Apple needs to make friends right now, not enemies

By February 17, 2011Apple, Google

On Tuesday I wrote about how Android is continuing to gain momentum, but that it still lags Apple in terms of the health of its ecosystem.  Also on Tuesday Apple announced a tightening of the rules around purchases via the apps that run on their platform which are designed to increase Apple’s share of the pie.  In a nutshell any app or service that is available on an iPhone/iPad/iTouch needs to be available via Apple’s app store at the same price or less than it is available elsewhere, and of course Apple will take their 30% cut.

Newspaper publishers who sell subscriptions via their website and keep all the margin this will lop a significant chunk off the revenues they hope to get from selling content online, their great hope.

Amazon will have to put a link in their Kindle apps that launches Apple’s single click in app purchasing, on which Apple takes a 30% cut.  That will replace the link to Amazon’s website where they get to keep all the margin.  I don’t know if it will be profitable for Amazon to sell books if they have to hand over 30% of the purchase price to Apple.  If not they may have to pull their Kindle apps.

It will of course be easier and simpler for consumers to buy direct from their iPhones and iPads apps than launch a separate browser session, type in the link, etc. meaning that newspaper publishers, Amazon and Apple’s other partners will end up handing a significant portion of their sales to Apple.  Either that or move off the platform.

No wonder the Wall Street Journal is reporting that Apple’s latest move raises anti-trust issues.

Given the growth in the Android platform (and I was with a company yesterday that is launching a mobile app only on Android) I am surprised that Apple isn’t adopting the opposite strategy of working to be a better partner.  Perhaps I shouldn’t be surprised though – looking back over recent history it is clear that Apple has long thought that their contribution is far more important than that of their partners and as a result have undervalued the ecosystem.

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  • Anonymous

    The biggest issue in my mind is not Apple forcing publishers to allow content to be purchased through iTunes; but that they don’t let publishers adjust prices accordingly. Apple are essentially forcing publishers to build in an 30% apple tax across their whole pricing – which is clearly untenable for most. If Apple need 30% they should let publishers increase their pricing to sell via iTunes – and then consumers can decide if the convenience is worth a 30% increase. The reason Apple is not doing that is because they know the convenience is not worth anything near that much.

    I also recall a court case (not even sure if it was UK or US) regarding the credit card companies trying to force merchants to not be able to offer alternative pricing (discounts) to people not using credit cards; a case they lost. There seem to be similarities here.

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  • The danger here is that Apple is forcing out the very people that make their products so great. People love iPad and iTouch because of the apps, the music, etc. These are things that groups and people outside of Apple bring to the table.

  • Exactly – and they will force them to Android. The better option for Apple over the long run, it seems to me, is to open up their policies a little.

  • Anonymous

    History repeating itself …. the market will always find a way round a closed system …. Apple will benefit in the short term – but as you have confirmed the majority of the partners will find a way to drive traffic outside their system within the year. Really a shame they never learn or don’t want to learn.

  • Incredible how people ignore the lessons of history…

  • Totally agree. Apple are leveraging the fact that right now publishers need to be on the iPhone and iPad to insist on their 30% across the board and also that the pricing on their devices is the same as elsewhere, and that the convenience alone doesn’t merit it.

    Your analogy with credit cards is interesting. I guess Apple’s ability to make this stick will come down to the strength of their position vs the competition, and ironically if they are strong enough to make it work commercially they are probably more vulnerable in court.

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  • Anonymous

    Exactly on the competition issue. I am pretty sure they will back pedal; it will just take a few high profile apps leaving (Economist/FT/Spotify/Kindle) to kill the platform – if I loose a single one of those I know I am off to Android. I hope that these high profile publishers don’t sign private discounted deals (I can’t imagine for a minute Murdoch is paying 30% for The Daily) and take a stand early on.

  • I agree, and wrote as much this morning on the back of Rhapsody coming out and saying their business model doesn’t work with the 30% cut

  • Anonymous

    Nick; do you have any insight into the legality of a big publisher like Rhapsody publishing their iOS app on their website and suggesting people jailbreak their iphones; perhaps even linking to jail breaking sites? I can’t imagine anyone small would want do take Apple on in this way – but I could see Spotify trying.

  • Recommending that customers jail break and invalidate their warranty opens you up to all sorts of problems if their phone stops working, particularly if it might be because of your application.

    I doubt that anyone serious would go down this route.