Subscriptions on the Apple App Store

Magazines on the iPad
Apple's iPad

Apple announced today that they will be supporting subscriptions on the AppStore. A lot of us have been thinking that would make for a good day, as it never made sense for owners of the iPad to only be able to buy something like a magazine for the iPad one issue at a time (often for more than a print single copy).

However, the way that Apple is doing this is causing a great deal of consternation outside of Cupertino.

First, they are demanding 30% of every subscription sale. This is a similar rate that is paid on magazines at the news stand, but not having to provide that discount to magazine stands is part of what allows magazine subscriptions to be so inexpensive. Apple does allow people who sell subscriptions to do so “outside the app.” But, again, the bargain they are asking people to make is draconian. In their press release, they write:

“However, Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app.” In other words, the time honored tradition of the “cut-out-the-middleman” buy direct discount is not going to be allowed.

This means that Amazon cannot sell books in the iOS version of the Kindle reader, even though that reader only has a link to Amazon’s website to make that purchase. (For titles sold through Amazon’s Digital Text Program, authors and publishers get a 70% royalty. Simple math shows that if Amazon gives Apple the remaining 30%, they will be spending money to support publishers, authors, and Apple, without a penny going to pay for Amazon’s server farms, let alone its employees or shareholders.)

Amazon does not have a similar policy. If you sell a book on Amazon, you can set the price, or let Amazon set guidelines on the price ($2.99 – $9.99 and 20% less than the cheapest print version of the title), and get a better percentage of the sales price. But there’s nothing to stop someone from selling a Kindle-formatted book for $9.99 through Amazon and $7.99 directly from them. This is called the agency model, and it means that when Amazon acts as the publisher or author’s agent, they get income, when they don’t … they don’t get income, and furthermore, they make no stipulations about how much the author or publisher can sell the Kindle book for outside of the Amazon store.

At best, this announcement by Apple will make legitimate vendors of books, magazines, and audio and video think twice before offering their services at current prices through the App Store, since doing so would incur a steep fee that they did not have before. At worst, some companies will play, but others will be left out. It seems like a sure way for Apple to make good revenue from those who remain, and to stifle competition from the likes of Hulu and Netflix (video rentals), Amazon (books and magazines), and Rhapsody (music).

A comprehensive article on the reactions appears on ReadWriteWeb: “A Round-Up of Reactions: Apple’s Greedy, Anti-Competitive, Evil, Brilliant Announcement.” This article points out that the Wall Street Journal muses about the legality of the announcement:

“Apple Inc.’s new subscription service could draw antitrust scrutiny, according to law professors,” writes the Journal’s Nathan Koppel. According to the article, the antitrust argument hinges on two primary points – whether or not Apple is exerting “anticompetitive pressures on price” and whether Apple is a “dominant player in the market.”

But what does this mean for genealogists? We may never know for sure. If Apple’s strategy goes forward, but actually does have a chilling and anticompetitive impact, a lot of content and services, some not yet conceived of, may not come to a dominant platform. Genealogists are ravenous consumers of books, including e-books and audio books. This may delay or stop the delivery of a lot of titles that might otherwise have been available. Hopefully, Apple will re-think their announcement, at least as it concerns how vendors price and sell their content off the iPad.

Comments are closed.