# My way or the Highway, says Steve Jobs:



## Eeyore (Jul 16, 2009)

Steve Jobs to pubs: Our way or highway
Posted by Philip Elmer-DeWitt
February 15, 2011 10:28 AM

The subscription model Apple announced today is unlikely to please anyone

There was a rumor in the Time Life building last week that Apple (AAPL) -- which had been in a stand-off with the publishing industry for nearly a year -- had "blinked" and was about to cut a deal favorable to the publishers.

It was not to be. When Apple announced its new App Store subscription service Tuesday morning, it was as draconian as the publishers feared. Among the terms:

* Any subscription offered outside an app must also be offered for the same or lower price inside the app. No passing on extra costs to the user.
* Apple takes 30% of the revenue from in-app purchases -- be they Amazon books, Time Inc. magazines or Hulu Plus TV shows. As Joshua Benton writes in Nieman Journalism Lab: "Giving up 30 percent of tablet revenue is one thing; giving up 30 percent of print subscription revenue is suicide."

* The publisher gets to learn the name, e-mail address and zip code of in-app subscribers only if the user clicks a button agreeing to share that information -- something most are unlikely to do.
* Publishers may no longer provide links in their apps (to a website, for example) that allow the customer to buy content or subscriptions outside the app, which pretty much shuts down the business model of, say, Amazon's Kindle app.

In the press release, Steve Jobs makes all this sound like the most reasonable thing in the world:

"Our philosophy is simple-when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing," Jobs writes. "All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app. We believe that this innovative subscription service will provide publishers with a brand new opportunity to expand digital access to their content onto the iPad, iPod touch and iPhone, delighting both new and existing subscribers."

"Delighted" is not likely how the publishers feel today. We note that no developer or publication except News Corp.'s (NWS) The Daily is mention in the press release. We suspect the rest are still studying it.

http://www.apple.com/pr/library/2011/02/15appstore.html

*** The two most interesting things about this notice is specifically shutting out Amazon downloads unless Apple gets their 30% cut, and the ability for publishers to get your name, email address and zip code unless you opt out.***

Best Wishes, I think...


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## intinst (Dec 23, 2008)

May end up selling a lot more Kindles...


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## pidgeon92 (Oct 27, 2008)

I still don't care. It doesn't affect my Kindle, or how I use my Kindle app on any of my Apple devices. I don't buy books through any of the devices anyway, as I purchase them through our KB affiliate link, so that KB gets a cut of the sale. 

That's the interesting thing about how you purchase.... You can choose who gets a cut of the sale. If I buy directly from Amazon, they get 100%. If I buy through our affiliate link, KB gets a small percentage (not sure how much). If I buy through my Apple device, Apple gets 30%.


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## monkeyluis (Oct 17, 2010)

This is talking about subscriptions. Not books. So we'll see what happens.


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## JCBeam (Feb 27, 2009)

pidgeon92 said:


> I still don't care. It doesn't affect my Kindle, or how I use my Kindle app on any of my Apple devices. I don't buy books through any of the devices anyway, as I purchase them through our KB affiliate link, so that KB gets a cut of the sale.
> 
> That's the interesting thing about how you purchase.... You can choose who gets a cut of the sale. If I buy directly from Amazon, they get 100%. If I buy through our affiliate link, KB gets a small percentage (not sure how much). If I buy through my Apple device, Apple gets 30%.


This while thing has me confused anyway. All of my books on iPad were purchased through amazon.com via their website or from my Kindle and now in my library on iPad; so does this mean they will be inaccessible on my iPad if Apple gets their way, or is this related to new purchases or blocking the ability to purchase unless through an in-app?


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## Zero (Jan 27, 2011)

JCBeam said:


> This while thing has me confused anyway. All of my books on iPad were purchased through amazon.com via their website or from my Kindle and now in my library on iPad; so does this mean they will be inaccessible on my iPad if Apple gets their way, or is this related to new purchases or blocking the ability to purchase unless through an in-app?


The way I read this is that it only applies to in-app purchases. So if the Kindle app removes the "buy in Amazon" link, then its compliant. You can still buy from the amazon.com website or through the KB link here, and choose to send that book to your Kindle app. This doesn't modify any purchases you've made or books that you already have on your Kindle app. You could still send books to the Kindle app (as this is still allowed).


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## Mike D. aka jmiked (Oct 28, 2008)

Wow. 30% for doing nothing is outrageous. Especially when the seller is possibly not making 30% in the first place. Steve is still firmly in the grip of his patented Reality Distortion Field (TM).

He's making it really, really hard for me to remain an Apple enthusiast (I'm definitely not a Steve-enthusiast, haven’t been since he canceled the Newton). And I don't even buy books through an iThing.

Mike


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## Mike D. aka jmiked (Oct 28, 2008)

Zero said:


> The way I read this is that it only applies to in-app purchases. So if the Kindle app removes the "buy in Amazon" link, then its compliant. You can still buy from the amazon.com website or through the KB link here, and choose to send that book to your Kindle app. This doesn't modify any purchases you've made or books that you already have on your Kindle app. You could still send books to the Kindle app (as this is still allowed).


