Apple Attempts to Extract eVig from Amazon, Other Booksellers

Apple this week revealed that it was willing to prevent competitors from providing apps on its iPhone and iPad devices unless, of course, those companies are willing to engage in a revenue-sharing scheme with Apple. It's the type of behavior that landed Microsoft in antitrust courts around the world, and one has to think that regulators everywhere are turning their attention to this matter right now.

Here's what's happening: Last year, Apple jumped into the eBook market with its iBooks application for the iPhone and iPad, and its online e-commerce solution, the iBookStore. The iBooks platform competes with other eBook sellers, including Amazon (which makes the Kindle platform), the Barnes & Noble Nook, Sony's eReader efforts, and more. But unlike those other solutions, Apple's eBooks can only be read on Apple devices. This is a classic lock-in strategy.

Competing eBook sellers have created or are creating apps that run on Apple's iPhone and iPad, yes, but also on other mobile devices such as Research in Motion (RIM) BlackBerry devices, PC laptops, and more. Amazon, as the market leader and an obvious example, provides a Kindle app for numerous devices, including Apple's. The app allows readers to download and read purchased books on the devices and provides device-to-device synchronization so that readers can automatically pick up at the last point read, no matter which device is used. The company calls its strategy "buy once, read everywhere."

But the Kindle app, like most other eBook apps, doesn't include integrated book buying. Instead, by clicking a link in the app, Kindle users can browse Amazon's online bookstore using the device's web browser. And this is where Apple comes in: eBooks purchased through the web browser bypass the Apple eBookStore and App Store controls, so Apple doesn't get a 30 percent cut of the sale. So, what Apple is requiring is that these eBook apps provide a way for customers to purchase books from inside the app. That way, Apple gets its 30 percent, playing the role of a toll booth between the bookseller and its customers.

Early reports suggested that Apple had somehow changed its policies to require this in-app purchasing scheme, but that's not the case. Instead, Apple has simply begun enforcing a pre-existing policy for eBook apps. And its first victim was Sony, which saw its eBook app submission rejected by Apple this past week.

"We have not changed our developer terms or guidelines," an Apple spokesperson said. "We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase."

Amazon and other eBook providers could get around this requirement by offering both in-app and external eBook purchasing options, and one could imagine that the in-app purchase could be clearly labeled as being, say, 30 percent more expensive because of the Apple tax. But it's more likely that these Apple competitors will simply resist the change, and perhaps some will even challenge Apple in court. After all, what's to stop Apple from extending this self-serving requirement to other forms of content in apps, such as movies and TV shows?

Apple, of course, has never shied away from antagonizing users, partners, and competitors alike, despite its shiny reputation with an overly friendly media and its many fans. But this is anti-competitive behavior, pure and simple, and if it's allowed to continue it will result in higher costs for consumers.

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