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back to article Rhapsody bristles at Apple subscription grab

Apple's subscription scheme, introduced yesterday, extends to all online content, not just newspapers. Movie and music services and ebooks must pay a tithe to Apple, if they're deemed to be bringing in new customers via the Jobsian platform. Those customers pay a recurring fee. "Our philosophy is simple: when Apple brings a new …

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Go

Hi Ho, Hi Ho....

... it's off to Android we go...

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Go

... must pay a tithe to Apple.

Or three tithes, to be precise.

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Headmaster

Exactly

"Tithe" is the root of "Tenth" essentially. So 30% = 3 "tithes".

Spot on. :)

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Gold badge
WTF?

Print publishers.

"only themselves to blame"? Why?

What possible reason could there be for saying that because they didn't go for a common payment system it's their fault that Jobs is burgling their wallets?

I'm sure the only difference *that* would have made is that Mr 30%'s cash would have been skimmed from Alesia...........and that would have been on top of the Dirty Digger's rakeoff (sorry, "service charge").

Still, last service out of Apple's app store? Please turn off the lights when you leave.....

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Anonymous Coward

@TeeCee

I assume that if everyone signed up to a common system then there would be a common body fighting for their rights. Backed by Murdoch who is pretty good at getting what he wants.

All the press pulling together could easily force Steve Jobs' hand - all they need to do is refuse to mention anything Apple based or carry Apple adverts and suddenly the massive hype would disappear (remember too that many of the TV channels are also owned by the same people who own the papers and magazines) which would certainly hit Apple's bottom line.

Presently Apple hold all the cards - iThingies are very popular and refusing to do business with their owners would be bad for business. Especially as *someone* will, especially if they think they will be the only one doing so. Equally the press have to report each and every Apple tidbit as their rivals will, so ignoring Apple would make individual organs seem technologically irrelevant.

So, you want access to the millions of existing (and generally financially well enough off) Apple customers you play by Steve;s rules. And you will still give him lots of free advertising as well.

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Anonymous Coward

Need to embrace change

It seems to me that many of these organisations - much like the music industry - just wants everything to carry on the way it has in decades past, even though they can clearly see problems looking around them. Papers, for example, have complained about the loss of profits with news distributed for free on the Internet. The need for a different model is real and very urgent.

I really don't know if Apple is providing a good business model for them or not. It *does* provide a way to distribute news electronically *and* make money out of it - something that has been a huge dilemma. I think the writing is on the wall for a great deal of printed media, and perhaps Apple is providing a way forward. There just isn't an alternative to use as a benchmark.

In any case, it seems to me that many of these business have been running in circles with their fingers in their ears shouting "La, la, la" in the face of these problems. I just hope they get their act together quicker than the music industry.

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Go

Better than that

"all they need to do is refuse to mention anything Apple based or carry Apple adverts"

They could do one better: have the music industry as a whole revoke licensing of music on the iTunes store. Or perhaps get greedy like Jobs and charge a 30% "online iTunes content distribution" fee (on top of their current licensing scheme). Then we'll likely see Jobs turn into a Ballmer stage monkey throwing chairs....

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Anonymous Coward

I must be dreaming

"They collectively shunned Project Alesia, a common payment platform, because they didn't trust Murdoch, who wanted to share the technology with rivals."

No, no. Murdoch wanted to make money for himself.

"I assume that if everyone signed up to a common system then there would be a common body fighting for their rights. Backed by Murdoch who is pretty good at getting what he wants."

Murdoch backs himself and fights for himself and no-one else.

When did Murdoch become the Jesus of the business world?

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Something's got to give

It's an aggressive and some might say greedy move by Apple to be sure. Even if the cut was 15% I'd wonder if they are overplaying their hand though. With Android growing at an incredible pace, the content providers and developers have much more power than they did a year ago and that swing looks set to continue. I'd be very surprised if more providers don't take a stand alongside Rhapsody.

Having said that, demanding 30% appears to be deliberately prohibitive and so perhaps they do just want everyone else to bugger off and have a completely closed system. They must look at the kindle with envy.

It'll be interesting to see how it plays out, whether we have a situation in a year or so where you you can only purchase and subscribe through itunes on iOS devices, while android devices offer choice and competition.

