Apple demanding 30% commission in in-app purchases

Either that or prices will remain stable and programmers will take their business elsewhere. That’s actually the big reason I refuse to get an iphone.

Some hard copy publishers used the online version as a promotional item, buy the magazine or newspaper … get free access to the online extended version … now, impossible

Either that or prices will remain stable and programmers will take their business elsewhere. That’s actually the big reason I refuse to get an iphone.[/quote]

So you use an android device and suck up to Google instead? They are not better. Android is highly dependent on you having Google account. For example, Calendar can’t even be used without being logged into a Google account. In a way, you are just trading a certain amount of Apple lock-in for a certain amount of Google lock-in. Apple chooses to be different in the way they operate, and there is a reason for what they are doing. Making money, yes, but it doesn’t end there.

The “free” culture on android isn’t all pink. Google has encouraged a “free stuff” culture on Android, while Apple has been helping developers count the money. Just take GPS turn-by-turn navigation apps. Around the very same time that TomTom and others were listing $100 navi apps on Apple’s store, Google went and built its own navi app for Android — and gave it away for free. Not only did that discourage competition, but it set the price impossibly low. (There are now paid GPS apps for Android, and freebie GPS apps for iOS, but the lesson was chilling for developers.) Link

In-app purchases are finally coming to Android, which is good news, because it means that there may be some nice subscription magazines and other premium content available for Android tablets. I wouldn’t hold out for News Corp’s The Daily to make the jump, though: Apple helped develop it, and News Corp’s Rupert Murdoch has long contended that Google unfairly profiteers off of his company’s content.

So Google making a few bucks on the side, too, then… Same difference. You think Google is more ethical in business? Think again… The bottom line is that both platform has its own downsides but iOS still comes out on top when it comes to quality control, consistency and user experience. This is much different from the android community where every idiot is in the running without any quality control, consistency or concerns for the end users or for the community as a whole. YMMV.

You are right, Robin. In fact, I am an active Google user (Google apps on my web site; mail-calendar-docs, Google Voice for free calls home, etc), so a big reason I changed to Android is to more seamlessly integrate with those services. Others have argued it is just as easy with iOS, but that was not my experience.

I have no problem paying for my apps on either iOS or Android. Free apps on both platforms are putting ads on them, so they are getting their money.

I don’t care about News Corp or Rupert Murdoch. He gets his money, including when someone clicks on a link from Google News and gets taken to a News Corp website, where they are exposed to more advertising. He should thank Google for the referrals.

I have no problem with a business making money. I realize that is their purpose for existence, after all. Google has to make money, too. But, I find their way of going about it to be much more palatable than Apple’s.

This is extortion. It would be no different for Microsoft to say if you use Windows to buy something online, then you need to pay Microsoft commission. Apple can make money on anything they sell, but now to tell app developers that anything THEY sell to someone using an Apple iPhone or iPad in-app-purchase and prohibiting developers from putting an external link in the app to direct people to make their purchases directly, is just crap.

There is no grounds for antitrust. Apple doesn’t have a majority market share in this space let alone 25%. What they do have is a statistically more wealthy user base who value the design and simplicity that getting an Apple product gets them. A publisher getting direct, one-tap-to-buy lead-gen into that demo for 30% of the product retail price with the ability to do a direct-sale, zero-marginal-cost, zero-inventory-model is exorbitantly low compared to their existing shipping-atoms-through resellers model. Publishers can choose whether to play here or not. There is no coercion, no extortion. You want access to my call list? Pay me. It’s just business.

Apple makes money by selling hardware primarily and all the other stuff around it to make the hardware more desirable. Great hardware and great user experiences on that hardware is Apple’s lifeblood.

Google makes money by auctioning advertising against search terms primarily and gives away a phone OS (for less than free) so hardware manufacturers can sell phones, spreading the baked-in Google-search capabilities on that phone, and driving up search volume. More search volume is Google’s lifeblood.

Both companies have very smart people working there who have thought through the implications of their moves thoroughly. The point is you can’t make a decision that you think will have a negative long-term expected value to your primary objectives.

Last I checked, Passport (or Live ID, or whatever it’s called these days) hasn’t at all rivaled PayPal or in this case, iTunes as a digital wallet. Nor does Windows include any particular store paradigm where users have been conditioned to know this is the place you go to buy apps (AppStore), music (iTunes), books (iBooks) with one tap.

