

Apple: if we get you subscribers, we deserve a cut - baxter
http://arstechnica.com/apple/news/2011/02/apples-in-app-subscriptions-if-we-bring-in-subscribers-we-deserve-a-cut.ars

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nomurrcy
Full disclosure: I generally like apple products and have used NeXT / apple
products for a long time.

I don't see how Apple's stance here is defensible or honest. They using their
position as a large platform provider to steal from 3rd party developers.

To me this is akin to me writing a program for OSX that allows users to sign
up for a subscription service, and apple taking a 30% cut of my cash flows
just because I targeted their platform. They have been paid for their device
by the consumer, they don't own all the software running on the device. They
provide an OS, 3rd party developers provide the applications.

Most iOS programs receive absolutely no advertising from apple. In these cases
how has apple contributed anything - how as Apple brought them customers. What
if I run an ad-words campaign and drive my own app sales? If Apple were to
make deals with developers for cuts of cash flow in exchange for advertising
on the store, that would seem more honest.

To me this seems anti competitive and just plain dishonest. Apple is at risk
of becoming the troll under the bridge here.

~~~
drawkbox
I also mirror your sentiment. I think that this will lead to lost hardware
sales (I may have to buy a Kindle now) and may as well develop for that if I
have one.

When did Apple turn from a hardware focused company to a software
company/platform company only? It seems their platform is taking precedence to
their hardware now.

Then again you can't buy iBooks on Kindle or Nook but the point of an iOS
device is a bit of a smart phone singularity. I want all my stuff on that
device.

This will not get me to buy more iBooks, it may make be buy a Kindle though
instead of using my iPads for reading books.

Let's hope they all go PDF.

~~~
msbarnett
It's a bit off-topic, but PDFs, with their fixed page size baked right into
the file, make for a truly miserable eBook experience.

~~~
CWuestefeld
I couldn't agree more. I think what your parent post meant to convey was the
need for a standard format for ebook files. I think MOBI or EPUB could both
fill that role.

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kalak451
Hmmm....and if my app gets someone to buy your iPad, what do I get?

~~~
brisance
You get heavy promotion. Look at how Angry Birds and all the other games did
by being featured on "New and Noteworthy" or "Staff Picks" or "Top Grossing
Apps". It's a two-way street; don't make it sound like Apple is taking
advantage of your efforts.

~~~
enjo
That works for a hugely small subset of apps. Each (well written) app creates
a lot of value for iOs, most of those won't get anything at all from Apple.

So again, why isn't the inverse true? If I'm building something that helps
sell an iOs device, why shouldn't I get a cut?

Of course I shouldn't, but that's the problem in Apples logic here.

~~~
neutronicus
> Each (well written) app creates a lot of value for iOS

We all, being programmers, like to assume this, but I don't think it's really
true. I think the bulk of the value for both Apple and iOS users comes from a
pretty small core of apps (Mail, Maps, Browser, Music, YouTube, Publisher
subscriptions).

> If I'm building something that helps sell an iOs device, why shouldn't I get
> a cut?

I don't think Apple agrees that you're "helping sell the iOS device". I think
Apple correctly assumes that most people who buy iOS devices do so in
ignorance of your app. They can take it or leave it, and if they're not going
to get a cut, what possible reason do they have to take it?

~~~
enjo
It's a small subset of apps that matter to each individual, but collectively
it's a big number. Lets take my wife. She'd describe each of these as being
indispensable to her:

\- Quickoffice \- Local weather app (9news here in Denver) \- OpenTable \- Her
password store (not sure what she's using these days) \- Evernote \- Probably
8-10 others

My list is completely different. These apps, together, create a lot of value
for the phone. When we recommend phones to other folks we do it in the context
of the applications running on it. Angry Birds has undoubtedly sold a ton of
devices (both Android and iPhone) but it's hardly alone. Hell, I'm positive
that I sold an iPhone one day while showing someone a document in Quickoffice.

Each app provides a ton of value to Apple. They owe _us_ , not the other way
around.

------
nhangen
As an indie developer, this excites me. Sure, I can understand how the big
guys might see it differently, but now I don't have to build an entire
distribution network should I decide I'd like to develop subscription based
content.

I read many digital PDF's (like Hacker Monthly) and though I enjoy downloading
and reading the PDF on my iMac, I would be delighted to pay 99 cents to have
each issue delivered to my iPad on a monthly basis.

And as a developer, it's added value.

------
JoeAltmaier
So arrogant - "We get you subscribers"!

How did they do that? They didn't create the ad, they didn't put it in the
app, they did diddly-squat in fact. You (the app developer) did the work, take
the risk, and now cannot even get paid properly - you have to essentially make
iPhone your sole outlet, or charge 30% premium everywhere else.

