Steve Jobs clarifies 'Subscription Gate' confusion with more confusion The increasingly convoluted morass of Apple's latest App Store Guidelines – notably whether software-as-a-service (SaaS) apps are now verboten in the sacred store – has prompted what may be a response from Steve Jobs himself. "We created subscriptions for publishing apps, not SaaS apps. Sent from my iPhone," is how Jobs …
"This could have a dramatic effect on our development process, the next rev of our product, and more,"
Maybe that's why Apple doesn't provide clarification: the big guys will HAVE to keep on developing iOS apps until the Apple tax collector comes a-knocking, bill in hand. Otherwise, if Apple doesn't come, they will look very stupid indeed. So perhaps Apple is trying to keep the big guys in the dark as long as they can, hoping that they won't leave once they have committed significant resource to a new version of their iApp.
But I am probably just being paranoid. Chances are that the explanation is much simpler: as has always been the case with the Apple App Store, absolutely no-one knows what the real rules are, let alone how they are applied, or to whom. Not even Apple themselves.
Maybe there is confusion because Steve consulted with the Apple lawyers and they told Steve the new pollicy is illegal.
Why would the new policy be illegal?
I can explain just as the Apple lawyers explained to Steve.
Why is Apple's Subscription policy illegal?
All you have to do is understand why Apple adopted the policy.
It was designed to preclude competition.
1.alternative music services can not possibly afford to pay the 30% cut demanded by Apple. That precludes them from servicing Apple customers. They may not even know alternative services exist. Monopoly to iTunes.
2.all alternative sources for media must charge the same high price as by Apple. That means that Apple is assured of always having the lowest or best price for all media on Apple products. In other words, the only way to compete with Apple on price is to not make such media available to Apple users. Again, monopoly to Apple.
Apple consumers remain ignorant to the both the high prices they are being charged and the availability of alternative services provided by Apple.
Nothing is more antitrust than that. Preclude the competition completely or prevent them from offering any better price or terms, etc. Every company in the industry would love to pull that off if they could.
And only those companies having substantial monopoly power can do it. Some of that power comes from iTunes and its dominance in the marketplace. Dominance insured by making sure alternative services do not appear on Apple. And some of that power comes from iPhones and iPads. Currently iPhones have alternatives in the marketplace. But, no iPads. At least not yet. So Apple thinks it is essential to get media companies signed up now before those Android tablets get established in the marketplace. Once in place, some media companies will stay (as opposed to drop services to Apple customers).
The policy is designed to preclude alternatives and to keep prices high for media services.
And, worse yet, the high Apple prices will affect even those customers who do not have Apple products. If media suppliers can not sell for less through their own means or through other means, even Amazon, Google or others would have to charge the higher prices caused by the 30% tap by Apple. Trying to force media companies to charge high prices keep Apple competitive even though it insists upon higher prices or a big fat percentage for what amounts to a simple processing service. Apple does nothing but transact the business for its cut of the media pie. No advertising. No promotion. No kind of guarantee. No stocking of merchandise. No even serving up the media. Media companies have to do everything they do know on their own services regardless how customers are signed up. Apple just wants to force media suppliers to pay them 30% for essentially nothing. Okay, they host the small app that allows the customer to subscribe. And they process the payment. Nothing else.
And due to the restrictions they want to impose upon everyone else, Apple customers remain blind to the high prices they are being charged for media. Lower prices can not be offered anywhere or anyhow or Apple customers can not sign up for the media via Apple. So Apple customers are kept blind and ignorant.
Google has said they will only charge 10% and they will not restrict media suppliers outside of the Google system. 10% may still be too high but at least it not an attempt by Google to preclude competition among Apple customers and causing higher prices for everyone from any vendor who chooses to be placed on Apple.
Consumers have a right to alternative sources of information, media or what have you. And they have a right to be free of costs levied by a monopolist. Or, any company that refuses to give their own customers a competitive price. A high price everywhere is not competitive. Competition has been eliminated. Or, at least that is what Apple wants to impose upon Apple customers.
Nothing is more harmful to your own customers. Keep the prices high and restrict availability of alternatives sources. And take a 30% cut for doing almost nothing at all.
There has been a smattering of discussion regarding Apple's 30% cut in the sale of software, and most of the salient facts were covered e.g. it isn't bad compared to selling through conventional retail outlets, and Apple seems to be largely covering its costs. I didn't need to be told this, having been through the experience myself (and handing over far more than 30% to resellers).