Last I checked, Passport (or Live ID, or whatever it’s called these days) hasn’t at all rivaled PayPal or in this case, iTunes as a digital wallet. Nor does Windows include any particular store paradigm where users have been conditioned to know this is the place you go to buy apps (AppStore), music (iTunes), books (iBooks) with one tap.[/quote]
Oh, speaking of crap, there’s that 1-Click business practice patent (which Apple licensed from Amazon). How is that patentable? :loco:

[quote=“CraigTPE”]You are right, Robin. In fact, I am an active Google user (Google apps on my web site; mail-calendar-docs, Google Voice for free calls home, etc), so a big reason I changed to Android is to more seamlessly integrate with those services. Others have argued it is just as easy with iOS, but that was not my experience.[/quote]I have limited experience with android but I believe you. I’m sure it’s pretty user friendly, especially with the high-end android devices.

It’s all business. Concerned participants can pay 30%, or they can miss out on a very healthy market. If anyone wants to complain about this, I think they are free to go on developing their own platform. In the mean time, I think the devs that need to put food on their table will keep slaving away… I think a lot of people expect too much from mega corporations. We are just sheep to them.

This is certainly a win for consumers. The only downside as a consumer that I can see is that they have created a process that makes it far too comfortable for me to spend money.

Steve has not learned from his past mistakes.

he wanted to control both the hardware and the software side of the individual computers - result, Wintel beat the crap out of him. A bit less greed would have seen him 10 times as rich as he is now.

Now, he’s up to his old tricks, and well, he will be eaten alive again in the end.

Wow, I must be really dense. I don’t get you guys at all.

Apple sells phones. They make money from the sale. Apple has a marketplace where people can sell apps for that phone, and again Apple makes money from the sale. Both of those seem reasonable to me because Apple is doing something to earn the money.

Now why on earth, once the phone and app are sold, should Apple receive any further financial reward for how that device and app are subsequently used? Apple is not providing any incremental value. How is this any different than me using my Windows computer to shop online? Microsoft doesn’t extort a commission. Acer doesn’t get a cut when I use my desktop to buy something.

And how is Apple’s extortion a win for consumers? By getting a 30% cut from a transaction where previously they got zero increases the cost of the transaction, which is likely to be passed on to consumers in the form of higher prices.

WTF :loco:

I get what you’re saying Craig, but doesn’t this effectively close the loophole where app makers could previously price the basic app however cheaply they want (perhaps even free), thereby giving the F-U to Apple and their 30% commission, and then charge a steep premium for the in-app upgrade? Apple had no way to get any commission on the upgrade price, which one could argue should/could have been included in the price of the basic app.

I honestly have no strong feelings about this, as I don’t even own a smart phone, but I am quite good at finding loopholes, and I think Apple is just trying to close one. I could be wrong about this, though, given my ignorance on the subject.

Look at the cost of software before the app store.
Look at the cost of software after the app store.
Where are the higher prices? Where are the higher profits? I spend at least 10x more on software today than I did three years ago, because it’s easy to do so, it’s safe (I’m not handing out credit card information to Joe Blow developer online), and individual products are inexpensive enough that I’m willing to take a flyer on a whim.

Apple’s set up a marketplace that’s proven phenomenally successful. Like a supermarket or grocery store, it charges content providers rent to gain access. It also imposes significant standards on those providers. Vast numbers of consumers love the ease and security (and prices) of that marketplace, and readily spend money therein. Makes it a good place to be for content providers. Established content providers have reason to grumble about Apple’s rent-seeking behaviour; smaller and newer content providers have reason to be ecstatic about Apple’s platform, and are more than willing to trade 30% for access to that market.

Good for new entrants; good for consumers. :discodance:

This isn’t really a big deal to anyone and I am surprised how much press these decisions get in terms of reactions from developers. Never in my life have I seen programmers opinions carry so much weight in the mainstream press.

Apple has been primarily a design/marketing driven company (vs. companies like htc which are almost entirely engineering driven) which sold products based on the valid premise of a superior user experience. Their products are quantitively better designed and have a qualitative aspect that some people connect with (conversely some people hate them). This is a business in which they gain a huge profit.

They now also have a hugely successful distribution and payment platform which is a no brainer for the consumer to use. Like Amazon (the system it may be based on), I enter my payment details once, and forever after, all I have to do is go through a minor security hoop to make a purchase. The store is in my pocket and follows me wherever I go. It works and the consumer trusts the process. Apple is making a large profit and they want to make more.

