If they are eBooks, it becomes marginally more complex.

If inside your app, a user could ‘unlock’ and read an eBook or piece of content, you would need to sell that unlock access using Apple’s in app purchase system. If on your website you sold the same eBook (and purchasing it on your site also unlocked it in the app) then you could not make the app to site link.

Hope that helps.

Also, I wish I could make the text on this page bigger (such is the life past 40, alas) without having to expand the window to a huge size.

thanks!
Liz

Some people object saying that Apple does not have a majority of the smart phone market so anti-trust laws do not apply. That is immaterial since the market for the sale of smartphones is not the one in which they are violating anti-trust law.

They currently do have an absolute monopoly is in the distribution of applications for iOS devices. Their only competition is the jail breaking community and Apple goes out of their way to do away with this competition. Some would argue that this monopoly is illegal, but that is a separate question. It is pretty hard to deny that said monopoly does exist.

Now they are leveraging that monopoly to compete unfairly in the market of digital media content for ios devices. There had been a thriving competitive market for this content with multiple sellers to provide a check on prices. If Barnes & Noble charged took much for a book in their app, then you could buy it on th Kindle app for less.

But now Apple has created a market guaranteeing that no one else will be able to compete in this market. They’ve already put one company out of business. So if Apple sells a book through iBooks they receive 100% of the revenue resulting in a profit of 30%. If another ebook app sells an ebook for the same price under the new, policy

With the new rules, this is forbidden, you can’t route to pay outside the app and putside Apple billing system

This is why you can use the Amazon app to buy a physical book but not a Kindle book (the app redirects you to the web to purchase Kindle books). This is why you can buy a domain name via the godaddy app without Apple receiving 30%. This is why you can still refill your prescriptions using your Walgreens app without Apple taking 30%. And so on and so forth.

Using the Amazon example, my card details are already plugged into my Amazon account, if I wanted to buy a book through Amazon, the application could invoke a call, back to the Amazon server which would be handled, action the payment using the card Amazon have on file, process the actual transaction using their store/software and set a property within my account to let the application know that I can now download or access that book for free. Amazon would avoid paying 30% to Apple entirely.

I invite anyone to use the GoDaddy app as an example, to confirm this theory, I just purchased a domain name using the application, which charged the card I have on file with GoDaddy. I wasn’t asked for my iTunes payment, I wasn’t even (concerning) asked to confirm my CVV number.

What’s more, that domain will continue to renew itself every year, charging the card I keep on file with GoDaddy and they will never have to deal with Apple.

But the infrastructure that GoDaddy have in place to enable that is huge. Not only do that have to have a reasonably complex payment system that allows recurring billing and flexible transaction processing (from a web service and not a standard payment provider gateway page), but they have to have all the security in place that’s necessary to legally hold credit card details. They have to have a customer service team, a series of scripts and email alerts that warn me if I’m about to be charged again, or if my card has expired… that’s a huge system. But for a company that size, it’s worthwhile.

This level of technology is not really available for small or mid-sized publisher. To these companies, the 30% commission is not a hindrance.

Obviously opinions change depending on how big your publishing company is and in what country you distribution and ship your magazine.

As far as I can tell, Apple’s rules and regulations really only apply to people making use of their payment gateway and their StoreKit functionality.

I would be extremely interested to hear if this is not the case though and examples like GoDaddy can be explained by special circumstances allowed by Apple.

As an aside, for major UK publishers, news-stand circulation is generally profitable whereas subs are loss-making; subscriptions are only there to support the rate base for advertisers.

My point: Taking all this into account, the lifetime value of an iTunes subscription will be higher than a print subscription for most publishers. The problem is that if the customer is anonymous, they are of less value in terms of advertising & cross-sales, and the publisher could end up the proverbial creek without a paddle, if Apple chose to change their terms again – for example, increase their cut from 30% to 50%.

Apple is already letting the boundaries on data-sharing slip a bit, by allowing publishers to offer incentives (as is Kindle, by the way) – for example, the UK’s Telegraph has been allowed to offer 7 days extra access as the incentive. And even without incentives, 40-50% of customers are opting to share details with publishers when buying subscriptions on iTunes. A good start, but not good enough for publishers.

app.ft.com is a really interesting (albeit predictable) development, which will be followed by others – although the html5 implementation is pretty ropey, if you ask me. It all builds up pressure on Apple to soften its line. Don’t expect them to roll back from their 30% headline rate any time soon (30% has become a sacred number, after all, in Cupertino), but data sharing will get easier (including tracking reader behaviour etc), and they’ll cut shady discount deals with the major publishers over the next 12 months.

But the book is not stored, not distributed by Apple, it is all on Amazon servers.

Why do they have to take any cut from a transaction, when they have forcing people to implement their system?

Also, “However, in contrast, last month MSNBC published a study (1) showing that Android-based malware is up 400%”

The original report doesn’t have any number for this figure. And I don’t trust the reliability of an study that accounts Windows malware on a SD card as Android malware like the report does.

