

Regulators probe Apple 30% subscription plan - jhamburger
http://www.reuters.com/article/2011/02/18/us-apple-doj-idUSTRE71H4DU20110218

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bryanallen22
Google Launches New Web Referral Program

Google today announced a new Web Referral program as part of their search
engine. Indexed web pages that accept payment will be required to accept
Google Checkout as a payment option. Google Checkout payments now give Google
a 30% cut per transaction.

CEO Larry Page stated, "Our philosophy is simple - when Google brings a new
buyer to the web page, Google earns a 30 percent share; when the company
brings and existing or new buyer to the page, without using the Google search
engine, the company keeps 100 percent and Google earns nothing. All we require
is that, if a company is making a product or service available on their web
page, the same (or better) offer be made via Google Checkout. We believe that
this innovative Web Referral service will provide companies with a brand new
opportunity to expand their exposure on the world wide web, delighting both
users and companies."

Page added that customers will benefit from a consistent user interface and
less distribution of their credit card and personal information.

~~~
richcollins
I don't see how that is an argument to get regulators involved (if that is the
point that you're trying to make)

~~~
bryanallen22
There are good arguments elsewhere in this thread. I'm just pointing out a
scenario I haven't seen discussed much: What if all powerful tech companies
started wielding their power as an offensive weapon?

Oracle wants a cut of JVM delivered content, Microsoft wants a premium on
content that passes through their APIs, etc.

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ghshephard
The last thing we need at this stage of the game is "Regulators" messing
around in the market. It's early years, in the tablet market, and Google is
going to come out with some awesome android operating systems, and I'm
confident we're going to see some great tablets that will let me read my
Kindle books on.

If Apple wants to shoot itself in the foot, and send everyone over to
Google/honeycomb tablets by coming up with some insane pricing strategy for
resellers - I think they should be free to.

If _anything_ this step by Apple, at this stage of the tablet market,
_ensures_ we'll have competition. If they weren't making blunders like this,
then the argument for going with an Android tablet would have been much, much
weaker. As it is - I, Mr Apple fanboy himself, am finally preparing to
purchase a non-Apple tablet, simply because all the content providers I'm
interested in (WSJ, NYT, Economist, NetFlix, KINDLE(!)) are going to start
abandoning the iPad and moving over to the Android Tablets.

And I'll follow them. No government assistance required.

~~~
zzleeper
I don't think they "shot themselves in the foot" in terms of profit. If they
actually have a dominant position in the market (kinda true for ipads), then
Amazon and the others will accept Apple's terms.

That means that EVERYONE ELSE will subsidize Apple prizes (since they have to
sell their products at the same prize as in the ipad). With that subsidy,
Apple can choose to lower the prices of ipads, thus cementing it's incumbent
advantage.

Let's put it in another way: If MSFT circa 1999 forced every shop selling
Windows programs for a 30% share (and lower or equal prices than everywhere
else), and with that share they gave away Windows at a low price (or for
free), then it would have been VERY HARD for Apple or any other competitor to
disrupt Windows.

~~~
ghshephard
Netflix, Kindle, and other resellers will not be able to operate on the iPad.
The 30% number eliminates their entire margin. Therefore they will abandon the
platform - rocketing up Android in popularity.

I think this is Apple's Plan (To have those resellers abandon their platform)
- because they want to have a "Walled Garden" in which they are the only
content sellers.

The only problem is that there are a _lot_ of us who like our Kindles, and
have no desire to use "iBooks" - the lack of an eInk reader that lets us read
in the sun is only one reason. Our large library of Kindle books is another.

Ergo - we'll go to the next platform, and abandon the iPad - reducing it to a
niche player in the Tablet world.

This isn't like the iPod where Apple was the major distributor of Music. Apple
is _not_ the major distributor of Books, Newspapers, and Magazine and there is
_lots_ of competition in those markets. Apple actually only has about or so
magazines and newspapers compared to the close to 1000 that PressReader and
Zinio have. Apple has NO streaming Audio or Movie presence that I know of.