But journalism is outside my experience. I don't know who takes what from subscriptions, or what percentage or involvement stores or other outlets have selling magazines and other media. So when Apple announced a 30% cut when they bring new customers in, I read article after article hoping to learn some of the relevant facts and figures relating to this business.
But it seems that when something touches their own business, journalists lose all sense balance or proportion. The 30% levied from others is suddenly 'greedy', 'profiteering', and 'Apple tax'. The rules are suddenly 'confusing' and a 'convoluted morass.' But can we please have some hard facts to work with? As a developer, I feel handing over 30% for this kind of service is a good deal. But that might not be true for the media - it might be a rubbish deal. Maybe shops only charge 1-2% for stocking magazines on their shelves, where they charge 40-70% for everything else - I simply don't know.
The absence of facts leaves me wondering if journalists are simply abusing their position to wangle a deal that nobody else can reasonably expect. The media in general seem to have struggled with making a living in the Internet era, so maybe this alarmism is nothing more than an ongoing inability to cope with change. So tell us how it works - who usually shares in subscription fees? What proportion is distribution costs? What does it cost to attract new customers? What cut do shops usually get? If Apple is offering you a huge pile of potential customers with easy payment and distribution methods, is that actually worth something?
Come on Reg - a bit more depth please!
Apple isn't just demanding 30% for new business -- the subscription model is supposed to be an ongoing 30% for renewals.
Consider that an average magazine costs about £5 in a newsagent. The same magazine is often about half price when delivered as part of a subscription. The subscription is advertised in the magazine that you buy in the newsagent.
Now, the in-app purchasing guideline say that:
a) You're not allowed to offer the same service cheaper elsewhere (so that 30% comes out of your bottom line)
b) You're not allowed to encourage users to shift to using alternative subscription methods.
If Apple is a retailer, it's like telling magazines that subscriptions have to be the same as the cover price, and don't publish ads for your own subscriptions in the mag.
But in the world of IAP, Apple is *not* a retailer. The purchaser doesn't go to Apple real-estate, but simply connects to an Apple payment system. Visa, Paypal, Western Union, whoever... no other legitimate company demands such a high cut on what is essentially a cash transfer. *That's* the 1-2% comparitor: transaction handling fees.
Apple's problem is that they're not demanding cash when they deliver the app. If they made a distinction between truly-free apps (hobbyist produced vanity publishing) and free-with-strings-attached apps (including both commercially-sponsored advertising apps and free clients for subscription-based services), then they could charge a delivery cost for the latter, and that would be all fair and good.
But right now, Apple are happily giving away free ring binders and demanding a 30% cut of all paper that goes into it at a later date.
Taking your shops stocking a magazine argument a little bit closer to the truth, would be:
A shop stocks a magazine and charges the publisher 40-70% for each magazine it sells. I buy the magazine and like it so much I decide I want a years subscription to it. Now I fill in a form in the magazine and send it to the publisher along with payment which is generally in the region of (price x 12) - 40% (that they don't have to pay the newsagent) and I get the magazine through my door once a month until the year is up and I pay the vastly reduced price again for a subscription.
What Apple are trying to do here is say that the form you fill in and send to the publisher should instead be sent to them for no apparent reason other than you bought it through them, which I might add is the only place to buy such things so I call it by it's proper name a "Monopoly". So it's quite clear to everyone that Apple are blatantly abusing their monopoly to demand publishers use a system that gives Apple a 30% cut for having sold you 1 magazine at some point.
Now publishers who want to sell through the app store will have to either absorb the 30%, possible but unlikely, or they'll pass it on at least in part to you and me the customer. Apple won't missing out on their cut, the Publisher can't miss out and reduce it's margins so I'm left paying extra for something Steve Jobs hand no hand in!
"Apple won't missing out on their cut, the Publisher can't miss out and reduce it's margins so I'm left paying extra for something Steve Jobs hand no hand in!"
It's even worse than that: EVERYONE will have to pay more for it, not just Apple customers. The New York Times would have to bump their subscription cost 42% to make that 30% tax disappear as far as their margins go. But since the InApp Subscription service is REQUIRED to be the same price as elsewhere, your Droid NYT reader now has to charge that 42% mark-up, making Droid users suffer the same fate as their poor-of-choice Apple counterparts. Likely, NYT and others will find a happy medium, perhaps a 30% sweet-spot to mark everyone up to, taking a margin loss on their App Store subscriptions, and a margin gain (since even Google's subscription service is only 10%, but still allows you to use other in-app payment methods, and doesn't require you to use Google's in-app payment services), which in the end would provide a net gain or perhaps equal margins as before the price bump.
