Musings about the Apple 30% content tax
Apr. 15th, 2011 12:32 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
abortrephraseI don't use an iPhone these days, and I'm doing my e-book reading on a Samsung Galaxy Tab now, so why do I care about Apple's rules about content on iOS devices?
A quick explanation of those rules may prove helpful: if you sell content (either as a subscription or as a purchase) and want an iOS application for your customers to view it then you have to make the same content/service available via in-app purchasing from your iOS application, at the same price as it is available outside the iOS in-app purchase system.
Apple takes a 30% cut of those sales, so either you have to eat the 30% revenue reduction on all sales made via IAP or you have to increase your prices across the board to keep your revenue where it was. My best guess is that any vendor who goes along with this will probably do a bit of both: increasing all your prices to take the 30% cut into account will alienate everyone, but there's a fair chance that your business model just won't survive too many of your customers switching to a channel which costs you 30% of the sale.
My particular area of interest is e-books, but you can expect this to hit other services too even if they're not immediately in the firing line. Hulu Plus, Netflix, the international BBC iPlayer, paid Dropbox subscriptions, there are plenty of possibilities here.
But to take just the e-book space for a moment...
There are a couple of players in this market. Amazon, Barnes & Noble, Sony, Borders/Kobo, plus the various stores offering Adobe ADE ePub books without their own apps. Oh, and Apple.
If you're Amazon or B&N, you're going to have to think about whether you want to lose that 30% on all IAP sales, or increase prices for everyone, or somehow re-negotiate your distribution deals to take the changed situation into account. Or you can choose to forego the iOS native application entirely and provide a browser-based service for iOS users.
That last option must be looking pretty appealing right now. Booki.sh have shown that it's quite possible to do this in a way which provides offline access to books and with a pretty good reading experience. Their reader isn't perfect, and I still much prefer the Kindle application to reading from Booki.sh, but the deficiencies are probably all solvable.
Doing that puts you at a disadvantage against anyone who'll eat the 30% and do a native application, but on the other hand you get to keep the 30% and can probably compete rather effectively on price. Except when you're competing against Apple, because of course they don't have to find a 30% cut to pay themselves, do they?
There are all sorts of reasons not to buy books from Apple -- being locked-in to iOS devices only, the really lousy range (I just looked for the last three books I bought from Amazon, and none of them are there), the iBook application itself not being all that great (though that's a matter of personal taste) -- but one imagines that pushing Amazon, B&N, and all the other content competitors off iOS is exactly what Apple wants. Why settle for "just" 30% of the purchase revenue when you can have all of it?
iOS is still a great money-maker for developers, if they can get their applications on the platform and if they get lucky and have a hit. But if you're selling a service rather than an application, consider your days on iOS numbered. Even if Apple aren't coming for you now, there's every chance they will be soon enough.
A quick explanation of those rules may prove helpful: if you sell content (either as a subscription or as a purchase) and want an iOS application for your customers to view it then you have to make the same content/service available via in-app purchasing from your iOS application, at the same price as it is available outside the iOS in-app purchase system.
Apple takes a 30% cut of those sales, so either you have to eat the 30% revenue reduction on all sales made via IAP or you have to increase your prices across the board to keep your revenue where it was. My best guess is that any vendor who goes along with this will probably do a bit of both: increasing all your prices to take the 30% cut into account will alienate everyone, but there's a fair chance that your business model just won't survive too many of your customers switching to a channel which costs you 30% of the sale.
My particular area of interest is e-books, but you can expect this to hit other services too even if they're not immediately in the firing line. Hulu Plus, Netflix, the international BBC iPlayer, paid Dropbox subscriptions, there are plenty of possibilities here.
But to take just the e-book space for a moment...
There are a couple of players in this market. Amazon, Barnes & Noble, Sony, Borders/Kobo, plus the various stores offering Adobe ADE ePub books without their own apps. Oh, and Apple.