I think they learned the wrong lesson from the iPod - and now they are going
to screw their Tablet market dominance - much to their loss.

~~~
zzleeper
So in that sense, this is a smart way to prevent their competition from using
the platform, without ringing so many antitrust alarms. (If Apple just said
"we banish Netflix and Kindle because we say so", it would probably lead to a
few antitrust investigations)

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protomyth
I actually wouldn't be opposed to it if (big if) they hosted the content and
allowed apps with subscription/content to not have any in-app purchase at all
(no Apple / no flip to Safari) to avoid the 30%. This would let Netflix,
last.fm, etc do their thing and Amazon to do its thing. Everyone already knows
to buy books on Amazon, so no great loss not having something in-app.

~~~
jonbro
this is exactly it. the problem with the rules is that apple requires any app
that makes money outside of the app to also give apple a way to skim. Apple
could of course just enforce this for the apps that they are direct
competitors with, but that seems like an even bigger issue.

I just thought of some other things that would be effected: google apps for
business, any app that google distribs would need the option for in app
payment.

this is 3.3.1 all over again.

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ck2
Apple's problem is it's company name doesn't end in _AA_ , they are the only
industries that can get away with 30% without investigation.

~~~
random42
Non US guy here. Which company is it? (Must be famous, but does not ring a
bell to me, right now).

~~~
bpodgursky
Pretty sure he's referring to the MPAA and RIAA (they aren't actually
companies.)

~~~
random42
Thanks!

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reedF211
Apple has gone too far trying to gouge developers and the backlash is well
deserved. I was planning on buying an ipad but I decided to boycott all Apple
products until they back off from this madness. I bet if 90s Microsoft could
travel ahead in time and see apple's behavior recently, even they would blush
with blatant anti-competitive moves, monopolistic practices and gouging of
their users.

~~~
zzleeper
Same boat. I was going to buy a new ipad for my parents but I can't see myself
doing that now. However, the problem is that there is no real alternative to
it..

~~~
reedF211
Have faith in Android tablets

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mortenjorck
There is only one thing the DOJ should be concerned about with Apple's app
subscription program, and that is the price requirement. As it's highly
dubious that Apple has any kind of monopoly, it should be free to set whatever
requirements it sees fit for its platform, but mandating other prices
_outside_ the App Store sounds an awful lot like restraint of trade to me:
[http://dictionary.findlaw.com/definition/restraint-of-
trade....](http://dictionary.findlaw.com/definition/restraint-of-trade.html)

*Not a lawyer

~~~
juiceandjuice
I believe they have a monopoly in terms of digital music distribution, which
is one of the services that would be affected.

I might be wrong, but I don't think Amazon's market share approaches that of
iTunes in music.

~~~
pnathan
I always buy Amazon MP3s, personally. It works really well, and I know they
don't seem to have a big skin in the DRM game for music, unlike Apple.

Personally, a Kindle is my next gadget to buy. I've been very happy with the
Kindle apps on PC/Mac and I've liked the physical Kindle UI.

The iPad just doesn't _do_ anything for me.

------
SoftwareMaven
Fully recognizing that Apple's 30% is highway robbery, isn't Google's "only
10%" still fairly outrageous? This seems like more a 5% feature, since the app
providers still have to provide all their own infrastructure to actually
support the subscription.

~~~
danilocampos
> the app providers still have to provide all their own infrastructure

Like the credit card processing, the hardware manufacturing facilities in
China, the software libraries, the industrial designers...

Apple has made it absurdly convenient to consume rich content. They have built
_fucking science fiction_. 30% to get delivered to someone _anywhere_ , any
time is a bargain. You're paying to be part of the gut wrenchingly difficult
channel Apple has created from scratch, which no one else had the foresight to
predict or the balls to put money behind.

Apple bet the damn farm on this crazy iDevice shit and they get to charge
whatever they like for it now that it works. Anyone who doesn't like it can go
build their own fully integrated platform.

~~~
benologist
Except Apple didn't build Netflix any more than HP, Dell or LG did, all of
whom provide devices you can use for Netflix.

Why doesn't Firefox get to charge 30%? A big chunk of people probably get to
Netflix via it.

~~~
danilocampos
So we'll let the market decide which approach provides better value and a
better user experience. Sounds like we've all got options, so what's the
problem?

~~~
falcolas
The problem is Netflix can't offer their content to Apple customers at $13,
and everyone else $10. Apple using their position to remove those options you
say consumers have.