Based on this, I am lead to believe that it should be the responsibility of the developer and publisher to work together to create smart and intuitive ways to let their users purchase, subscribe and interact with their magazine.

In my opinion, the comparison with the associated costs of subscriptions is still a valid one. First of all, the postal service in the UK is vastly different to the very smart US postal service, here in the UK a 500 gram magazine (110-140 pages) costs £1.50 or $2.50 to post. In other countries, and the USA in particular, periodicals are offered various concessions to make this much more affordable.

A publishing company not only has to ship magazines and pay the postage, but deal with returns, transactions, renewals and other tasks. Using the Apple subscription system the process of signing up, renewing subscriptions and cancelling subscriptions is handled inside a user’s iTunes account. There is the scope for a small, independent publisher to sustain subscriber levels in the hundreds of thousands, or even millions, without having to scale up their subscription department, negotiate postage rates, mailing houses, and (dramatisation) field telephone calls, emails, faxes and letters from piqued subscribers day and night.

On top of all the above, we should also take into account global distribution. Shipping copies overseas is prohibitive, so much so that a print magazine with a truly global readership is rare. In one central place, using one central delivery system, a publisher can sell their magazine or newspaper to any country in the world. On top of that, the publisher’s remittance stays consistent, and perhaps more importantly still, the cost to the reader stays consistent. I have had to purchase British magazines in Hong Kong for three times the usual cover price, the subscription prices were comparable.

The debate, I suppose is about whether this is worth 30%. I agree with you, if it were 5% then no one would have a problem with it, but I think that’s probably the case with a million other items in the world today.

I suppose “fair” in my article was the wrong word to use, as that’s not really the point. It’s whether we think it’s value for money or not. Personally, it is my opinion that for periodical publishers of magazines and newspapers a 30% commission is good value for money. Apple played a huge part in creating a world in which we are happy to pay real money for digital “products”.

Perhaps where a 30% commission isn’t viable, the solution might be to use out-of-app payment processing. Which is possible, it just requires dramatically more development time and is less convenient for the end-user.

Daniel Sharp
Partner, Special Projects
Stonewash DD&AG

Footnote: It is a great honour to be replying to Tim O’Reilly, the founder and CEO of O’Reilly Media, Inc.
Tim’s books are responsible for the majority of my technical knowledge.

No, what people are complaining about is that Apple wants a cut of all in-app purchases.

Take for example the Kindle app. You download the app, but you fill it with content from Amazon. Now imagine that every time you bought a book for your Kindle, Apple took an extra 30% cut. That’s most of Amazon’s margin on the sale. So Amazon would have to increase the price.

Now, as it turns out, Amazon most likely has enough clout to cut a special deal with Apple. But smaller applications that have the same model – the application as a vehicle for ongoing content sales or subscriptions – are likely to get squeezed off the platform.

In the case of a subscription publication like The Economist, Apple wants a cut of every new subscription. Sure, in the beginning, many of the users of the app will be existing subscribers, and Apple isn’t asking for a cut of their price. But what about when they renew? What about the ability of The Economist to offer single copy sales or free copies that then lead to a subscription? There just isn’t enough to go around.

Compare to a newsstand. As you correctly surmise, most magazines don’t make much money (if any at all) on newsstand sales. But they are a source of subscriptions, as the best customers graduate from single-copy sales to subscriptions. (That’s why you see those blow-in subscription cards falling out of every magazine.) The newsstand sales exist, in effect, mostly for subscriber acquisition (or advertiser readership numbers.) Imagine for a moment if every newsstand demanded 30% of any subscription that resulted from a copy of a magazine sold from their racks? That’s the equivalent of what Apple is asking for.

Even then, the policy may not be “unfair.” After all, it’s Apple’s platform, and they get to make the rules. It’s just stupid. If they had asked for a small percentage – say 5% – everyone would be willing to pay it. But 30% is most of the margin for anyone who is any kind of reseller of content.

The point is that a company that wants to grow its ecosystem thinks about the economics for all the players in the system. If they create pricing that drives some of the players out of their ecosystem, they either wanted to do that, or they didn’t understand the ecosystem well enough.

In either case, the problem is worth highlighting.

This is in effect a squeeze play that drives a certain kind of application out of the ecosystem.

What would you recommend for the startup indie publisher that would like to get their e-mag on Newsstand?

I was hoping to avoid the costly branded-app route by going with the e-mag publishing sites (calameo, issuu, yudu, etc). But as far as things currently stand, I won’t be able to get on Newsstand going those routes.

Basically what I (and every other startup publisher) will need is a white-label app we can load our e-mag into and submit to Apple for Newsstand compatibility. Will you be providing a cost-effective solution for that? £750 per issue for your current offering is a bit cost prohibitive (at least initially).

Feel free to reply here or contact me via email.

Thanks,
Brian