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Rhapsody passes on Apple's "economically untenable" sub plans (technologizer.com)
72 points by msabalau on Feb 16, 2011 | hide | past | web | favorite | 92 comments



Of course Rhapsody can't sell their stuff for a 30% margin. It's not their own stuff!

They're trying to be the last link in a chain of 90/10 (or more) splits. They repackage record labels' repackaging of artists' content. Do you think the artists would find 30% economically untenable?

The App Store is 70/30 because Apple can take things straight from content producer to customer. When the Apple takes the place of publishing, distribution, inventory, sales, payments and shipping, there's real value for that 30%.

When all someone wants out of Apple is merely to process the payment and send things down the pipe, gee, who do they think they are? But that's not what Apple is actually holding themselves out as. Apple doesn't want to be in that kind of commodity market anyway. Seems reasonable to me.


It's not always this way. Think about, say, a Pandora subscription - thin margins, but provides a real value added service that is well above and beyond that of a mere distributor.

Can they afford to give Apple a 30% cut of all revenue?

It's completely misguided to characterize all payment through a mobile app as cutting out the middleman. In a great number of cases (i.e. subscriptions) Apple role is nothing more than a payments gateway + lead generation. Does that make them deserving of 30% of your entire revenue stream?


My point is that Apple doesn't see in-app payments as merely payment processing. They see them as App Store purchases which are delayed in time.

Everyone keeps anticipating Apple becoming a payment processor, but it hasn't happened yet. They're still a platform provider.

This kind of reminds me of some of the TripAdvisor reviews you see on resorts with a championship golf course and all kinds of amenities. There are always people annoyed that because just wanted a simple room and don't want to have to pay for the amenities. They argue they should be able to pay a lower rate. But they just stayed at the wrong place.

A 30% rent is a great rate for what the App Store provides, but if all you want to pay for is a better payment processor, yeah, it does seem outrageous.


No, a payment processor is exactly what they are in this case. Consider what Apple is attempting to do to Amazon's Kindle service: users can purchase Kindle ebooks directly in-app but Apple takes a 30% cut of the payment. Amazon still hosts and provides the content, all Apple does is act like a payment processor like Visa or Paypal. Clearly Apple wants to shove out competition to it's own iBooks, iTunes and movie services.


And yet there seem to be a lot of books as apps on the App Store considering there's this 30% cut.

What kind of inside track should Amazon have on the poor shlubs who sell their books as apps?


The poor schlubs who sell their books as apps haven't cut out the middleman.

With Kindle (or iBooks), the author simply uploads his/her work in a commonly exchanged format. Everything else is handled - distribution, payment, formatting, device compatibility. The works.

As an author who wants to publish their book as a discrete app, suddenly you're engaging with a different middleman - the inevitable app vendor. The vast majority of book authors aren't coders and wouldn't know how to publish an app to save their lives, much less on multiple platforms (Android, iOS, webOS, WP7, along with their phone and tablet variants). Inevitably they will buy this solution (which, in essence, is largely of the same nature as Amazon/Apple) from someone else.

And what will we, as consumers, have seen from this situation? More confusion and a worse experience overall, as every single little piece of content now floods the app store, obliterating any sense of discoverability while making the UX much, much worse (downloading a discrete app, along with all of its code and media, every time you want to read a book?!)


Bookbaby makes it pretty easy, but I don't see how that even matters.

You're just arguing that there should be more middlemen, sub-platform-providers who get a special deal with Apple compared to original app authors.

We can all foresee what happens when providing a hammer factory is favored over providing a hammer. It's not good UX or good for consumers.


Apple's argument is that they deserve 30% of all revenue streams for getting a customer on board. For 30% of revenues, you could hire a true sales force that goes out and actively sells stuff, rather than just sitting back and hoping someone signs up. In the App store model, you still need to sell on your own, Apple just centralizes payment and distribution. Thus, I'm not sure I follow your logic.

Payments: Visa, Paypal, Amex, MasterCard, and many others would gladly handle the payments for ~2%. Not sure where you're getting anything about inventory and shipping given it's digital content. Sales: when did actually do any selling for anyone's product other than when it was mutually beneficial? You still need to sell it to people to actually use your product. Publishing: again, what is apple doing here? Distribution and a little bit of marketing, sure - but that's certainly not worth the other 28% of revenues.

