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.

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