Just not having a proper kindle app would be enough to put me off getting an ipad.

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Pirate

Tiered pricing

Why not sell price stuff sold through apple at 30% more than if sold through other channels. Fanbois are used to paying the Apple tax.

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Apple already covered their backside on that one.

Apple's full statement also included the caveat that in-app pricing must match or beat the out-of-app price, so they can't just bump up the in-app prices or Apple won't let the app in.

“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." - from: http://www.tipb.com/2011/02/15/apple-announces-iphone-ipad-subscriptions/

And by "customers can easily subscribe" they mean "we still get a ludicrous chunk of your cash" :(

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@Bracknellexile

>> And by "customers can easily subscribe" they mean "we still get a ludicrous chunk of your cash" :(

Actually, it means "customers can easily subscribe." 16 million Apple customers that already have their credit cards on file, that do not have to consider whether they want to give their personal and billing details to *another* party, or go outside their known walled-garden in order to get their goods.

Presumably they already trust Apple, and clicking a single button and entering their password (as they already do for many other apps, songs and movies) is substantially easier than opening a new account on an unknown web site.

Lets be clear, _this_ is what everybody here is rambling about: that users will find it much more convenient to purchase through iTunes than through their own systems, and thus must lose 30% of every transaction. In other words, they are against offering the _choice_of_convenience_ to the user.

-dZ.

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Silver badge

no

the particular moan you're responding to was the fact that providers aren't allowed to charge more in app to cover apples 40%. Do try and keep up!

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Jobs Horns

Not allowed

The Apple T&Cs are that the in-app subscription has to be at the same price as offline. Because they know that people are generally lazy, so would prefer to buy in-app but if they had to pay 30% more they might be less lazy and go through other channels.

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WTF?

@DZ-Jay

Cupertino called and said they want you back for bathtime ...

They said your bath will only be 70% as full tonight as they believe you find it more convenient for them to fill your bath than for you to run your own ...

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FAIL

Re: Tiered pricing

Matthew 25, you got your maths wrong. It would have to be about 43% more , as Apple would take 30% of 143%. As others have pointed out, Apple doesn't allow this.

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Anonymous Coward

Walmart, really?

Why are they comparing this with Walmart, no one is talking about real goods here.

The comparison must be made with other electronic media stores, and currently there's NOT ONE well known store that does it for less than the 30% Apple charges.

Real goods can perfectly be sold by any app, no in-app payment required, and there's even an agreement in place with Paypal to support paying for them inside apps at the usual Paypal commission rates.

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Anonymous Coward

Get a grip

What are you on about @AC.. anti-Apple shill lol

Both Google and AppHub charge 30% royalties on applications, of course 30% of a free app is 0 but if you charge for the app you can be sure they claw back their part.

Now the difference from Apple is that neither Google nor Microsoft handle in-app purchases YET.

Google said they'll have their system up soon and have been saying they expect it to be popular...

MS is quieter (or busy finishing their half-baked OS, hopefully finally adding sockets support ) - just says for now you can have your own payment system as long as your app is not a game (get your cogs working on why they added that)

I'm sure you remember that recently Google rejected Kongregate, the alternative app marketplace where users could purchase and download games, from the official Android one, so they are starting to enforce some restrictions.

At the time of the rejection Eric Chu (from Google) said: "it’s important to distinguish between Android as a platform, which is totally open, and Google’s Android Marketplace, which Google needs to control more tightly, so that apps deliver a good user experience across multiple devices"

So give it time for these companies to catch up. I wouldn't be making plans on platforms staying the way they are, unless you're thinking of going on your own for Android (and have even less paying users)

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FAIL

@Gk

Kongregate is nothing more than a Flash game browser and the app was added back to the store after some minor alterations reflecting that.

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Thumb Down

Another reason...

... why many developers won't touch iPhones. I'm concentrating on Android, then Windows Phone 7 if it takes off.

Apple's control freakery will do them serious damage in the long term.

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FAIL

Is this intentional?

There's just one slight problem. For many retailers, the marginal costs are unavoidable: the margin is much lower than 30 per cent (WalMart's margin is under 4 per cent)

---

Just wondering if this is an intentional fact manipulation, or someone getting mixed up between gross margin and profit margin.