Also don't see why Rhapsody repackaging stuff makes it any different. Shouldn't a true app store model work for any type of business?


I think you overstate the willingness of existing payment processors to deal with, say, .99$ purchases (they likely won't bother). I'm not arguing that Apple's providing a service that's worth 30% to everybody, but building a payment processing system to handle sub-$1 charges cost-effictively isn't trivial -- and if you're not in the business of building payment processing systems, you might just pay the rent. Amazon could handle rolling their own; Packt probably can't.


They would bother if they could get 30 cents on the dollar instead of their measly 2


I'm comparing it to a retail model. So I included sales but not advertising.

Every retail outlet is different, and App Store purchasing has a very particular set of advantages. If you don't need those advantages, the App Store still provides a great value by letting consumers access your service through a free app.

If neither of those work with a particular economic model, then I guess it's just not App Store compatible. So yeah, there's definitely room for a better model of app store that suits more developers. But I think Apple is more concerned with getting a broad selection of content than making the economics work.


And for those who don't need the help with payment, distribution, etc Apple is forcing them to take it. Do you think Amazon really needs Apple's help in processing or distributing any of their content? I'm pretty sure the WSJ has plenty of experience handling payments as well.

I paid several hundred dollars for my iPad, and for that price I'd like to do whatever I want with it and be able to take advantage of the greatest things people have built for it, not what Apple approves of being done. The issue I have is that Apple's feeling of entitlement inherently blocks out many incredible things from that iPad. E.g., I bought a bunch of books on the Kindle app so I could read them on any device. Apple could have done the same by getting off their asses and building iBooks for other devices, but they chose not to. And now that advantage of Kindle is gone because Apple wants to take every last dime from anyone doing anything on an iOS device? Many business models cannot survive having to give up 30% of revenues. It is a poor model.

Edit: I guess I wouldn't have an issue if there was an alternative way to get native stuff onto your device other than Apple's app store. But there isn't.


Pretty much. Apple is pretty well known for being a one-size-fits-most company.

They don't seem interested in stretching to make things work out for certain sets of customers and potential partners, and it can seem maddening. And they always keep themselves in control wherever they reasonably can. It is their strength and their weakness.

So far it's served them pretty well, but I agree it's not the ultimate model for an app store or a platform. It sure does seem to cover the most profitable surface area, though.


"Of course Rhapsody can't sell their stuff for a 30% margin. It's not their own stuff!"

Yeah. The original article talks about "calling Apple's bluff" as if this is some sort of choice on Rhapsody's part, but anybody who literally can't make a profit with a 30% cut off the top from Apple isn't "calling a bluff". There's no volition involved.


It's deeply disturbing that the people at Apple feel entitled to radically change the rules of the game whenever it suits them. This is like an extortion racket. Submit to their demands today only to find out what new whim strikes them tomorrow. How can iOS legitimately be called a "platform" when Apple pulls a leg out from under it every six months?

Thank god Android scares them. I can only imagine what they'd dare without any competition.


See Tim Bray's essay, which should be titled "Are You a Sharecropper?" http://www.tbray.org/ongoing/When/200x/2003/07/12/WebsThePla...

tl;dr: "[Apple] owns the ground you’re building on, and if they decide they don’t like you, or they can do something better with the ground, you’re toast." In this case, if they decide the rent covers your garden plot as well as the fields, you ante up or die.


Apple owns a very fertile piece of soil. You can grow 10x the crop there that you can grown any where else. Where do you want to farm your crop ?


Ah yes...

"Apple owns a very fertile piece of soil. You can grow 10x the crop there that you can grown any where else."

And they can change your rent to 11x normal - just before you sell your crops...

"Where do you want to farm your crop ?"

Go question but it is actually a real question, not a rhetorical question... Do you want to a golden share cropper or do you want to be independent. There may be no easy answer...


Simple solution: sell your crops where it is most profitable. Maybe with 11x normal it's still worth it. As soon as it's not, you switch.


"I can only imagine what they'd dare without any competition."

I don't remember anything evil during the height of the iPod era.


Well, there was the iPod accessory rings to jump through, but that’s fairly standard.