If you want to sell content or native apps. on their store they want a cut. It’s brazen and not an altruist move at all but what’s wrong with a company wanting to make money? Especially when it removes a few hoops for the consumer (and potentially shields your personal data from asshole publishers who sell your data on a whim). Lots of companies want to be able to do the same thing.

After bad experiences with companies like eMusic, with Apple in charge of the payment experience, I might even consider subscription payments on media again.

I am able to purchase far more software now than at any time in the past. It’s my understanding that many developers are making more money as well.

I also have on my phone the Amazon store - what is their profit on purchases and subscriptions?

Here is how it works. After the consumer has purchased the app and they are happy with the product and how the transaction was conducted (through Apple), they are more likely to purchase additional content inside the app the same way. Apple handles the transaction using the customer’s credit card information that was previously provided to Apple, so it provides a better experience for the consumer since the entire process can be completed within the app. Otherwise, the consumer has to come out of the app, create a new account with the content developer (if they don’t have one already) and pay them in a different method than they originally paid for. So yes, it is better service to the consumer and Apple IS providing additional services to both the developer (handling transactions and associated fees) and consumer (providing a better shopping experience).

If I use my Acer / Windows computer to shop online, Acer / Microsoft are not handling my transaction or providing additional product discoverability, whereas in this case Apple is.

[quote=“Mr He”]Steve has not learned from his past mistakes.
he wanted to control both the hardware and the software side of the individual computers - result, Wintel beat the crap out of him. A bit less greed would have seen him 10 times as rich as he is now.

Now, he’s up to his old tricks, and well, he will be eaten alive again in the end.[/quote]
How did Wintel beat the crap out of him, if Apple is far and away the most profitable computer manufacturer? They are also close to beating Microsoft in overall profit, despite holding only 10% of the PC OS market. If he was eaten alive, why is the rest of the industry copying Apple with the design of iTunes, iPod, iPhone, iPad, App store etc.

It seems to me that Steve and company are doing just fine these days…

In related news today, Border’s Books went busto:
online.wsj.com/article/SB1000142 … 34214.html

Other brick-and-mortar book stores are next, mirroring the collapse of the music store and the rise of iTunes as a dominant distribution channel a decade ago. The device is now the store. The store is now the device. Creative destruction in action.

The simple creation of a “store” metaphor should not be discounted, as kelake and Jaboney have both elaborated. Before the Android Market challenged the App Store, no other computing devices save for the Kindle have had this store metaphor so well embedded and easy to use that consumers are conditioned to shop there and pretty much only there for content and applications for their device.

It’s better for content makers because they get reach to the entire long tail with no distribution costs and almost no customer acquisition costs except for the 30%. The middle gets squeezed, which is why all the uproar. Musicians still need large corporate marketing channels to get airtime and get to “Billboard” level, but as with apps, all a content publisher will need in the future is great content, a lot of people voting with their wallet and perhaps getting lucky and getting featured.

Digital business, and particularly the app-store dynamic almost demands freemium business models and as scormargo alluded, it is these freemium business models that Apple is making sure it covers. App developers know that going free with an app or a version of the app gets orders of magnitudes more looks and downloads. Hook them, then sell them upgrades. As app developers experiment more and more with this “first ones are free” “drug dealer model”, Apple and other entities running stores need to put in guidelines to make their businesses sustainable. The free hook’em versions are all loss leaders for the store, so the shift of margin-getting payment has to be to with in app purchases.

[quote=“Mr He”]Steve has not learned from his past mistakes.

he wanted to control both the hardware and the software side of the individual computers - result, Wintel beat the crap out of him. A bit less greed would have seen him 10 times as rich as he is now.

Now, he’s up to his old tricks, and well, he will be eaten alive again in the end.[/quote]

Let’s look back at history here.
Steve Jobs spearheaded the Mac release in 1984.
The Mac didn’t have any developers, didn’t have any apps so it sold well at first, then tanked. Steve Jobs got ousted soon after the release of the Mac.
Artist and designer support on the Adobe toolset and educational sales kept Apple afloat in the dark days since then.
Steve Jobs returned in 1997.
Since then, the company has introduced to the world the iPod, iTunes, iPhone, the App Store and Intel Macs.
Since then, the company has fully understood the need to support a way for an ecosystem of developers to get paid. Pot of gold = developers. Developers = great platform. Great platform = buyers.