~~~
neild
Sure they can: Charge $13 for Netflix with iOS streaming, or $10 for Netflix
with no iOS streaming.

~~~
xentronium
I'm almost sure this kind of trick won't help your app get validated.

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flyingyeti
Is it against the rules to offer a different service to iOS devices than you
do to Android, Web and/or PC users? For example, maybe Netflix could make
"Netflix Premium" available on iOS devices, and charge $12/mo instead of
$9/mo, covering Apple's 30% cut.

I'm sure this has been considered, but I'm not seeing where exactly.

~~~
xentronium
> I'm sure this has been considered, but I'm not seeing where exactly.

Your app needs to get validated. Bazinga.

------
soljin2000
I remember when another giant monopoly got investigated by Anti-trust
regulators a few times a year. I miss hating on MSFT. But Apple actually
worries me more than MSFT ever did.

------
siglesias
Here's the part where Apple argues that the iPad is part of the PC market, and
thus represents < 1%. No antitrust.

~~~
notahacker
That's going to conflict with their magical revolutionary marketing as a
"whole new class of product"

------
Bossman
The issue isn't just the 30% subscription fee. The problem is they won't let
app developers charge any more than they would on their own site to make up
for the fee. Also, they can't link outside the app anymore to where the
developer would actually get more of the profit.

------
danilocampos
If we're going to believe this website, looks like Apple will let you keep $3
more per $100 than PayPal and $11.50 more than credit card processors,
assuming a $1 subscription fee like The Daily's:

<http://feefighters.com/paypal-calculator>

Maybe regulators should probe those guys.

(Credit to @schwa on this one:
<https://twitter.com/#!/schwa/status/38676753316708352> )

~~~
trotsky
It is interesting how the micropayment zeitgeist has evolved

\- Micropayments are not possible because fees and rakes amount to
unsustainable cuts

\- In some specific verticals (self published, digital) some micropayments are
able to thrive despite the large cuts.

\- Platform provider responds to those verticals by enforcing a micropayment
fee structure on any transaction size

~~~
jonbro
I think that the way to deal with micropayments is to sell them in bundles,
like xboxlive points (MSDollars?). I could see amazon getting behind this with
other platforms. Having your own currency is really nice for lock in, etc.

------
ramanujan
Literally the day after Apple's announcement, Google announced a competing and
cheaper offer. A more clear cut case of "let the market decide" is harder to
find.

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hardtke
Apple spent millions of dollars promoting the concept that iPhone/iPad apps
should not necessarily be free. How many times did you see a print ad where
they showed a bunch of cool apps AND their prices? This 30% fee is simply a
return on that investment. Paid apps don't sell on other platforms (e.g.
Android) because these platforms never marketed this idea to consumers. 70% of
something is better than 100% of nothing. It's the same story with iTunes --
Apple is the only company that convinced consumers to pay for music, and they
charge exorbitant fees to the record labels.

~~~
ben1040
_70% of something is better than 100% of nothing._

100% of nothing is preferable to 70% of "something", if it costs you 90% of
"something" to deliver the service, and "something" is already the maximum
price the market will bear (and Apple will not allow you to increase the
"something" only on iOS to compensate for their demands anyway).

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georgieporgie
_This would mean customers who want to sign up for a Netflix Inc video account
may have just two choices: They could do so through the Netflix website, in
which case Netflix would keep the full fee, or they could subscribe through
the applications in their iPhone or iPad which would cost Netflix 30 percent
of its fees._

I haven't written an app, and I'm not entirely familiar with all the terms
that have come up recently about Apple. Do I understand correctly that, merely
by initiating the subscription from within an app running on iOS, that Apple
is becomes entitled to 30% for all deliveries made on said subscription?

Is your only other choice then, within your app, to say, "please type this URL
into your PC's web browser to subscribe..."?

Is the actual content delivery mechanism any different between the two cases?

~~~
msbarnett
> Do I understand correctly that, merely by initiating the subscription from
> within an app running on iOS, that Apple is becomes entitled to 30% for all
> deliveries made on said subscription?

Yes.

> Is your only other choice then, within your app, to say, "please type this
> URL into your PC's web browser to subscribe..."?

You don't even have that choice. If you offer a subscription via the web, _you
must also offer the subscription, at the same price or better, through the
app_. They'll reject you if you don't. _And_ they'll reject you if you even so
much as hint that there's a way to subscribe outside the app that won't cost
you 30% of your revenue.

