What happens when Apple takes 30%?
What happens when Apple takes 30%?
It increases the cost for all subscribers by 42.85%.
Do the math yourself. Take a $100 subscription directly from a vendor. If the vendor has to cover a 30% from Apple or anyone else for that matter, the retail price has to go up by 42.85% at $142.85 in order to keep the net the same to the service provider. 30% of $142.50 is $42.50 leaving $100 for the provider.
What if it is 10% as Google has claimed?
Still bad enough at $111.11.
So at their own web site they can take a subscription for $100. Through Apple they have to charge $142.85. Or, at Google perhaps $111.11.
But, what if you do not have an Apple device. No iPhone? No iPad?
You still pay the highest price of $142.50.
Why?
Because Apple mandates that you either leave the Apple marketplace alone and do not sell there, or you charge the same high price as through iTunes. Even if on your own web site taking a subscription to a non-Apple device owner. Apple insists upon it.
This all assumes you need to maintain your net take per subsciption.
But, don't you get more net for your own sales? Yes, you do. To clear $100 on Apple you have to set up your own subscriptions for $142.50 as well. So you actually net $142.50 there. Great, right?
No. You may have just priced yourself out of your own market.
If you assume that you decided upon a $100 subscription based upon its perceived value to customers, being force to charge $142.50 is going to lose customers. Maybe all of them. If $142.50 was doable, you could have picked that price without Apple's help.
So what if you can not charge $142.50? Maybe your stuff is not worth that price?
Assuming your decision of $100 is correct. You have to eat the $30 take that Apple insists upon. That means you get $70.
And perhaps your cost per subscription is more than $70?
Will you still sell and only take $70?
You might. If your marginal costs for each additional subscription is less than $70, you might take less than $70 and hope to make up the difference through other channels. Sometimes that works. But, if you want the same net revenues you have to charge more than $100 in other channels. If you can do with less revenue, you can stick to the $100 price on your own web site or other markets.
Of course Apple insists that you have to stick above or even with the iTunes price or you are blocked from Apple customers. It is your choice in other words. Give us the power to control your retail prices in all channels or do without the customers restricted by Apple. Restricted by which apps they can get. And restricted by which subscriptions they can sign up for through iTunes.
And it is not the wholesale cost that is being controlled in all markets by Apple. It is the retail price paid by consumers. Not even the suggested retail price. It is the actual retail price. Apple insists upon no other channel being able to offer price competition facing the individual consumer.
But, what if your other marginal costs for each additional subscription is greater than 70% of the retail subscription price? Well, then you can not sell through iTunes and Apple has precluded you from their market. Then Apple customers only see products Apple is selling or products and services from vendors willing to give Apple the power to control their retail prices in all channels whether or not those channels have anything to do with Apple or Apple devices. You must agree to not compete with iTunes on price.
Every company in any field of business would like to preclude anyone and everyone from competing on price, right? That is a given. And any practice along that line is almost always illegal. And it does not take monopoly power in order to preclude others from competing on price. Apple thinks it can do that simply by restricting access to Apple customers. Agree to Apple's price controls or don't do business at all with Apple customers.
The Apple policy is designed to do one of two things.
Either raise the price for all consumers of a given product so that it can take 30% without doing anything for it; or, block competing products or services from the Apple marketplace. The second helps build and maintain a monopoly. The first makes the retail price so high that Apple can take a 30% cut without providing value.
Apple thinks that giving access to customers that once bought an Apple device as “giving value” for that 30%. But, it is not. Or, they think they can preclude potential competitors to Apple products by insisting up the 30% cut and watching those competitors leave without doing business. But, that is just precluding competition by increasing the costs for a competitor. And that is illegal.
So what is the affect of the Apple 30% cut?
It either restricts access to competitive products and services for Apple customers or it increases the cost for ALL consumers whether or not they are an Apple customer or whether or not they use an Apple device (i.e. phone or tablet).
Media subscriptions are normally not device specific. Sometimes it might take a specific application on a given platform. But, generally not. Apple demands that it control the retail price facing consumers on all channels so that it does not face price competition. And without price competition it can allow the retail price to rise high enough to cover that 30% cut they demand. Can't raise your price, then do without Apple customers.
Apple insists upon getting the 30% cut or it will preclude you from Apple customers.
And what happens if you buy an Android device?
Same high price regardless of Google's suggested 10% cut. After all, Apple insists on controlling the retail price facing consumers not a wholesale price. If Apple only controlled the wholesale price, a lower markup or cut such as that from Google would allow a lower price to face the consumer. And Apple must prevent that. Either that or Apple customers will find out they are being overcharged. So Apple customers have to be kept ignorant.
This is an antitrust move on Apple's part. And they know it. They think it works because they can exclude those vendors that do not give up their own ability to control prices for various channels. And if all consumers see the same high price, Apple can take 30% of the action without doing anything at all.
Now I do not really suggest that Apple is doing nothing. They do process the payment. That is maybe worth 3%. 5% at most. And listing a product in a catalog or list is worth something. But, Apple does not do anything that retail sellers normally do. No advertising to benefit the service provider. No inventory. No shelf space. No promotion. They do not even write the simple app to allow one click sales. The media provider has to do all of that. Apple only accepts the listing if you will provided the seller gives up the price control for its products in all other channels. It can decide what the price is. But, the service provider is unable to distinguish between channels based upon efficiency or any other factor. Apple dictates it such that no other channel can offer price competition.
This will result in higher prices for all consumers. And it will result in reduced choice for Apple customers and high prices for them as well. Simply put, only higher prices makes room for the 30% take by Apple. And if you do not give up your rights, you do without Apple customers and Apple has exclusive access to those customers stupid enough to buy their phone or tablet from Apple.
Apple customers are being screwed here. But, if service providers do not avoid the Apple customers, costs go up for everyone as if everyone was taking a 30% cut while not adding any value to the service. No value to the service provider. And no value to the customer.
But, what about Google's 10% deal?
The amount that Google may charge is only relevant if a service provider is willing to forgo Apple sales. Otherwise, even the price on Android markets must be at least as expensive as on Apple. And that is true even though Google may charge less for handling the transaction.
Some subscriptions will be available via the web or via Android apps, but the price can only be low if the service provider agrees to be excluded from iTunes. If you are listed on iTunes, the price has to be just as high everywhere and for everyone.
Nothing here benefits consumers. Consumers are either restricted from certain choices or the price is controlled high by Apple.
How does this compare to the practice by Apple to take 30% of the application sales?
For one, applications for Apple devices are only relevant when bought for the Apple devices. Although Apple precludes other markets for such apps. That too precludes other markets from competing. Price wise or otherwise. Plus many of the applications are free. 30% of nothing is still nothing. There may be some costs for the seller but those costs are either absorbed or covered by other means. Plus for other devices there are other markets. And Apple does not restrict those products or services in any way. At least not yet.
Biting the hand that feeds IT