What’s seen as evil here is really a preference for the user over the content provider, and it’s the content providers who are whining about not getting everything their way.

You never hear any users complaining about subscription plans not automatically giving away their information.


How is effectively booting popular services from their devices in the interest of their customers?


Don't try and sell it like that. The "services" you obliquely reference (name one) are most likely intended be used at the OS level, which is against the way the platform is built.

The entire model of iOS is a node that downloads from several sources, which 3-rd party content providers are calling foul about. The platform is effectively binary: it either works or it doesnt, out of the box. There aren't any drivers or codecs to install.

If you don't like it, build your service for some other platform. I hear there's one that's got more marketshare.


>It's deeply disturbing that the people at Apple feel entitled to radically change the rules of the game whenever it suits them.

What makes you think that's what they're doing? It could also be that they never intended for their platform to be used this way but didn't explicitly deny it because they didn't see this coming. I don't have any way of knowing that is the case, but I don't think you have anyway of knowing your opinion is right either.


Thank god Android scares them.

Evidence?



That link is almost 11 months old, and given all the furor we've heard about HTC and Apple suing the pants off each other during those last 11 months -- i.e. zilch -- I don't think this link supports that argument.


In the meantime, we will be collaborating with our market peers in determining an appropriate legal and business response to this latest development.

Eurozone based content rights holders such as Spotify, Vivendi and Amazon should take this to the Directorate General for Competition. iTunes music enjoys a dominant position in online music sales. ITMS operates on only ~15% net margins [1] the other ~15% attributed to marketing, R&D, bandwidth, support etc. App store or video margins should be even lower due to increased bandwidth, hosting costs, editorial review, etc. Clearly Apple's own content businesses would be unsustainable or would constitute dumping if forced to pay their public rate card for the payment platform.

Traditional remedies like content divestiture or substantial regulatory oversight could stifle innovation and raise consumer costs.

Instead:

  - Allow end-users to specify an alternative root trust authority.
  - Unbundle application signing from packaging, allowing N signers per binary
  - Allow application side loading.
Effectively this would allow a competitor like Amazon to sidestep Apple requirements but only if they were willing to provide the entire infrastructure - payments, app store, bandwidth, support etc. Other root authorities could potentially be an open industry alliance, a privacy organizations like EFF, FOSS signers like FSF, code auditors like OBSD, security firms like Kaspersky or Secunia etc.

Apple as an apple signer would be able to continue to select and sign applications arbitrarily to maintain a high user experience, mandate platform changes, provide preferential payment terms to in house content businesses and avoid breaking out detailed incomes and revenues in public.

Competitors would gain a plan of last resort to split from the ecosystem if the only alternative is exiting the platform entirely.

Consumers would gain from competition driving down margins and overhead, alternative signing would discourage consumer unfriendly behavior by trust authorities.

Simple to enforce, easy to implement, solves competition concerns even in markets that haven't developed yet.

[1] http://seekingalpha.com/article/90735-how-much-will-the-app-...


What's going to get really interesting is seeing where Apple draw the line with "subscription apps".

The Rhapsody and Magazine apps of this world seem fairly clear cut. Kindle is somewhat less so (since books aren't a subscription service - something most blogs seem to miss). But what about these "Go to my PC", Salesforce.com, or other SaaS sites that basically provide free iOS apps for expensive subscription plans? Are these companies now all going to start adding in-app sign-up options and paying Apple a cut?


Actually it does affect the Kindle and other non-subscription apps, as confirmed in this report: http://www.computerworld.com/s/article/9209580/Apple_s_new_A...


amazon offers magazine subscription for kindle. Besides, I think Apple has been known to ignore or allow exceptions. For these SAAS companies, I imagine Apple will allow them to slide, but by their own terms.. it sounds like they shouldn't. I think their only main concerns are profiting from companies that compete directly with Apple revenue streams, music, movies, and books.


Kindle magazine subscriptions are only available for the Kindle hardware itself, IIRC.


They are now offered in the Android Kindle application as well.


I'm not happy to have predicted this in comments early today: (some slight paraphrasing)

The current state of affairs - where Apple provides a nice sales channel (marketing in a sense) on their already highly profitable devices and where service providers bring attractive service to the platform - is a fairly even trade. Apple is asking for such a drastic renegotiation of this "trade balance" that I predict services will need to reprice for iOS or abandon the platform. Content services are already struggling enough - and Apple has too many viable competitors! - for me to imagine them simply submitting. Sony's withdrawal of their app was the writing on the wall, I'm afraid.


