Apple’s in-app subscription rules are anti-competitive

And now Apple wants 30% cut of every subscription carried out through an iOS app. And apps are not allowed anymore to include a simple link to load a web browser page and let a new user subscribe through it either. In other words, if you need to sign-up new users, and your service is not free, you either have to have existing customers that don’t need to sign up, or pay Apple a 30% cut.

At first, this doesn’t sound that bad. I mean, apps can increase their prices so they can afford to pay up Apple. But there is a specific kind of app that it’s simply impractical to do that. See, there are some companies that serve their own content, and these can compensate. But there are other companies, who license the serving content, that can’t.

I’m talking about the music streaming subscription services, like MOG, RDIO, Rhapsody, Napster 2.0, Thumbplay, Spotify etc. And then there’s Netflix, Kindle too. These apps already pay a heavy price to RIAA or studios, so their margins are very small, in the already competitive market of entertainment. It’s very possible that these companies don’t make more than 10% per song streamed, maybe much less! And now Apple wants 30% off of a $10 subscription? How could these companies survive?

Increase prices from $10 to $15, you say? How are they gonna stay competitive when iTunes Streaming is coming this year for possibly no more than $10? Yes, it IS coming, it’s the natural evolution of the music market and gadgetry/networks. This is clearly anti-competitive, because Apple will be able to offer the same service for less, by squeezing the other guys out with mafia tricks. There are anti-trust issues, as WSJ noted.

AAPL, just like RIAA and MPAA (all the AAs, it seems), are dictators. And they all take decisions that only benefit their shareholders in the very short term. Because, I can tell you right here right now, that developers will be forced to give Apple the finger, and move to Android — even if they might not like Android as much as iOS.

Talk about Apple shooting its own foot. I think this great documentary, on Netflix Instant, asks the right question to corporations: “how much is enough money, where would you stop?” A highly recommended documentary.

Sometimes I keep thinking of Apple, particularly of Steve Jobs, and how he keeps making the same mistakes over and over. Mistake in the ’80s with the Mac clones and an open ecosystem, and exact same mistakes now. Some people never learn. Either that, or he finds the eventual minuscule market share, “cozy”.

10 Comments »

Bruce Nelson wrote on February 15th, 2011 at 8:31 PM PST:

I think the link to “this great documentaryi” goes to the wrong place.


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Eugenia wrote on February 15th, 2011 at 8:37 PM PST:

Thanks, I fixed the link. The documentary is called “The Corporation” btw.


Michael C. wrote on February 16th, 2011 at 1:18 AM PST:

Thanks for the link. I feel hopeless and helpless.


Apotheosis wrote on February 16th, 2011 at 2:02 AM PST:

Eugenia, for once I fully agree with your comments. I think the worse part is that Apple forces providers to offer their subscriptions on Apple’s devices at no higher price as offered elsewhere, meaning that the content provider cannot just simply bump up the subscription price on the iPad only but offer their usual price on their website.
I own a lot of Apple hardware and software, but I’m getting progressively more fed up with their prectices and restrictions. I bought the iPad with the hope that I can start reading magazines. It hasn’t happened yet.


Adam S wrote on February 16th, 2011 at 5:16 AM PST:

Let me argue the other side.

Gruber said it best: count on Apple to make decisions that benefit Apple and its customers. It’s easier for me to buy something in-app than out-of-app.

Not every product is sold in every store. I can’t buy certain things in Walmart, often because a supplier has chosen to sell elsewhere. And if I want it bad enough, I’ll go elsewhere, and if enough people don’t go to Walmart, it will have to close. Same here.

If app developers abandon iOS for Android, Win7, MeeGo, whatever… it will eventually fail when the ecosystem is less attractive. But something tells me that they won’t, even with this. It’s a great platform for most people and payment arrange of the developer is not a care of the consumer – they just want a good experience.

It’s common for people to think that because of Apple’s success, they “owe” people something. But Android is a worthy competitor now. So Apple’s behavior isn’t anticompetitive, it’s just shitty.


Frank Drebin wrote on February 16th, 2011 at 5:45 AM PST:

While I can understand that Steve Jobs strategy is annoying and maybe worrying, I disagree when you say that he makes the same mistake again and again. If you look at Apple’s stock price, market share and mind share in the last 10 years, there’s nothing to support your comment.


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Eugenia wrote on February 16th, 2011 at 6:26 AM PST:

>It’s easier for me to buy something in-app than out-of-app.

Yes, but it’s another matter to force content providers to go through Apple and pay them. Developers and users should be free to decide how to get a subscription of something, which credit card to use (rather than the one used with their iTunes acct), how easy would be to get tracked down about all their subscriptions and likes and dislikes etc etc. Basically, these restrictions add many negative points for both developers and users, and they mainly benefit only Apple.

>So Apple’s behavior isn’t anti-competitive, it’s just shitty.

It is anti-competitive, when you realize how this measure will affect competitors that sell books, movies, and music.

>market share and mind share in the last 10 years

The Apple stock has been soaring for the last 7 years or so, yes. However, it was soaring in the early ’80s too. It made Jobs a millionaire overnight. My problem with this is that the strategies used by Apple help them drive the stock up, and take a lot of market share in the SHORT run, but these are strategies that eventually fail in the LONG run. This is why I wrote that last paragraph. Because there you had a true innovation, both with the Mac and the iPhone (especially with the iPhone), and then we just see that ecosystem getting down to the floor again because of the closed philosophies that drive them.

Yes, this makes money for stockholders in the short run, but they are not products that will drive the stock up for the long haul. For that, Apple needs to be re-innovating itself every 10 years or so, and this is not easy to do. Especially after Jobs leaving — he will have to eventually. It’s much more safe to grow an existing product over the years, rather than drive a brand new technology to the ceiling, only see it come down to the floor just a few short years later, resulting the company needing to innovate really strongly again. You can only innovate at THAT level so many times only, because if you fail even once in that cycle, you’re toast.


Adam S wrote on February 16th, 2011 at 11:34 AM PST:

>So Apple’s behavior isn’t anti-competitive, it’s just shitty.

It is anti-competitive, when you realize how this measure will affect competitors that sell books, movies, and music.

I don’t think you understand the term “anti-competitive.” It’s Apple’s platform, they do not have a monopoly, they do not have a majority market share. They can do whatever they want, and developers – or users – are free to walk away to something more open if they prefer.

Look, you keep viewing this from the point of view of developers; meanwhile, most people are much more concerned about how it affect them, not developers. And for most users, this is probably better and easier, but certainly more consistent.


William Eggington wrote on February 16th, 2011 at 1:31 PM PST:

I walked away form all things mac a long time ago when they made it impossible for me to upgrade my own hardware or theme my interface. It felt like I didn’t really own the damn thing. What they bring to the table in innovation, they take away in their closed box RULES for everything.

I got a nook color for Christmas and I am loving this little thing. The android OS is rough around the edges but the fact that in a few steps I can change the OS to be able to buy products on the Android store made this little $249 gift. . . the gift that keeps on giving. Not interested in Apple’s products in any way now. Very happy.


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Eugenia wrote on February 16th, 2011 at 5:31 PM PST:

>you keep viewing this from the point of view of developers;

Erm, of course. It’s the developers who compete, not the users.

>meanwhile, most people are much more concerned about how it affect them, not developers.

Yes, it does affect them too. From the price hike, to privacy and other things I mentioned above.


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