~~~
josefresco
They created the very ecosystem in which your app exists. I'd say that's a
pretty important aspect of the whole app development model.

~~~
nomurrcy
So microsoft would be within their rights to take a 30% cut of all cash flows
from subscriptions made using internet explorer?

What about 30% of all sales of Windows Software?

Where does the ownership of the OS author end and the ownership of the 3rd
party developer begin?

What if Apple insisted upon 50%?

~~~
sethg
IIRC, each video-game console manufacturer charges royalties to all games that
are compatible with its hardware.

------
BigZaphod
I'm a huge Apple fan, but I admit there's something about this which doesn't
feel entirely... right, and that's concerning.

That said, however, there's decent and non-evil reasons for them to think like
this - at least in terms of subscriptions, IMO.

One issue is that subscription-based apps are almost always free in the app
store. Apple loses money on free apps that don't include iAds. If the
subscription fee itself is also outside of Apple's control, they're hosting
your app, getting you "shelf space", driving people to your app, etc. and they
get nothing in return. With such an app, the content is basically replaced
every month (or week or day or whatever) which makes the process a bit like a
scheduled purchase of a new version of an app - hence the 30% cut.

On the surface, I disagree that Apple should get 30% forever for a
subscription - especially if the publisher is providing all the infrastructure
necessary to deliver that content. What if, though, the subscription system
allowed publishers to upload the content once to Apple, and Apple hosts and
distributes it to the apps and users? Now the 30% starts looking a bit more
reasonable. If indeed it works this way (or will eventually work this way),
you could be a very small shop and still manage to support thousands or,
indeed, millions of subscriptions with virtually no support infrastructure of
your own. That's _certainly_ worth 30% IMO.

The flip side, though, is if you already have your own content delivery
mechanisims in place, Apple taking 30% each billing cycle seems unfair. IMO,
they should offer the subscription products in two flavors - one where they
host and distribute your content, and another where you are doing that work.
In the second version, Apple could easily take 30% of, say, the first billing
cycle and take diminishing amounts for as long as the subscription remains in
effect - perhaps even going all the way down to something like 2% just to
cover the payment processing. That would seem a lot more fair to me than
taking 30% forever.

Sadly, though, I haven't yet seen anything that suggests that either of these
situations are even true. For all I know, Apple might not be offering any
distribution or hosting services and might not even have an API to allow apps
to easily take delivery of subscription content, and if that's the case,
taking 30% forever seems excessive.

~~~
CoffeeDregs

      * there's decent and non-evil reasons
    

Funny, I just e-mailed some friends about how Apple was starting to get a bit
of the stink of Evil about them.

As I read your comment, I was struck by how Apple does everything in a very
one-size-fits-all fashion (Mac -> no window menu; iPhone -> home screen is a
list of apps; subscriptions -> one revenue model). There's a rich set of
monetization schemes out there and Apple might offer a range of monetization
models. Apple could use an affiliate fee style model where App maker pays
Apple $X for each subscription+. Then Apple could just use the eCPM or
expected revenue to rank search results (App gets a lot of subscribers and
pays a healthy CPA, they get ranked higher). App makers would then need to
figure out how much $$$ to pay Apple for an install. This could also apply to
free apps [...but we've seen the harm that causes elsewhere].

Then Apple could add simple hosting/management fees for hosting an app's
content.

\+ I've been fairly heavily involved in the affiliate/CPA space, so know the
kind of unpleasantness the model can bring, but am fairly confident that Apple
could work around it.

[ed: formatting]

------
c2
The flip side of course is that these apps make the iPhone/iPad more appealing
to more people. I can see Apple shooting themselves in the foot with their
predatory practices against app publishers. Losing a big chunk of your margin
while developing apps for free for Apple's products is only going to be
sustainable for so long. And more likely then not, it will drive away the big
players first where each percent means more.