They're not allowed to reprice for iOS, unless they also reprice for all their other platforms. Quoting the Apple announcement[1], "we require ... that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app."

[1] http://www.apple.com/pr/library/2011/02/15appstore.html


I think it would follow the letter of these rules if service-providers made "with iOS" versions of their services available - both on their website and in-app. So Rhapsody could say their service is $10/mo for everybody... except if you want iOS access, in which case you pay $13/mo.


You can make a token better offer with pricing that is near %30 more, since "better" is fairly subjective. Mobile carriers do this all of the time with things like unlimited texting, or caller id in canada. Since apple is a premium product, you have have premium service pricing.


Could be good news for the Android and Windows Phone 7 ecosystems. Seems like it'd be easy for most of these publishers and services to re-focus their mobile strategies on platforms that are more friendly to their business model.


But if end-users don't see any loss (e.g. Apple provides similar capabilities to Rhapsody, et al), then it won't matter. People won't leave the iPhone for another phone over this.

My prediction is that Apple will make sure it has similar capabilities.


I'm not sure "similar" capabilities will always be enough. If Apple succeeds in chasing off Amazon and B&N, then WP7 and Android phones will look much more attractive than iPhones to Kindle and Nook owners.

Netflix availability so far has been an advantage that iPhone/iPad has over Android, but that'll turn around completely quite quickly if Netflix get's chased off the IOS platform by Apple's 30% cut.

Let's get serious. iBooks and iTunes are good, but are they really going to be able to take on Pandora, Rhapsody, Last.fm, Amazon, B&N, Netflix, Hulu, etc. all at once?

By pissing off all the content providers at once Apple is basically gifting a huge chunk of the app ecosystem to Android and/or WP7.


You are absolutely correct. I've invested hundreds of dollars into the Kindle platform. If, suddenly, I can't access this content then I will go where the content is. Apple's platform is compelling because content providers have set up shop there. That's the synergy that Apple has seemingly ignored. I can go anywhere for $0.99 fart apps.


Just curious: shouldn't Netflix be worried? This entitles Apple, Inc. to not only Rhapsody's income, but also to 30% of the income from Netflix's streaming only plan. Presumably, this policy would also affect Netflix's hybrid distribution model.

I think Rhapsody's got a friend in Netflix.

This will be interesting, given how much Apple has promoted Netflix in recent store advertisements, and integrated Netflix with Apple TV. Does this mean that Netflix will be required to have subscriptions entered through the App Store? What about the restrictive privacy policy; will that hinder physical distribution?


I would be surprised if the thought of using in-app purchasing for subscriptions even moved their needle of interest at Netflix.

Again, if you're just providing a conduit for your subscription service, all this means is that you can't provide a direct call to action in your app.

They seem like the prototypical example of an company that couldn't care less about using the App Store as an app-based advertisement or purchasing platform.


My understanding of the new rule is if your app is used to consume content bought outside of the app, then your app must offer a way to purchase content/subscription through the app for the same price, with apple getting 30%.


Precisely. Netflix doesn't get a free pass.


If the iPhone doesn't have things like Pandora, Evernote and many other cloud services available because of this change, it makes one of the most useful parts of the iPhone disappear.


Time to pull the iOS app, build a mobile web app, and have your customers send e-mails to steve@me.com expressing their displeasure.


I'll do one better than email Steve. This will be my last iPhone.


The iPhone 3G was my (first and) last iPhone because of other issues (the language lockdown). Actually not just my last iPhone but my last Apple Thing, period.

Voting with your wallet is the ONLY thing one can do to really get their attention (governments could step in on anti-competitive grounds, but that's not really something we can help with short of contacting our representatives).

If the user base just whines and moans while continuing to line up for the next shiny phone a week in advance of release to help Apple deliver record quarter after record quarter, Apple isn't going to change anything, they are just going to keep pushing and pushing. They've already shown that clearly in the past.. this is hardly the first questionable decision they've made in terms of controlling the iOS platform.