If you're Amazon or B&N, you're going to have to think about whether you want to lose that 30% on all IAP sales, or increase prices for everyone, or somehow re-negotiate your distribution deals to take the changed situation into account. Or you can choose to forego the iOS native application entirely and provide a browser-based service for iOS users.
That last option must be looking pretty appealing right now. Booki.sh have shown that it's quite possible to do this in a way which provides offline access to books and with a pretty good reading experience. Their reader isn't perfect, and I still much prefer the Kindle application to reading from Booki.sh, but the deficiencies are probably all solvable.
Doing that puts you at a disadvantage against anyone who'll eat the 30% and do a native application, but on the other hand you get to keep the 30% and can probably compete rather effectively on price. Except when you're competing against Apple, because of course they don't have to find a 30% cut to pay themselves, do they?
There are all sorts of reasons not to buy books from Apple -- being locked-in to iOS devices only, the really lousy range (I just looked for the last three books I bought from Amazon, and none of them are there), the iBook application itself not being all that great (though that's a matter of personal taste) -- but one imagines that pushing Amazon, B&N, and all the other content competitors off iOS is exactly what Apple wants. Why settle for "just" 30% of the purchase revenue when you can have all of it?
iOS is still a great money-maker for developers, if they can get their applications on the platform and if they get lucky and have a hit. But if you're selling a service rather than an application, consider your days on iOS numbered. Even if Apple aren't coming for you now, there's every chance they will be soon enough.
(no subject)
Date: 2011-04-16 11:49 am (UTC)If Apple are also providing the storage and distribution facility even in a case like Amazon Kindle books, well, yeah, that's more than payment processing but it's not what Amazon (or anyone else in a similar position) wants.
For services like Hulu Plus or Dropbox (I'm not sure if Apple has come for them yet, but if not it's only a matter of time) it really is just payment processing, and 30% is an outrageous amount.
As I understand it none of the iPad magazine/newspaper things have done very well so far. Hype at launch, then subscriber numbers rapidly dropping off. I mean, why would you bother when the same content is on the web for free? Even if it's on the web but behind a paywall, an iPad app is going to have to be "insanely great" to be worth paying the premium compared to simply using the pay website in the longer term.
We had to set up (and pay for) the special iPad support on our corporate VPN because someone very high up got an iPad and wanted it. It's not like this is the first shiny to have this sort of flow-on effect (I've talked plenty about the millions we paid to do Exchange because the suits wanted Blackberries), and it won't be the last. I'm fine with that, just not with the huge fucking-up of the content market this risks creating.
(no subject)
Date: 2011-04-17 02:40 pm (UTC)Let's be a bit more clear about what the 30% thing is - they're saying "you can let your customers buy digital goods from elsewhere, then deliver to the iOS device but you must *also* offer in app purchasing of the same digital goods, and if the customer buys it via our in-app purchasing, then we take the 30% cut."
In other words - if you can convince your customers to pay you at yourwebsite.com rather than via in-app purchasing, you're perfectly fine. If you can't, then, well, you can't. That isn't playing very nice, no. On the other hand, at this point in the game, they don't entirely have to. I'm not sure whether or not that situation with the poor state of competition will last - I expect probably not, and if it doesn't last, I expect pricing models to change.
AFAICT Dropbox is unlikely to ever be in trouble - their service is nothing to do with selling digital goods, plus the vast majority of their users would continue to pay them directly anyway, I'd bet.
Hulu Plus, maybe they could have a problem, I'm not entirely sure. I suspect they'd be in the same boat - many of their users would use Hulu on other platforms than iOS, so they likely wouldn't pay for the service via iOS anyway...
As for iPad magazine/newspaper things? Yeah, they've all been pretty bad - because most of them have been horrendously big implementations of some flashy magazine lookalike thing... which is not really what people actually want to read on a digital device. Also most of them have implemented some kind of weird confusing pricing scheme, which causes people to wonder why the heck they want to read it inside an app instead of just using Safari. Not sure you can blame that failure on Apple, that's more a failure by paper publishers to really get to grips with what will or won't actually sell in this digital publishing business.