This section suggests that your average widget maker gets 96% of the retail price when they sell via wall mart - that has got to be completely implausable.

Your average stuff-marker woulde be thankful if he ever got near 50% of the retail price.

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Pirate

jobserve, rightmove?

Will Apple claim a 30% on my salary if I find a new job through a job advertising app?

What if my house is sold through the rightmove app? Do they want 30% of the house price?

Pirates (real maritime ones), because only they had a better business model.

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Jobs Horns

"Only themselves to blame"

That's twice you've made that statement, but I don't understand how that would have given publishers any leverage against Apple, because the problem here isn't the fact that Apple are changing a toll (30% is taking the piss but you could make a business case for it; Amazon paid out affiliate fees higher than their gross margins for years), its the part where Apple state that you MUST offer the same or better pricing in the App Store as anywhere else. Apple are effectively price fixing if you want to use iTunes, which is not only untenable, its probably illegal (certainly in the EU).

And for those who say "well you don't have to distribute via Apple", I say "don't be so naive". Apple is the de facto market for Apps right now; yes you can ignore them and go to Android, Blackberry etc. but Apple are betting customer pressure from all those iPhone owners will keep the likes of Amazon on the platform, and certainly Amazon can probably take the hit for now. However, Spotify etc. are screwed, and that suits Apple as well; Spotify and Rdio etc. have whetted iPhone owners' appetites for streaming, and guess what happens when they disappear off the App Store? Remember LaLa?

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@David Evans

"Apple are effectively price fixing if you want to use iTunes, which is not only untenable, its probably illegal (certainly in the EU)."

No they're not and no it's not.

Price fixing is when different suppliers of the same product "conspire" to charge the same price for that product. - see aviation fuel, milk, wheat and other similar products over recent years.

There's no conspiracy in Apple's announcement - it's all out in the open.

If Apple Apple is price fixing - then by your definition - so is every supplier/dealer/agent/auction house in the world that uses the commission model for its business.

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Its not the commission model that's the problem...

...its the "you have to price the same on iTunes as other channels" bit. Think of SRP in retail, there's a reason why the S stands for "suggested". Prices should be able to be set freely at the point of sale by the retailer; in this model, the content owner has to fix the end price to the consumer IN ALL CHANNELS if they want to stay on iTunes.

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Anonymous Coward

@David Evans

Firstly, absolutely no-one ever charges more than the SRP. Secondly Apple are only saying the price through an app cannot be more than the best offer outside of the app. This neither fixes the price of the subscription in app nor does it fix the price outside the app (other than ensuring it cannot be cheaper than in app).

And finally, price fixing is about retailers conspiring to rip off customers, by agreeing (fixing) prices at a level artificially higher than they would be if market forces were allowed to run free. This is about consumers not being charged more just because of the platform.

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Anonymous Coward

@Lee

What Apple are *actually* saying is 'don't even THINK about recouping the 30% by putting it on your/our customers, making it an unattractive prospect to use our payment system." However you put it, Apple is essentially dictating to content authors how much they as authors can charge for their content on a subscription basis. While this may benefit Apple customers in the short term, it is not on. Where this get problematic is if (or realistically *when*) Apple offer a streaming service from iTunes that is similar to Netflix's or Spotify's. The price fixing I believe would be antitrust; Apple would be leveraging their position as custodians of the app store to make their content delivery products more favourable. IANAL though.

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Stop

not so fast

Very few if any supplier/dealer/agent/auction houses control the price the vendor can sell the same product through other means.

Apple is demanding that it controls the price of any product on any market if it is available through them. That most certainly is illegal.

You get away with that kind of crap if you have monopoly power. But, the act itself most likely violates antitrust laws.

If you do not have monopoly power then the ploy fails. Sellers simply go elsewhere. And Apple's attempt to preclude customes going elsewhere by refusing to let them have the right app may also be illegal. For the same reasons.

What Apple is doing is very likely to be illegal. And they know it. They just think they can get away with it.

Apple customes are not very intelligent.