My startup is sponsoring a campaign to raise awareness for this issue.

www.mylastiphone.com


Pretty soon..I'm sure it will be 30% of your advertising revenue. Rent? This is more like taking a chunk out of your paycheck. For all the employees out there I'm sure your company would love to take part of your check for the opportunity to work.

30%? do you get any other benefits from Apple? or is it "you take it and you like it."

Apple just has to do is sit there and let the small developers take all the risk. Are they loosing money on each phone sold? I can see charging a payment processing fee like PayPal. 30%? I just hope this doesn't set any precedent.


Given the challenges subscription services already face re:margins, giving away another 30% is game over.

If this stands, the labels are probably going to have to give up on subscription services as a category, or lower their wholesale prices dramatically.


Rhapsody doesn't have "another" 30% to give. Their margins are probably something like 5%. Crapple is demanding 30% of the sale price, which leaves Rhapsody with a 25% loss.

Since that is economically infeasible, Apple is effectively mandating that they are the only ones who can sell content on their platform.


I've just realized what Apple is up to here - it took me a day, and some of the excellent comments on HN - but I now get it.

My inability to see what was going on, was that I couldn't see how Netflix/Amazon/Rhapsody/etc... could operate, profitably, under this plan. The 30% cut would eat their entire margin (and more).

And the plan is brutally straightforward and honest, if you just mediate on it for a few days.

Apple isn't interested in hosting Amazon Kindle, Netflix, Pandora, Rhapsody, or _any_ of the middlemen that have been selling their content on the iPad. Effective today - those sellers no longer have a business model. They are middlemen, and, in fact, they'll need to seek other pastures to sell their wares. They will all be removed from the ipad with 3-6 months. Gone.

So - what will replace them - well, let's see what's leaving:

  o Music -  Itunes
  o Movies - Itunes
  o TV Shows - Itunes
  o Books - iBooks
This is the master plan, and I'm surprised we didn't realize it immediately. Apple will get their 30%, because _they_ will be the platform providing this content, NOT netflix/rhapsody/Pandora/Amazon.

I suspect all of those vendors realized this in about 5 minutes, much faster than us "Customers."

Apple is going for the whole enchilada, and will henceforth be dealing directly with the publishers, labels, and studios.

What's staying?

  o App Developers
  o Newspapers
  o Magazines
Basically, anybody who creates _original_ content, will be okay with the 30% cut (they already pay that much or more through other channels), though they may gripe a little at the lack of customer information (That's the bone that Apple tossed in todays release - the "option" for customers to let the publishers know their user information.)

This is nothing more, or less, than the continuation of the Apple "Walled Garden" philosophy, where Apple is able to control the entire experience. Jeff Bezos realized this when he ensured that Amazon had a platform of their own to deliver content to the customer.

It's customer centric, and, if they pull it off (With a good streaming, book reading, and content delivery platform) - brilliant.

I have a huge investment in the Kindle, and it's books - so I'm still unclear on how I'm going to respond as a customer. I would have _never_ purchased a book through iBooks (I like the ability to read books on my e-ink Kindle, and Apple has no comparable platform, yet). I also have both an extensive list of cultivated Pandora Stations, and, have a Netflix AND Hulu Plus account - all of which I'm going to lose on the iPad. If Apple doesn't come up with a compelling alternative for me - I'll actually consider an Android Tablet. They'll be able to replace Netflix, and Pandora, I'm certain - but I do love my Kindle(s) - so, I don't know what my next step is going to be.

What I _do_ know is Apple has unambiguously signaled what they will be doing. They don't have a great streaming solution yet, for music, or movies. So they have some gaps in their portfolio of offerings - if I'm correct, we'll see a Netflix and Pandora competitive application being offered fairly quickly - possibly in the next release of IOS.


"It's customer centric, and, if they pull it off (With a good streaming, book reading, and content delivery platform) - brilliant."

I don't see how this is customer-centric in the traditional idea of the term at all. Customers want to be able to listen to Pandora and sync with their Kindle. Customers do not want restrictive DRM and policies that lock them into a given company for eternity.

I thought we were headed in a more open direction regarding the ownership of digital property. Thank goodness for Android.