True enough (for now). But how many of the "general populace" are going to know the background of the situation well enough to make the choice that will allow Amazon to maintain profit margins (whatever those might be)?

Mike


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## pidgeon92 (Oct 27, 2008)

jmiked said:


> True enough (for now). But how many of the "general populace" are going to know the background of the situation well enough to make the choice that will allow Amazon to maintain profit margins (whatever those might be)?


.... and this is what aggravates me about the general populace. People need to educate themselves. The information is out there, and it's often - like this this issue _right now_ - right there in your face. It's on the front page of the Chicago Tribune right now. It's been in the Wall Street Journal for days. People are "talking" about it all over the internet.

On the other hand, I would wager that a majority of people could care less when buying a book who is getting the profit, as long as that book is below whatever threshold they have deemed acceptable ($9.99 ban, anyone?), because, ultimately, it's all about "me."


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## Eeyore (Jul 16, 2009)

Actually, I am more worried about something like this happening:

http://arstechnica.com/apple/news/2011/02/ibooks-to-jailbreakers-no-yuo.ars

Apple applying an i-DRM (patent pending) code to all applications, books and magazines. If you purchase a book through Apple ibooks, you can read it on your iPad or iphone because it has the correct DRM. If you purchase a book through Amazon _by way of_ the Apple app (and Apple getting its 30% cut), it will also have the approved DRM. If you purchase your book through Amazon and try to send it to your iPad through the Kindle app, the book will be unreadable because it does not have the approved Apple DRM. Seems simple enough to add the correct code according to the above linked article.

But this only applies to subscriptions, some people cry. Says I, "How long will it be before someone at Apple figures this would also work for books too?" Thirty percent is still thirty percent and Apple wants their cut.

Best Wishes!


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## kkay5 (Feb 1, 2010)

monkeyluis said:


> This is talking about subscriptions. Not books. So we'll see what happens.


The article I read today said it applies to all digital content.


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## The Hooded Claw (Oct 12, 2009)

kkay5 said:


> The article I read today said it applies to all digital content.


I've also seen articles saying this applies to Kindle books and similar purchases. Since vendors are prohibited from offering lower prices elsewhere, it will lead to higher prices for our Kindle books as long as the agency model stays in effect. Publishers will have to do this even if Amazon pulls the Kindle app from iThings. It appears this will even affect Netflix and Pandora subscriptions!

I smell anti trust action and enriched lawyers.

And as mentioned, higher prices for us all, even non Apple users.


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## corkyb (Apr 25, 2009)

This sucks.  Big time.


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## pidgeon92 (Oct 27, 2008)

The Hooded Claw said:


> It appears this will even affect Netflix and Pandora subscriptions!


If you buy them _through the application_.


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## The Hooded Claw (Oct 12, 2009)

pidgeon92 said:


> If you buy them _through the application_.


Yes....but it also requires that buying through the application be the same price as the lowest price offered anywhere else. Which means that either vendors have to accept that they will lose 30% of the price on most app purchases (which is far more than their profit in most cases) or else they will have to raise prices everywhere to match the app store price.


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## VictoriaP (Mar 1, 2009)

I think what's most likely is that companies like Amazon/Netflix/etc. eventually don't make their apps available on the iOS platform.  No one can afford to pay Apple for doing absolutely nothing, not for long anyway, and stay in business.  If they somehow get away with this, next they'll expect the same thing for physical goods--there goes ebay, Zappos.com, etc.  Eventually a company will refuse to use the in app purchase setup, Apple will refuse to allow downloads purchased through your computer or Safari, only those from within the app, and that will be the end of that company doing business on iOS.  

But their stuff will still be available on an Android model, or a regular PC.  

That's where Apple's shooting itself in the foot with this idea.  Too many tablets are entering the market now, and at this point, if this continues along the current predictable path, I'll be switching mine over to a competitor within the year...along with my phone and my computer.  I'm an Apple shareholder, hubby's a former employee--and this behavior is frankly making us both ill.  It's just incredibly stupid, and I'm not investing another dime in the app store at this point as it's money down the drain when I switch platforms.


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## pidgeon92 (Oct 27, 2008)

The Hooded Claw said:


> Yes....but it also requires that buying through the application be the same price as the lowest price offered anywhere else. Which means that either vendors have to accept that they will lose 30% of the price on most app purchases (which is far more than their profit in most cases) or else they will have to raise prices everywhere to match the app store price.


Maybe, maybe not. These people run a business, and you would hope they have enough sense to build the cost of doing business into their prices. As we've all been moaning over the price of books over $9.99, how does one really know the margins that have been added to these items? Will they go up? Maybe, but magazines and other subscription items have always been luxuries that most people do not need to subscribe to.


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## The Hooded Claw (Oct 12, 2009)

Wall Street Journal thinks the new policy may raise antitrust issues:

http://online.wsj.com/article/SB10001424052748704409004576146613997208194.html

but they do add several qualifiers to that statement....


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## kindlegrl81 (Jan 19, 2010)

Last I checked, 30% is the amount of profit Amazon recieves from ebook purchases.  I highly doubt Amazon is going to allow another company to take all of their profits from a purchase so one of two things is probably going to happen.  

