Musings about the Apple 30% content tax

[abortrephrase]

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.

Comments

[thorfinn]

Apple is in the business of being a middleman. 30% is a cheap cut for a middleman - and employing three or more middlemen is a bad idea for both the consumer -and- the content creator. If your "service" amounts to nothing but being a content middleman, then yes, you'll be stuffed on iOS. You need to do more than that to justify your cut.

From the ordinary consumer perspective, nobody really cares. You pay for the content you want via the most convenient means you have, without regard to how many layers of middlemen there are.

And for content creators - a service like smashwords for books or bandcamp for music is well worthwhile. "Traditional" publishers who aren't changing their business model are in trouble - and nobody is crying except them.