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Anonymous Coward

@AC & Lewis Mettler

AC: Clearly not. I can charge whatever I like for content, just no more through in-app purchases than I charge anywhere else. I can charge 1 miiiiiiillliiiiiion dollars for a weekly subscription if I chose - as long as I don't charge less elsewhere. All Apple are doing is stating that sellers cannot make it less appealing for consumers to purchase on their iWhatsit than elsewhere - essentially protecting their brand.

Lewis Mettler: (1) your statement of obvious illegality is clearly crap - otherwise Apple would be taken to court now by people like Rupert Murdoch - which hasn't happened. (2) Your statement that Apple customers are not very intelligent beggars belief. What on God's green earth is "not intelligent" about buying stuff for at worst the same price as the lowest price anyone can buy it for? On a related note, I have a shiny 5p coin here I think you would like to buy off me. A bargain at just £500.

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Anonymous Coward

You're looking at it the wrong way around

Its not pricing HIGHER than SRP that's the problem, its that if you price LOWER than SRP in a channel other than iTunes, you have to offer iTunes the same deal or get kicked out of the marketplace. If you are a content owner and you're selling through a third party, you don't necessarily "own" the end price to the customer (hence, SRP). In Apple's world, you have to own that price or match it on iTunes if the third-party reduces the end price (say in a sale). That's price-fixing.

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g e
Silver badge

Appropriate business response?

"Don't support Apple"

Just bung it on Android or WinMo or something, nay EVERYthing, else

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Jobs Horns

What do Apple really want?

Clearly Apple do not want anyone to run a commercial operation over their platform. They are quite happy for hobbyists to write Apps in their spare time, and make a little money on the side, but they don't want other "competitors" to their corporation.

Is this a good business philosphy?

A long time ago, in an office far far away, a thing called a desktop computer was born.

There were two leading competing providors at the time. IBM PC with the rubbish MS-DOS, and Apple with it's simple WIMP interface.

Apple tightly controlled the hardware and OS. IBM Compatibles appeared, and despite IBMs efforts, they ran the Microsoft OS. Like it or not, Microsoft now has >90% of the desktop market.

I guess however that Steve Jobs and the rest of the board of Apple are happy screwing over 5% of the market - they're still billionaires after all.

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Silver badge

Things change

It's possible that all Apple want is to cream the 30% off whoever stays around for as long as they stay around, with more liberal terms to come when the market dictates them.

It's not really the same as the Apple/Microsoft shakedown. The Mac came to the market two years after Compaq had introduced the first complete IBM PC compatible and Microsoft had been trying to sell DOS as the platform before that, trying to create an 8086 market that didn't otherwise rest on IBM compatibility — like the CPM world before it. So Apple were already aware that proprietary systems were starting to lose.

They were very close to Microsoft in those days and licensed a lot of their GUI technology to Microsoft in return for software support. An error in the contract gave Microsoft the right to use the licensed bits in perpetuity rather than simply for Windows 1.0. So they lost the desktop not because they wanted to own the entire platform but because they were too trusting of third parties and were out manoeuvred, legally and on price (and technology, during the 90s, once the collapse phase began).

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Go

not a bad comparison

Apple will continue to screw over its customers by attempting to control them and limit their choices.

Smart consumers will go elsewhere if they can.

If all consumers are forced or restricted to cover a 30% tap to the Apple or even Google, sellers will sue. Most likely that is an antitrust violation.

But in the meantime stupid customers just go along.

Sounds like a very good reason NOT to purchase any Apple product. That 30% cut will burn into customers.

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I'm Lost lewis

If I buy a subscription to Wigman Weekly through iTunes it will cost me 20 tokens.

If on the other hand, I choose to buy my subscription from the publishers of Wigwam weekly, it will only cost me 230 tokens.

Also I don't see how Apple is controlling me and limiting my choice. If I wanted to buy a paper subscription I could only do that through the publisher and it would probably cost me 30 tokens, or I could walk to the newsagent each week and pick up a copy (and it would probably cost me 35 tokens,. Alternatively I can forget Wigwam Weekly and buy Top Teepee. (The ads are the same anyway.)

This is where I get lost Lewis. I just cannot see how 30% affects how many tokens I have to pay for my download copy.

