Apple’s 30% Toll on App Store Content

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Apple's 30% Toll on App Store Content

Rumors have been rumbling since the Sony Reader app was rejected that Apple was planning on making changes to subscriptions and in-app purchases. Today, Apple fired the first shot across the bow with a press release making it clear that all subscription options must be offered as an option through iTunes (complete with a 30% cut to Apple).

Engadget is reporting that Rhapsody has already weighed in with their response, and it’s a big fat no. According to Rhapsody, 30% is simply too high to be sustainable. What’s really interesting is that in their press release Rhapsody explains they are used to (and budget for) a 2.5% charge from credit card processors. That’s a HUGE difference, and I can see why Rhapsody is looking for other options! Don’t forget, if Rhapsody is caught in this, so are Netflix and Hulu. This is an issue for all content providers offering subscriptions, not just magazines and newspapers!

Meanwhile, the Wall Street Journal has been polling law professors, and the answer seems to be mixed. Either Apple would have to prove they’re a tiny portion of the market and therefore free to set their own rules, or the content providers would have to prove Apple held a big enough portion to be influential. Since neither is likely to be a clear-cut answer, don’t expect the Dept of Justice to swing the anti-trust hammer so fast.

So it’s down to the free market. If Google, HP, and Microsoft are smart, this is their time to strike. Call up Rhapsody, call up the New York Times, and play “Let’s Make a Deal”. The amazing thing is, since Apple has opened with 30%, someone else could come in with a significantly lower number and strike a more attractive deal. If Google called Rhapsody and said they could do business for 5% or 10%, and still offer the vast Android army, Rhapsody might just say yes, where before this they would have said no. Alternately, Google and the other competitors could offer free access in exchange for some other arrangement. The point is, there are other ecosystems with other users and deep pockets to turn to, and if the competition is smart they’ll use this as the wedge they need to bring big names to their side.

Finally, the ebook angle, which gets a bit different from the streaming/subscription offerings. Apple can’t stop Amazon and B&N from selling books through Safari or on your personal computer for later reading on your iPad. Not to mention, ebook readers aren’t exactly expensive items these days. Amazon has more pricing flexibility and deeper pockets than B&N, but both could easily drop prices to the point where they’re practically giving the devices away. Even if this policy does impact ebooks, there’s more outlets and options, so the big players will be ok. It might also drive smaller stores and publishers to partner more with Amazon and B&N to leverage their wider reach and deeper pockets.

It obviously depends on how this all plays out, but here’s my final thought…just imagine the ads for the various tablets and iPod Touch alternatives that have been released so far this year. They can show how they have Rhapsody, Netflix, Kindle, etc…anyone who pulls from iOS! And even if it doesn’t get to that point, Android, WebOS, even Blackberry Playbook have no doubt suddenly started looking far more interesting to quite a few content providers!

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About the Author

Zek has been a gadget fiend for a long time, going back to their first PDA (a Palm M100). They quickly went from researching what PDA to buy to following tech news closely and keeping up with the latest and greatest stuff. They love writing about ebooks because they combine their two favorite activities; reading anything and everything, and talking about fun new tech toys. What could be better?