We want to be able to listen to Pandora and sync with our Kindle to read e-books. The vast majority of the iOS userbase just want to listen to music and read e-books and do not care as much about what delivery mechanism provides the content. As much as I hate to admit it, they are not really going to miss Pandora or the Kindle app as much as we might like to hope. [For future reference, try not to use the Kindle as a counter-example when talking about restrictive DRM and walled gardens, it may be possible to remove the DRM but pretending it is not there in the first place isn't really honest...]


It is important to draw a distinction between "the Kindle" (the hardware device sold by Amazon) and the "Kindle Store" (Amazon's e-book sales platform).

The Kindle Store, yes, is all about the DRM. And it's the "platform" accessed by the Kindle app on assorted devices.

However, if you're talking about the hardware device then it's entirely reasonable to ignore the DRM issue. You plug it into your computer and it mounts as a USB drive, onto which you can drop books in a variety of non-DRM'd formats (annoyingly not ePub). You can purchase said books from a variety of vendors who are happy to sell you non-DRM-encumbered products.

Amazon obviously really wants you to use these two things together, and the Kindle (device) is well set up to work with the Kindle Store. But they're not forcing you to use only their DRM with the hardware you bought.


The iPad also displays and sync ePubs with no DRM with iTunes, same as the kindle.


Yeah, I didn't want to imply that iOS was forcing DRM on people. I just see the argument that the Kindle == DRM far too much, and wanted to correct it. :)


My mother recently said to me:

"My friend showed me how to use Pandora. I love it, but you probably wouldn't like it because its all my music."

Point being, I think you're drastically underestimating Pandora/Netflix accessibility and market penetration.


This would make a nice video campaign for Pandora. Various different types of people saying "It's all my music." with references to the music they love.


"Customer Centric" as opposed to "Content Creator Centric" or "Developer Centric" - Apple is focusing on creating an experience for the customer.

Now - whether you _want_ Apple to be doing that, instead of just creating a neutral hardware system that permits others is another thing. I, personally, would prefer that Apple focus more on insanely great hardware, and developer centric policies, while simultaneously allowing all content providers to sell me their movies, TV, magazines, and Music.

I understand why Apple is choosing a different path, though. If they succeed - they just might create something we've never had before - A consistent, seamless, unified content purchase and presentation platform.

It will be interesting to see how it works out - and yes, I couldn't agree with you more - Thank goodness for Android - we've got choice.


Apple is "Customer Centric" in many ways, but this isn't one of them. I don't think the motivation for this decision was on creating a great customer experience.


I think the phrase you were looking for is "Apple-centric" since you yourself listed several ways in which this move hurts the customer.


I really hope they do kick the Kindle off of the iPhone. I read about ten or twenty Kindle books a month. I read them on my iPhone when stuck somewhere waiting or whatever, I read and search them on one of my computer monitors while at work, and I read them on my Kindle device in bed.

And, if Apple fucks this up on the iPhone--as they apparently are willing to do--then I will finally muster up the effort to get an Android phone and stop using iOS. As a user, I have long been offended by all kinds of things about Apple's behavior since the naziPhone debuted. But I am too lazy and unprincipled to do anything about it.

I mean, it's one thing to try to make a system friendly to incompetent and technically handicapped users. Apple does that with the Mac, and the Mac is the best platform out there for almost anything you might want to do. Because you can turn on the right mouse button. You can turn on full keyboard access. You can install Mondomouse and resize windows from any edge. You can fix all the simpleton-friendly crap and it is a kickass system. (And you can script all that stuff, so you don't need to do it over and over again when you provision a new Mac.)

However, it is a whole different thing when you design a system for the low-competence user, and then actively work to prevent any user from fixing the resulting shortcomings. When you even try to make it illegal to fix those (an endeavor in which they failed, thankfully).

I hate that. And so lately I claim to hate Apple and their fascist little phone, but the good parts are so damn good I cannot bring myself to get rid of it. I was really on the verge of junking my naziPhone 3GS and not getting the 4 when it came out, but then there was that damn Retina Display and I knew I would be carrying another beautiful crippled little mussoliniPhone around with me.

But if Kindle stops working on the iPhone, at long last I will be freed! I have so many kindle books, use them on multiple devices every single day, and that would just be the straw that broke the camel's back and with it the beautiful little 320ppi animated chains that bind me.