I get burned If I buy the paper copy - but I'm not buying that through iTunes.

I cannot see any anti-trust (what-ever that actually means - it gets bandied around here as if everyone on the planet knows what it means and I seriously doubt that they do - you included).

So you tell me. What's the difference between a 'smart consumer' paying 30 tokens for a paper copy and a 'stupid customer' paying 20 tokens through iTunes?

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Anonymous Coward

Benefits

30% does seem a lot to take from publishers, but there are 2 facts that nobody yet has mentioned which directly benefit consumers:

1) Apple provides a very easy way to cancel your subscription at any time (something that can seem almost impossible to do when dealing direct with subscription providers).

2) Apple doesn't pass on all your personal data to the publisher for them to sell on to other marketers. You can optionally provide name, email and post code - and that's it. So, if you value your privacy and resent publishers making money selling your details and preferences, then Apple is better for you.

So, although this screws publishers quite hard, I would guess that the number of consumers here, who would benefit, vastly outnumbers the number of publishers here, who wouldn't.

The main thing that is bothering publishers, is that so far they've been able to take advantage of, and sell to, Apple's huge customer base completely for FREE. Now, they're being asked to give something back to Apple for that benefit.

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Anonymous Coward

"For many retailers, the marginal costs are unavoidable"

Fortunately, nobody's making you use it.

Apple always focus on high margins. Look at the massive profit they make on their small share of the PC market.

If you don't like it, go somewhere else.

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Anonymous Coward

*sigh*

"Nobody's making you use it" other than the small issue that Apple is where most of your customers are if you want to sell mobile content. Amazon et al can't really influence the overall installed base mix for Smartphones. Now if this backfires on Apple, the content owners all leave and Apple's market share declines, then you may have a point, but in the meantime you've lost distribution to the bulk of the market, a calculation Apple are hoping content owners will make in their favour, but if they don't Apple's plan B is to sell its own content services to all those iPhone owners who no longer have access to Kindle or Spotify on their iPhones.

This all comes down to how you define the market; if Apple's market position is defined by the overall mobile market, their share is small and this isn't anti-competitive; if its defined by their share of the smartphone market, things start to look shakier for Apple, if its defined by their share of the "Apps" market, then clearly this is abuse of a dominant position. The question is which view will the various regulators take?

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Anonymous Coward

RE: Smartphone market share

IIRC smartphone market share for Apple 2010 was about 16% which is nothing like a monopoly or dominant market position.

Apps market share will be much higher (I can't find any reliable figures) but as apps are device dependent the argument that Apple have a monopoly with iTunes (as they have close to 100% of the iThingy market) is as specious as claiming Ford have a music monopoly because Ford determine what stereos are fitted in close to 100% of Ford vehicles.

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Anonymous Coward

Benefits are not all one way for the people selling apps on ios devices

It surprises me the way some people seem to want to stick up for apple in this situation by claiming they are offering so much to those people selling apps which overlooks how much of a selling point the likes of kindle, spotify etc. apps are for the ios platform not to mention drastically overstating apple's part which amounts to nothing more than hosting the various apps.

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Silver badge
WTF?

Apple is lining itself up for legal challenges: EU or U.S. first?

You can see all manner of legal challenges forming as Jobs tries to squeeze the last shekel out of suppliers and what for? Just so they have the expensive convenience of dealing with his skimming machine? The good thing is it opens the way for competition and he will lose out.

And what's with all this stuff about magazines and newspapers have only themselves to blame because they didn't join with with Murdoch? The man is untrustworthy, notwithstanding what the Roman Catholic church claims. The guy is a serial cheat and notwithstanding having repeatedly undertaken to keep his snout out paper acquisitions editorial policy he always does the opposite. Witness the Wall Street Journal.

Many business operate on way less than 30% - travel agents, thanks to American Airlines, operate on 0% commission.

The only question remaining unanswered is whether the EU or the U.S. Justice Department moves against Apple first.

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Grenade

no doubt

Chances are that SONY is already talking to the US DOJ and the EU.

Forcing vendors to sell through Apple, Apple taking a 30% cut and trying to control the price of any and all products sold to work with an Apple product is pretty much illegal.

