Apple Offers Subscription Plan to Content Providers, with Kickbacks

As expected, Apple this week rolled out a subscription offering for content providers that wish to sell magazines, books, movies, and other content from the iPhone App Store. But, as is always the case with Apple, this is a deal with the devil: Companies that opt into this plan must give Apple 30 percent of their revenues, and they're not allowed to link to external sources for the content. And the plan doesn't just affect potential new apps. It affects existing apps, including popular ones such as Amazon Kindle and Netflix.

"Our philosophy is simple," Apple CEO Steve Jobs said in a press release. "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. 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."

Jobs is right about one thing. Apple's philosophy is simple: If you want to sell services via the company's popular devices, Apple must get its vig, or fee, in the form of a 30 percent cut of the revenues.

But the statement attributable to Jobs is also quite inaccurate in many ways. And what Apple is really requiring of content creators is far more unfair than he suggests. As a typical example, consider the Amazon Kindle app. Currently, you can download and read Kindle-based eBooks in the app. If you want to purchase a new book, you tap a bookstore link and a mobile version of Amazon's Kindle store opens in the Safari web browser. Under these new terms, that action wouldn't be allowed. Instead, Amazon would have to offer the books for sale from within the app, and of course Apple would then take 30 percent right off the top.

Well, OK, you say: Amazon could use both methods, with in-app and out-of-app purchasing. But they can't do this either: Apple is preventing Amazon and other content creators from linking to off-app purchasing points from which they don't get a portion of the sale.

And it gets worse: Apple is also forbidding content creators from offering different prices from different locations. So Amazon (like other companies) can't, say, jack up the in-app price by 30 percent to account for the Apple tax, while offering a lower price at its own store.

So, let's recap this little marvel of anti-competitive behavior. What Apple is telling its partners is that their customers will need to know that another point of sale is available, even though they aren't allowed to mention that in the iPhone app. That other point of sale isn't able to charge lower prices, and when customers buy content from within the iPhone app, as they will—since they will often not even know about another option let alone how to get to it—Apple will receive 30 percent of the sale. Because, you know, Apple is the gatekeeper.

And before anyone even attempts to defend this indefensible act, please let me remind you that credit card companies (not exactly paragons of morally good behavior) receive only a 2.5 percent fee per transaction. Apple makes these greedy behemoths look like choirboys by comparison.

The change goes into effect June 30. Let's hope content-creator outrage and a little nudge from antitrust regulators  around the world puts the kibosh to Apple's latest plan. This ranks up there with the craziest and most unfriendly things the company has ever done.

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