Musings about the Apple 30% content tax
Apr. 15th, 2011 12:32 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
I 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: 2011-04-19 07:24 am (UTC)You routinely respond to any criticism of Apple or iOS with a pretty heated defence. It's pretty much all one expects at this point.
(no subject)
Date: 2011-04-19 08:25 am (UTC)If you posted a criticism that I agreed with, then I'd most likely agree with you. Those criticisms aren't huge in number, and you haven't posted about any of them that I recall. I already mentioned two of them above, and that's by no means a complete list.
If you post a criticism that I don't agree with, then, well, funny, this is a blog with comments turned on, I might comment to disagree.
Given our relative desired features in this space, I expect that disagreements are going to be vastly more common than otherwise.
If all you want is agreement to your statements, then I shall not bother commenting in future, there isn't any point.
(no subject)
Date: 2011-04-19 08:41 am (UTC)Either sellers of digital content go along with it and effectively raise their prices across the board, or iOS users get a sub-par experience. One would not be shocked to discover that the latter would be a perfectly acceptable outcome to Apple, as it would then make their own content-sale business more compelling.
Just because one can do something doesn't mean one should.
I'm reliably informed that among certain people Thorfy-baiting on Apple-fu is considered entertainment. It's not really my idea of a good time.
(no subject)
Date: 2011-04-19 09:06 am (UTC)But it's going to take some much better competition and/or complaints to some kind of real antitrust body that has teeth to make it stick.
For whatever reasons, consumers actually do spend more money inside the Apple stores as compared to other platforms. Significantly more - just ask some cross platform developers and cross platform sales groups. There's lots of them out there, and there's a consistent message - if you're any good, you make more sales via the Apple stores than on the other stores, despite the "Apple tax". If you're average or bad, yes, go elsewhere.
As far as trolls go, whatevs. :-) Trolls can troll, doesn't bug me.