Now, with that global price fixing in mind, Apple simply has to undercut these inflated prices with their own services (The Daily, iBooks, and iTunes) and suddenly no one is buying the New York Times subscriptions. Why? It's cheaper to get The Daily. Even if some rogue few get the NYT, Apple still gets a significant cut. Win Win for Apphole, Lose Lose for the rest of the subscription world (remember, you can't even subscribe on their website to website view at a reduced price). Apple is merely trying to push competitors out of their marketplace. Frankly, in six months when Android Tablets are more prolific (See Archos 101 on Amazon for $300), content providers should simply dump Apple apps en masse and see what Apple does when their precious App Store has nothing in it besides $0.99 fart apps and flashlights.
Ralph
The fundamental difference for a subscription model service from any of the larger providers is that they already pay to manage subscriptions and distribute content etc, same with a SaaS provider, Apple arent taking over the SaaS infrastructure or client delivery.
What most of the sub model apps do is provide a way of Apple customers actually being able to use there hardware, you need to remember that the browsing experience in the iOS world is pretty poor due to the restrictions apple place on its products.
You also need to consider that most companies dont target one gadget user base so still need the infrastructure in place and with the economies of scale that they have its going to be way cheaper than paying 30% to Apple.
For example if your a newspaper with a monthly sub of £10 per month, if its collected by direct debit the cost is around 1p, debit card its 25 pence and credit card 2.5% so 25 pence. You then have your costs of distribution and your infrastructure to consider. Apple are not hosting the daily content or other items for you, they merely provide the app source so the cost of the £10 per month sub done in App is £3 per month or £36 per year, thats a lot for a sub engine compared to 12 pence per year for a direct debit.
If Apple where taking over the hosting and distribution of the content, management of the servers etc etc 30% would be fine, but for nothing more than a billing engine and an app hosting its a joke.
Its also pretty disingenious to say that Apple are bringing customers to the established brands in publishing, its actually the reverse, those brands are giving Apple users the opportunity to use there hamstrung products.
"What most of the sub model apps do is provide a way of Apple customers actually being able to use there hardware"
FAIL
as has been established time and time again it isnt their (or there) hardware.
it's Steve's, all Steve's, In fact 130% of it is Steve's
Mwhahahahahahahahahaha<cough>hahahaha
you buy apple, you will get screwed... and you kinda deserve it.
Why are you defending the 30% take? It is just too much. People keep saying that Apple barely cover costs even with the 30% take of the cost of an app but personally I think this is pure bull. Maybe they are telling you an overflated cost but I doubt they will be barely breaking even. Face it, Apple are making a profit on it pure and simple. They are also trying to corner the market in digital publishing.
Supposedly there are billions of apps downloaded each year. Supposedly iPhone users are supposed to be willing to pay for an app than an Android user (although this is a lie). So, Apple are making hundreds of millions of dollars and are breaking even? Give me a break!
Take a look at Apples turnover each year, then look at the profit they make. Apple are greedy and are making lots of money on their app store. Fools like you just help spread lies that they don't in an effort to make the greedy bastards look good.
How many more times - the issue isn't Apple wanting 30% for purchases through Itunes
It is the anti-competitive restrictive policy of not allowing an app onto the store if it doesn't use their payment system. It is also the clause that prevents publishers from offering their product cheaper elsewhere i.e. their own website and so driving the cost up for everyone. It is the restriction that you cannot put a link to your website in your own app and you cannot inform your users through the app that other purchasing options are available.
Stop focusing on the 30% figure and see the real issue
How is it anti-competitive?
It's Apple's hardware - you don't own it. You pay for the privilidge to use it.
It's Apple's AppStore - The only way to get apps on Apple's hardware. You pay extra for the "additional" features.
If the "additional" features have a subscription element then Apple are wanting their cut to allow the continue usage of the app on their hardware.
There is nothing forcing publishers to create content for Apple products.
They just cashing in on the popularity of the products.
And if they want to continue to publish stuff on Apple's products then they will have to pay the Apple Tax.
Remember you don't own the hardware, Apple do.
And until the law states that if you bought it, you own it, you can do what you like to it (thats all hardware, software and media) then Apple can do what they like.