Then my phone would suck in lots of little ways, but I wouldn't have a huge corporation trying to stop me from fixing those things. FREEEEEDOM!!!

So here's hoping.


You have it the other way around. It's not so much about apple wanting to monopolize the marketplace as it is about apple defending its own platform. The discussion is platform-centric.

Today Amazon's application on the iPhone sells books. Tomorrow it may sell music and maybe some day even applications (if I am to believe that jail breaking is now legal in the US).

Apple wants to the be "front platform". Any platform that sits in front (or "top" if you prefer) has the upper hand. Browsers sit on top of the operating system and Microsoft tried hard to dwarf browser growth as it threatened the OS itself. In fact, Java's ambitions were similar. Flash is just that. Adobe AIR has already made minor inroads. This is also in line with Jobs' decision to disallow Flash and Java. If Macromedia sold iPhone applications, iTunes would lose gravity.

The case here is a similar one. If vendors build their own stores through their application, iTunes will inevitably crumble. Apple is making a really long term bet that will without a doubt encounter a lot of resistance. But in the long term it wants to perfect the business model.

It will be a first if it works, but it's tricky. Platforms need to be open enough to allow others to build on top but Apple has developed a very unique platform. Unlike Flash or Windows or whatever else, Apple is the gatekeeper for the entire ecosystem. That means it can regulate the platform while others cannot.

Apple has been architecting it's platforms strategy for quite some time now. It is trying to build the perfectly sustainable platform. I am almost certain that they have secret discussions on "platforms architecture".

Exciting stuff.


What I _do_ know is Apple has unambiguously signaled what they will be doing. They don't have a great streaming solution yet, for music, or movies. So they have some gaps in their portfolio of offerings - if I'm correct, we'll see a Netflix and Pandora competitive application being offered fairly quickly - possibly in the next release of IOS.

It's unclear that apple really wants to enter the pooled subscription content markets. Clearly the main, first target here is Amazon Ebooks and their exclusive content deals. Elsewhere, everything they've done so far indicates that they'd prefer to sell or rent individual content this gives them reliable margins, no large upfront licensing costs and lower bandwidth costs. Instead, they may see services like Pandora and netflix weakening the demand for the music and video stores.

Purchased DRM content provides a long term platform lock-in, monthly subscription all you can eat has lower margins and provides less advantages to the platform.


The thought of moving from Netflix, Rdio and Kindle to iTunes strikes me as akin to moving from Gmail and Facebook for photos to MobileMe. I love(d) Apple, but their web services are afterthoughts that can't hold a candle to specialized (or, in Google's case, just brilliant) competition.


How many times does Apple have to shoot their developer base in the head before the developers get a clue?


It's not customer-centric. It will hurt innovation, because fewer players will participate. I wrote about the topic at some length here:

http://www.bradlanders.com/2011/02/16/apples-30-vig-is-bad-f...


isn't this how you kill innovation?

The problem with apple is that it thinks it can out-innovate everyone in everything. E.g. Processor - Check Hardware - Check OS - Check Store - Check Content Distribution - Check Content Discovery - Check

And even If someone tries to compete with them, they end up getting 30%.

Also is there any alternative for App store???

No!

Welcome my friend to Apple life, Apple now owns you. unless you break from this jail.


Once again, Apple is underestimating the average consumer's willingness to take the path of least resistance. Apple became very niche for graphics & layout artists back in the day and lost a market they could have owned. By trying to hold its customers hostage, they enabled IBM & Microsoft to become household names and the Apple name was "that other kind." They came back because they innovate, but innovation only stays innovative for so long.

They need to distinguish better between their "average Joe" and their "power user" products & strategies because "power user" products will sooner or later become "average Joe" products.

If they wish to limit themselves to a niche market then this move makes perfect sense. If they want volume and to continue market domination, they're repeating history and, regardless of how smart their executives are, I don't think they can pull if off because we don't live in that kind of a world.

I've been wanting an iPad and iPhone like you couldn't believe. But I'm patient and they made me nervous with their exclusive AT&T arrangement so I wanted to see what their next move was. I've been enjoying my Android phone very much. Looks like I'll be doing the same with whichever non-Apple tablet I choose. Too bad.


Might work out well for Apple as do most things they do - Amazon pulls out, garden-dwellers dwell on whatever iBooks offers, Rhapsody and Pandora pull out - there is only iTunes!