~~~
Samuel_Michon
A supermarket that sells magazines will appeal more than a supermarket that
doesn't. That doesn't mean it owes its success to the magazine publishers.

I very much doubt that the availability of magazine and newspaper apps like
The Daily will be a primary reason for customers to buy an iPad.

~~~
OpieCunningham
Magazines in a supermarket are slotted, so the publisher is paying the
supermarket to stock the magazine.

~~~
Samuel_Michon
In a supermarket, shelf space is limited. Online retailers like Apple and
Amazon have virtually unlimited shelf space. That's one of the reasons why
distributing paid content online is so much cheaper than in print. Compared to
print, Apple's 30% take for payment processing, marketing and distribution is
a great deal. That's how News Corp can offer a daily newspaper via the App
Store for only $1 a week, for which you would normally pay $1 a day.

------
sethg
Apple is trying to prevent the following maneuver:

¶ FooPub Inc. publishes FooMag through the App Store, at a price of $1/year.

¶ Each issue of FooMag contains some small amount of content and a link: “To
read more, go to foopub.example.com and subscribe to FooMag Deluxe for
$20/year!”

¶ Users download FooMag Deluxe through FooPub’s own servers, bypassing the App
Store completely.

¶ Scads of people discover FooMag through the App Store, subscribe to it
(giving Apple 30¢ out of each $1 subscription), and a significant fraction of
them upgrade to the deluxe version (giving Apple nothing).

~~~
georgemcbay
Is discovery via the App Store really that common? As a previous iPhone user
and current Android user I don't think I ever discovered a single app for
either platform via the App Store itself.

I always went looking for something on the App Store (or now on the Android
Market) after hearing of it elsewhere. I suppose I may be in the minority
there and I can't say for sure I'm not, but I'd be pretty surprised if I were.

~~~
sethg
If an app publisher wants to avoid all the App-Store-related restrictions, can
they just put their app on the Web and let people download and install it
through the browser? I don’t have any iStuff so I don’t know the
practicalities.

~~~
georgemcbay
No, they can't do that. On iOS it is the App Store or nothing when it comes to
native apps. (Of course, if users jailbreak their phones they have more
freedom to install apps, but I assume we're just talking about the standard OS
here).

On Android the publisher can bypass the store by distributing their own APK
files. Some carriers (glancing towards AT&T) lock this down in some phones,
but by default Android is happy to install new apps from anywhere as long as
the user agrees to a dialog warning them of the dangers of running random code
they download from the net.

This is one of many reasons I'm currently an Android user and self-described
"Apple hater".

------
galuggus
the only company that will kill apple is apple

~~~
mortenjorck
Hyperbole, yes, but there's truth to it. Apple simply _is_ in a position to
make these demands right now; the test will be whether they scale back their
demands once the market has matured to the point where they no longer have
that leverage.

------
kbutler
In related news, the US Interstate Highway system will now require a 30% cut
of the purchase price of every vehicle purchased in the United States. "Our
philosophy is simple—when US Highways bring a new driver to the car company,
US Highways earn a 30 percent share."