I agree that the issue isn't the 30% charge, Amazon have certainly charged more in the past, but I disagree that stipulating that an app only uses Apple's IAP/IAS system is anti-competitive. It's their shop and their 'ecosystem' (urgh) so they are entitled to do so. What /is/ IMO anti competitive is them essentially stipulating the prices that those offering subscriptions can charge outside of the app store environment.
On topic; They absolutely need to have more clarity on the SaaS implications on the new rules. I'm following this story with great interest as an iPhone 3G user. I'm looking to upgrade this summer and this new rule is potentially a show stopper for me.
I'
Apple hardware has been highly desirable for some time, but their PR and "service" seriousy let them down. Don't they know this? At what point will they care? Probably not until the next gen tablets hit the market in a month or two, and seemingly, with heads in the ground, possibly not then either.
My plan for my mother to get an iPad (she only really want to view the net and photos and has failed in past attempts at using a 'full computer' interface) has well and truly hit the buffers now. The only reliable thing about them is they they'll try and screw you after you buy their gear.
"it isn't bad compared to selling through conventional retail outlets"
Ignoring the fact that the internet isn't a conventional retail outlet, you'll probably notice that the price of a magazine/paper in the shop is a lot higher than if you buy straight from the source - something which Apple has specifically disallowed.
"Apple seems to be largely covering its costs"
Are you having a laugh? 30% for payment processing - and you can't really argue that you're just covering costs when you're forcing people to use your service...
The main problem is it's being forced on everyone - for those that don't need payment processing, for those whose margins are too tight to give up 30% - tough shit, use our service or no more iOS apps, and it's going to mean higher prices for us (whether we use iOS or not) and less money going to the people who actually create/provide the content.
An app is acceptable in the App Store if Apple says so.
An app is not acceptable in the App Store if Apple says so.
Aren't those the explicit rules, overriding all this other stuff about 30% of the cost of the subscription, and so on? I mean actually?
I believe that there are one or more "Remote Desktop" connection apps for iOS that allow you to connect to and control a Microsoft Windows computer. Under Apple subscription rules, it sounds like Apple are entitled to one-third of the cost of your Windows software, the computer you run it on, and your electricity bill. After all, Windows computing and electricity supply are seervices that you go on paying for, at least potentially.
So what is the cost of making a digital copy? zero. And what is the cost of distributing it - a little bit more than zero. Once content is created, any volume publisher is making twice as much as Apple for doing nothing. Any volume publisher can pay Apple as little as they like by simply reducing their prices. If they give away their content, Apple gives away their content discovery and distribution.
The bigger problem here is that the prices publishers want for their digital content is typically higher than physical, when it should be less than a tenth of physical.
On Apple's side, Apple is trying to create a viable proprietary ecosystem. All they are demanding is that publishers don't use it to explicitly bleed it to death.
If you don't like this, buy an Android device. Or create a competitor ecosystem that actually works. Check out what Pixelmator and other real content creators think about Apple's 30%. They love it.
You might say that what Apple is doing is the responsibility of government. When governments have built the infrastructure for such a new economy, doubtless iTunes will shut down. Speak to your MP (haha).
Another worshipper at the church of the arse of the magic elephant.
The "free" digital content of which you speak, perchance does it require writers, researchers, photographers, sub editors, etc etc ad infinitum?
That content, perchance does it require servers, bandwidth, maintenance? Does the bandwidth cometh for free at your church?
And this free content, how does it get marketed and promoted? Does your magic elephant do free advertising as well?
Forsooth, the arse of the magic elephant is verily a phenomenal tool, it can do so much for free I will be recommending it to all publishers and other purveyors of content and we can look forward to articles with the byline "from the arse of the magic elephant"
"The bigger problem here is that the prices publishers want for their digital content is typically higher than physical, when it should be less than a tenth of physical"
How unreasonable. They have invested time, money, effort and talent to produce something somebody wants and they have the cheek to try to make a living out of it! Bastards!
BTW, do you think that if you send somebody a cheque for £100 in an envelope, with a first class stamp on it, the post office should send you a bill for £30?
A typical independent newsagent will make 3-5% margin on daily newspaper sales.
A chain of newsagents (eg WH Smith) will make 7-10% margin on daily newspaper sales
Magazine margins vary depending on the frequency of the magazine and how niche/mainstream it is.