Apple is in a position where they can get very crafty and evil - just enough to get away with it all without being a monopoly - there is Google to help them there! Envious position for a company indeed!


Why hasn't a massive antitrust case against Apple been launched? Their behavior strikes me as far more anticompetitive than that of Microsoft during the "Browser Wars".

Apologists: I don't care that Apple created something this profitable--that is not the issue. Desiring complete control over the mere act of computing on your own machine* is the problem. Apple is doing a wonderful job of absorbing a large swath of the marketshare and turning it into a closed ecosystem for developers, content providers, service providers, and owners. Apple should not have the authority to control everything one does with their devices. Why is this happening?

Maybe I worry too much, but I don't want to see our electronic freedoms erode.


I'm not saying I agree with this move by Apple, but it's worth mentioning that browsers/the internet =/= the app store.


Apple doesn't even come close to having a monopoly.

Microsoft most certainly did have one during the browser wars, and were leveraging it to get people to increase IE marketshare.

With Windows on the desktop, you didn't really have much of a choice but Windows if you were going to use pre-package software, play games, or do business. With the iPhone, you've got tons of competition - Android, RIM, and WP7. If you don't want to work in that model, nothing forces you to, either as end user or VAR.


They're pretty close to having a monopoly on paid digital music downloads, and perhaps portable music devices, and they're shutting out competitor streaming music services with this move.


I can understand Apple wanting to cut out middle men. I've never been a big fan of middle men myself, for the most part. But the biggest thing that bugs me about this is: iBooks doesn't have any books where I am! I buy all my stuff on Kindle because it's the only place I can legally buy a book at all. They can't try to shove everyone off the platform when they don't have any viable alternative themselves.


What if Rhapsody offered a 23% discount for customers that subscribed via their website rather than through the In-App method? They could call Apple's 30% cut a "convenience fee" like online ticket sales.


Their app would be pulled from the store. You do business in the App Store at Apple's pleasure. Attempting to flout the spirit of their asinine rules is unlikely to be successful.


How's Rhapsody affected, if they don't offer in-app purchases?? quote: "Today, Rhapsody subscriptions are available for purchase exclusively via Rhapsody.com"


If you'd follow the press releases or read the updated app store guidelines, you'd learn that Apple has changed the rules and is enforcing old ones in new ways that will affect Rhapsody, Amazon Kindle, Rdio, Netflix, and so on. The new rules would require Rhapsody to allow new cusomters to optionally sign up via in-app purchase with an ongoing 30% fee to Apple. The rules stipulate rhapsody _must_ make this offer if they offer an app, despite the fact that such an offer is unprofitable to Rhapsody.


I'm sure it wouldn't get past the Apple Censor Board, but that's about the point that I would put in the in-app purchase button (for the item at 130% of my base price) right next to a "Click here for 30% off!" link. All of a sudden, your full retail price is heavily discounted and a lot more attractive!


The guidelines stipulate that the in-app price must be the same or less than your regular offer.

(You could possibly have a separate offer with iOS availability at a price that compensates for Apple's cut, which means you would get Apple's cut from everyone buying iOS availability outside the app.)


Technically, they state you must have the same or better offer. Better isn't the same as cheaper, it can mean more expensive with more features, so an "premium iOS offer with added features" for 30% more could be justified :P


They actually state both "same (or better) offer" and "same price or less" (just not what I wrote :P).

But I still think the idea is to avoid what would be perceived as an Apple tax when buying subscriptions in-app.


I stand corrected, it's more yucky than I imagined. I can imagine what's going through their minds doing this, but this is just plain stealing.. they want to drive off any one that sells products that can potentially compete with them (kindle vs ibooks?), but damn, again they're killing off everyone with a bazooka, again. It's like the dev license change to kill off flash apps that ended up hitting almost every top app vendor out there.

They might back down from this like they did for the dev license changes, but this habit of always changing the rules in the middle of the game regardless of who gets hit is really getting old.


I shouldn't wonder if then conveniently enough Apple follows on with a subscription service of their own...


The record labels won't let them do it. That is pretty much the only reason the streaming companies exist.


Good. Rhapsody suuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuux.


lol


AWESOME!




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