The US Postal Service considered a similar regulation, but found that
customers would simply divert shipments to competitors UPS, DHL, and Fedex,
and is instead filing suit against those companies for unfair trade practices,
and lobbying congress for a retroactive grant of a business method patent on
package delivery with corresponding extension of patent duration to life of
the organization plus 70 years.

kb

~~~
wmeredith
Apples and Oranges, my friend. The highway and the USPS are funded by tax
dollars. The App Store is a culmination of Steve Jobs and co busting their
collective asses for _decades_ on their own time without any mandatory help
from you. Now they're going to charge you an arm and a leg for the _privilege_
of using it. If you don't like it, you're free to take a stand with your
dollars and go elsewhere.

~~~
kbutler
Oh, that's why I didn't have to pay for my iPhone, then.

~~~
wmeredith
You're precisely correct, You did not have to pay for your iPhone. You chose
to.

~~~
kbutler
Yes, I chose to pay for the phone. Apple chose to sell the phone at a price
they felt adequate compensation for their "decades" of work.

Apple is currently seeking to leverage their monopoly[1] on the iOS platform
by extracting additional rent[2] from content providers.

Their probability of success directly correlates with their pricing power.

Is this rent-seeking good for Apple customers? Unlikely. Is it legal? Depends
on how the FTC views Apple's pricing power.

kb

[1]In economics, a monopoly exists when a specific individual or an enterprise
has sufficient control over a particular product or service to determine
significantly the terms on which other individuals shall have access to it.
(<http://en.wikipedia.org/wiki/Monopoly>)

[2]<http://en.wikipedia.org/wiki/Economic_rent>

------
waterlesscloud
By this logic, the customer's ISP also deserves a cut.

~~~
ceejayoz
They do, from the customer.

------
jscore
(Disclaimer: I don't work for Apple or own any of their stock, just a happy
dev in their ecosystem)

I completely agree with this model.

Apple's marketing muscle is HUGE. I'm perfectly OK with splitting one-time or
recurring revenue with them if they help bring me customers.

------
ezy
Obviously, any app store-only app will not care about this other than reduced
margins for subscriptions -- they weren't making money any other way. But
folks who sell through other channels than ipad will .. just leave. I wonder
if that's the goal.

But then again: it's like the ebook purchase thing -- Amazon and BN have been
strangely silent -- maybe they decided to relent, maybe they're going to get a
special deal, or maybe they'll pull their apps just before the ipad2 launches.
:-)

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pixdamix
_"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."_

 _"Apple's announcement went on to emphasize that publishers are not limited
to using the App Store for subscriptions; they're allowed to use their own
websites to sell subs."_

So purchase can be made in Safari in order to bypass the AppleVAT ?

~~~
mrud
safari is not _inside the app_

~~~
donohoe
_In addition, publishers may no longer provide links in their apps (to a web
site, for example) which allow the customer to purchase content or
subscriptions outside of the app_

------
brisance
I think this whole thing is overblown.

When I trade stock, options or pretty much anything, I get charged
commissions. So by the same reckoning e*trade, Schwab, Ameritrade, <insert
brokerage here> are thieves and have been "stealing" from investors/traders
for centuries.

------
christo16
It's more than just providing a subscriber base, it's the infastructure to
process recurring payments, while making it stupid simple for the customer.
Whether this is worth 30% is debatable, as some of us know it's not
trivial/cheap to do on your own.

------
trotsky
Does the upcoming launch of Apple's NFC system and general purpose payments
platform suggest that the same rules will be coming for ecommerce and general
transactions? Sounds like bad news for people like Square or PayPal.

------
aforty
Just based on that one line argument in the subject, I can't say I disagree.

------
alexobenauer
To round the issue out from their side, not that I agree, from their point of
view, it's "If we bring you subscribers via our devices, we deserve a cut"

~~~
nomurrcy
Once you have purchased a phone from Apple - doesn't it cease to be their
device?

Doesn't this all seem a little wrong?

~~~
neworbit
Only if you jailbreak it