I have no idea what planet some of you are on when you are quoting figures of 40-70%. That's pure fantasy. Obviously the highest costs involved in daily newspaper distribution & sales is actually transporting the papers to the retail outlet.
Re newspaper/magazine subscriptions : there's a good deal of fantasy figures here too. Remember that you get a discount for committing to buy for a year in most cases, you are paying in advance and the payments are non-refundable.
Private Eye for example sells at £1.50/issue. The yearly subscription is £1.10/issue.
Its reasonable to assume that the 26% difference is made up largely of distribution and sale costs but its not reasonable to assume that one entity (ie the retailer) is getting that 26%.
More to the point if Private Eye had a digital subscription and I wished to receive it on an Apple device it would cost me more than buying the paper version.
If that's the warped world Apple inhabits these days then they truly are fucked.
Why is Apple's Subscription policy illegal?
All you have to do is understand why Apple adopted the policy.
It was designed to preclude competition.
1.alternative music services can not possibly afford to pay the 30% cut demanded by Apple. That precludes them from servicing Apple customers. They may not even know alternative services exist. Monopoly to iTunes.
2.all alternative sources for media must charge the same high price as by Apple. That means that Apple is assured of always having the lowest or best price for all media on Apple products. In other words, the only way to compete with Apple on price is to not make such media available to Apple users. Again, monopoly to Apple.
Apple consumers remain ignorant to the both the high prices they are being charged and the availability of alternative services provided by Apple.
Nothing is more antitrust than that. Preclude the competition completely or prevent them from offering any better price or terms, etc. Every company in the industry would love to pull that off if they could.
And only those companies having substantial monopoly power can do it. Some of that power comes from iTunes and its dominance in the marketplace. Dominance insured by making sure alternative services do not appear on Apple. And some of that power comes from iPhones and iPads. Currently iPhones have alternatives in the marketplace. But, no iPads. At least not yet. So Apple thinks it is essential to get media companies signed up now before those Android tablets get established in the marketplace. Once in place, some media companies will stay (as opposed to drop services to Apple customers).
The policy is designed to preclude alternatives and to keep prices high for media services.
And, worse yet, the high Apple prices will affect even those customers who do not have Apple products. If media suppliers can not sell for less through their own means or through other means, even Amazon, Google or others would have to charge the higher prices caused by the 30% tap by Apple. Trying to force media companies to charge high prices keep Apple competitive even though it insists upon higher prices or a big fat percentage for what amounts to a simple processing service. Apple does nothing but transact the business for its cut of the media pie. No advertising. No promotion. No kind of guarantee. No stocking of merchandise. No even serving up the media. Media companies have to do everything they do know on their own services regardless how customers are signed up. Apple just wants to force media suppliers to pay them 30% for essentially nothing. Okay, they host the small app that allows the customer to subscribe. And they process the payment. Nothing else.
And due to the restrictions they want to impose upon everyone else, Apple customers remain blind to the high prices they are being charged for media. Lower prices can not be offered anywhere or anyhow or Apple customers can not sign up for the media via Apple. So Apple customers are kept blind and ignorant.
Google has said they will only charge 10% and they will not restrict media suppliers outside of the Google system. 10% may still be too high but at least it not an attempt by Google to preclude competition among Apple customers and causing higher prices for everyone from any vendor who chooses to be placed on Apple.
Consumers have a right to alternative sources of information, media or what have you. And they have a right to be free of costs levied by a monopolist. Or, any company that refuses to give their own customers a competitive price. A high price everywhere is not competitive. Competition has been eliminated. Or, at least that is what Apple wants to impose upon Apple customers.
Nothing is more harmful to your own customers. Keep the prices high and restrict availability of alternatives sources. And take a 30% cut for doing almost nothing at all.
Applications are part of what make the iPad/iPhone appealing. All those developers coding stuff for Apple was really helping them to move units, it was a selling point!
It's not hard to predict what will happen when those applications vanish from the iThing ecosystem and crop up on Android. It seems like someone at Apple was very shortsighted and chose a short term revenue burst over long term viability.
I hope they enjoy their goose dinner!
When all's said and done, Apple will release the iThing 2 that's 0.5 mm thinner than the original iThing was and all the Apple fans will swarm out to purchase it, and all of the people who use technology as a fashion statement will swarm to be seen in public with it. And Apple will rake in the dough.
My theory is that those old iPod commercials with the white silhouette people dancing spastically in front of psychedelic backgrounds were actually carefully crafted to hypnotise and brainwash the masses.
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