1) Amazon will increase the percentage they take per book sale, meaning the author earns less money. 

Or 

2) Amazon will yank their apple apps from the market, giving us one less perk to owning an idevice.

On a side note....I find Apple's timing amazing.  Not one month after buying my Kindle, Apple started their agency pricing war with Amazon, leading to me spending more on the books I wanted. And now, not one month after I purchase an iPad they start this.


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## geko29 (Dec 23, 2008)

pidgeon92 said:


> Maybe, maybe not. These people run a business, and you would hope they have enough sense to build the cost of doing business into their prices. As we've all been moaning over the price of books over $9.99, how does one really know the margins that have been added to these items? Will they go up? Maybe, but magazines and other subscription items have always been luxuries that most people do not need to subscribe to.


Actually we know EXACTLY the margin on e-books. It's 30%, by contract. So this requirement means that, should Amazon chose to allow in-app purchases (or depending on interpretation of the policy, should they continue to offer the Kindle app at all), they would be committing themselves to giving books away. And there's no possibility of increasing the margin, thanks ONCE AGAIN to Apple's foisting of the Agency model on everyone. Nothing like setting a competitor's profit margin against their will, and then demanding that they turn over exactly that amount to you, in exchange for doing absolutely nothing.

I definitely hope Amazon yanks the Kindle app from the App Store, posts it on Cydia, and then advertises the hell out of it.


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## monkeyluis (Oct 17, 2010)

I just thought of something. The more difficult these companies make it, whether to buy content, use apps, etc, the more piracy is going to continue to happen.


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## matt youngmark (Jan 11, 2011)

The best analysis of this I've seen is from nonfiction POD guru Aaron Shepard, who speculates:

1) Apple's new policy simply states that any app that sells anything through iOS (iphone/ipad/ipod touch) must include an option to sell through the apple store, where they get a cut.

2) Amazon can't afford to do this, because their margins are too slim as it is.

3) Amazon can't afford to pull their Kindle app, or risk losing their status as the premier ebook platform

4) Result: Amazon pulls the "buy" button from their Kindle app, and iphone kindle users will have to purchase Kindle books via PC, which many already do anyway. They'll get used to it, and the sky will not fall.

Shepard could be off in his analysis here, but it sounds about right to me.


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## Eeyore (Jul 16, 2009)

Gotcha !

U.S. Said to Examine New Apple Service for Violations
February 18, 2011, 2:28 PM EST
More From Businessweek

By Jeff Bliss

Federal Trade Commission are examining whether Apple's new media subscription service violates antitrust laws, according to two people familiar with the matter.

The agencies haven't decided whether to pursue a more formal investigation as the examination is at a preliminary stage, said the people, who requested anonymity because the matter is confidential. The Wall Street Journal reported today on the preliminary probes.

Apple on Feb. 15 said it was starting a subscription service for publishers to sell newspapers and magazines on the iPad and other devices through the company's online App Store. Cupertino, California-based Apple will take a 30 percent cut of any subscription purchased through the App Store. Publishers that participate will have to offer their lowest subscription rates within Apple's store.

The following day, Google Inc. unveiled a rival service that lets the company keep only 10 percent of fees charged by publishers.

Apple's plan is "economically untenable," said Jon Irwin, president of online music provider Rhapsody International Inc., in an e-mailed statement Feb. 15.

Gina Talamona, a spokeswoman for the Justice Department, declined to comment, as did an FTC spokeswoman. Trudy Muller, a spokeswoman for Apple, also declined to comment.

App Store content providers are working with Google and Apple to make their wares available in more ways, including on mobile devices, as sales of paper magazines and newspapers slump.

Apple's App Store offers more than 350,000 applications to users of the iPhone, iPod and iPad, according to the company. About $1.1 billion of applications were sold through the App Store in 2010, making Apple's revenue share about $317 million, according to estimates from Brian Marshall, an analyst at Gleacher & Co. in San Francisco.

The FTC has been reviewing separate allegations that Apple is engaging in anti-competitive tactics to restrict rivals in the mobile-advertising market. The Justice Department is looking into Apple's business practices regarding its iTunes digital music service.

http://www.businessweek.com/news/2011-02-18/u-s-said-to-examine-new-apple-service-for-violations.html

Best Wishes!


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## pidgeon92 (Oct 27, 2008)

They can examine all they like. I really doubt there is anything illegal in what Apple is doing. We'll find out soon enough, but by then we'll be busy demonizing another entity.


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## Jesslyn (Oct 29, 2008)

pidgeon92 said:


> They can examine all they like. I really doubt there is anything illegal in what Apple is doing. We'll find out soon enough, but by then we'll be busy demonizing another entity.


It doesn't bother you that Apple's deal with the publishers _immediately _drove up ebook prices? Or that this could do it again? I CAN see Amazon pulling out of iOS. Really easily.

As I said in another thread, the publishers should eliminate their agency deals with Amazon, allowing them to go back to being a reseller. Then Amazon could pull out of the Apple store and kill the competition with lower prices. Right?


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