Imagine if FORD demanded a 30% cut of all gas sales? Would it matter is FORD was not a monopoly? They are once you buy a FORD.

What if your CD player demanded a 30% cut of all CD sales? Or, DVD? What if Microsoft demanded a 30% cut of all software sales?

Apple is trying to screw vendors and customers by forcing the sale of products and services to go through them. And the idiots also demand that Apple determines the price that vendors can sell products through other means. Expect Amazon and othes to sue as well.

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Anonymous Coward

No doubt now.

After reading this last post Lewis I have no doubt at all that you don't know what you are talking about.

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Anonymous Coward

Sony?!?

Ahah SONY talking to the DOJ about Apple's AppStore, really? Now that's just too funny.

Is this the same SONY who runs the Playstation network Store? I don't see that one open for every

Dick and Harry on a measly 30% commission..

I suppose the DOJ should get in touch then?

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Anonymous Coward

@ Lewis Mettler

"Apple is trying to screw vendors and customers by forcing the sale of products and services to go through them. And the idiots also demand that Apple determines the price that vendors can sell products through other means. Expect Amazon and othes to sue as well."

Please, at least try to understand the situation.

First - Apple is not forcing the sale of products and services to go through them - the providers of the service can elect not to sell through the Appstore if they so desire.

Second - Apple is not 'screwing' either the vendors or the customers - in fact, if you understood the situation you would realise that Apple is actually trying to protect the customers in this case by preventing the vendors from charging the customers an extra fee for using a particular sales channel.

Third - Apple is not determining the price the vendors sell their product at. The vendors are free to sell at the current price and give 30% of the purchase price to Apple, they are free to up the price by 30% to cover Apple's cut (so long as they do so to the price on all channels) and they are free to set the price anywhere in between - or even up the price by 60% while they're at it and take an additional 30% for themselves.

There is no price fixing going on here and nothing illegal is happening. Yes, Apple makes money if the service is sold through their channel but they are not determining the price, just ensuring they have a level playing field, a concept so beloved of regulatory bodies world wide.

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Re: I'm Lost Lewis

There's a typo in my post.

"If on the other hand, I choose to buy my subscription from the publishers of Wigwam weekly, it will only cost me 230 tokens."

should obviosly read

"If on the other hand, I choose to buy my subscription from the publishers of Wigwam Weekly, it will only cost me 20 tokens."

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Badgers

Surely the easiest way is to differentiate the iApp from your other services and then charge more

From what I can tell, the issue here is that Apple is:

a) Mandating that any publisher who distributes a content-access app provide an in-app purchase mechanism, and

b) Mandating that any publisher who distributes a content-access app provide equal or cheaper pricing through the in-app purchase mechanism when compared to all other purchase options.

Apple are also mandating that they take a non-negotiable 3%0 of any fees charge through in-app purchasing.

Now, I see what Lewis and others are getting at - if you're a publisher offering a weekly publication and you've got an iApp, you now have to have an integrated purchase mechanism in the iApp on which you make 70% of what you make through your own mechanism on your website. So even if this 30% overhead is higher than the equivalent overhead from any other platform provider, you can't adjust pricing accordingly.

The counter-argument is, obviously, that publishers offering their own platform will have costs that eat into the 100% of the money they get. But those costs probably aren't of the order of 30%, and those costs have other benefits such as getting more raw data on their customer base, etc.

Which has me thinking that the easiest way around this, for publishers, is to differentiate between their web-based subscription content and their iApp subscription content. Make the iApp a bit fancier, maybe have a couple of functions that you can't get through the web-based service...and bump the price by 30%. As an alternative, offer a free iApp that's just a skinned browser conveniently optimised to load the web-based version.

Now of course, the iStore Guardians will be vigilant against any such brazen attempts to Steal Their Rightful 30% Cut From Them....but, well...it's worth a try, right? Especially if the worst-case scenario is that you junk your free iApp and just offer a subscription-interface mobile page that's 30% cheaper than the paid iApp version. I mean, Apple will like it as they can even crow that there's an iOS-exclusive app from $PUBLISHer - they'll just quietly fail to mention that it costs you more than a similar method to access similar content through a mobile web interface...

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