I think they learned just fine.

Went looking for that info as well.

[quote=“PC World”]Interestingly, however, Apple’s rules don’t seem that out of line when compared to what rivals are offering. Admittedly, it’s a small field of competitors-Android, Windows Phone 7, and BlackBerry platforms do not yet support subscriptions for app content. Barnes & Noble strikes deals with publishers for content on its Nook e-reader, though the company wouldn’t comment to Macworld on how it splits subscription revenue with publishers in its Nook store. (Its self-publishing book rates, on the other hand, are publicly available.)

That leaves Amazon and its assortment of Kindle offerings, including the Kindle e-reading device. Like Apple, Amazon makes a popular gadget for content consumption, serves as the sole (legitimate) gatekeeper for getting the vast majority of content onto it, and publishes the fees it charges for content delivery. Both large publications like New York Times and individual bloggers like you and me are able to publish content directly to the Kindle. But if we want to do so, we have to agree to Amazon’s revenue terms.

In a nutshell, Amazon used to give publishers only about 30 percent of the revenue collected from subscriptions sold through Kindle. In December 2010, Amazon increased that amount to match Apple’s existing 70-30 split with developers. But a publisher will only get that rate from Amazon if it meets certain qualifications, such as submitting its content in a format that can be read across all Kindle devices and apps. Furthermore, self-published bloggers still only get 30 percent of the fee Amazon charges Kindle customers.

Regardless of which revenue rate publishers qualify for, Amazon also charges a small fee for delivering content over its 3G Whispernet service, billed at 15 cents per MB. Remember, with each 3G-enabled Kindle, Amazon includes lifetime wireless service to download content for free, but passes on 70 percent of the content delivery costs to publishers.

[b]To use Amazon’s best case revenue split and pricing formula-(revenue - delivery costs) * 70 percent-a monthly publication delivered wirelessly that costs $10 and weighs 9MB will end up netting the publisher $6.05 per subscriber. With Apple’s terms and a native app in the App Store, that 30 percent cut would give the publisher $7.

Barnes & Noble only publicizes its self-publishing rates for books, but they’re worth mentioning. If your book costs $3 to $10, you’ll get 60 percent of your price (minus wireless delivery costs). If your book costs $11 to $200, you’ll get only 40 percent of your price.[/b][/quote]

I recall Amazon coming under significant pressure when Apple announced it’s bookstore, and the terms it set for content providers quickly improved to match those offered by Apple. Google’s now jumping in on the subscription front, offering a 90/10 split… apparently a better deal, but then Google’s milking the ad stream as well, so its not a clearcut comparison, but if successful Google may pull down Apple’s rates.

I find an emerging market like this is interesting because it’s disruptive – entrenched interests get all shook up – and there’s gasp real competition. Apple’s case is particularly interesting because when the iPad was announced established media outlets treated it like an industry saviour. Turned out it wasn’t as easy as porting existing content over, and with so many would-be-competitors churning out nothing but vapourware, Apple’s setting itself up as the premium media portal, flexing its muscles and tightening the screws. Hardly surprising that established media outlets are squealing.

Edit: more on subscriptions

[quote=“MacWorld:”]“Of course we would always like to see a lower commission, but we are able to work with this commission rate at this time,” said Philippe Guelton, chief operating officer of Hachette Filipacchi Media U.S., publisher of Elle. “The cost of developing our own e-commerce platform is not economically viable. Apple is offering a great turnkey tool that allows us to test with little to no financial risk.”

“In today’s consumer marketing environment, we feel a 70 percent remit directly to the publisher is a sustainable and reasonable model we can work with,” added Gregg Hano, Bonnier Corporation’s group publisher for Popular Science. “The audience is, we think, extremely valuable.”
[…]
Other publishers reacted more positively to Apple’s new rules. Richard Stephenson, CEO of London-based Yudu Media—which has built more than 60 apps for periodicals ranging from Reader’s Digest UK to American Handgunner —said he would advise publishers to put aside their reservations and plant their flag in the iOS platform. Apple’s commission may be a steep price, he suggested, but the user-friendliness of the iTunes subscription method may bring a higher number of subscriptions.

“We’re a great believer in slick consumer journeys,” Stephenson said. “When you take people off the App Store, you lose a lot of people along the way, the dropout rate is pretty high.”[/quote]