to criticise Apple for (they
are _far_ from perfect) without making stuff up.

------
efnx
bit.ly told me that daring fireball was potentially problematic...
[http://bit.ly/a/warning?url=http%3a%2f%2fdaringfireball%2ene...](http://bit.ly/a/warning?url=http%3a%2f%2fdaringfireball%2enet%2f2011%2f03%2fdirty_percent&hash=fd8b7Y)

~~~
jsm386
think it has to do with the fact that he is running a URL shortener himself (i
would guess bit.ly pro?) when he tweets it: <http://df4.us/h8h>

