U.S. and European Regulators 'Looking At' Apple's App Store Subscriptions Program

[marksman]

The real problem is Apple saying that you can't offer your product/service at a lower price anywhere else. That makes no sense in any business setting, and is absolutely anti-competitive. They're holding people to ransom -- what can you do? Raise prises across the board or take a 30% hit. I hope Europe move fast to rule it illegal, before Apple go and shoot themselves in the foot too badly. If Hulu, Netflix, Spotify, Lastfm and the others all abandon iOS there is going to be an incredible amount of negative press and bad will.

Apple is trying to ensure THEIR customers get the best price on any of these offers. That is a good thing for the consumer and the customer. I am not sure why people don't understand this. They certainly can do it, it happens all the time.

Apple wants to make sure the best deal on products they present in their store are the best prices available anywhere. Not better than anyone else, just equal. Nothing wrong with that... In fact that is a pretty good benefit to IOS users, to know that you will always be able to get the best price using the easy 1 click system.

Apple get's the cut on any subscription product that is sold on an IOS device. If you sell the subscription on your website (for an iOS product), you, by contract with Apple, are required to provide them 30% of the money you get. If that subscription costs you $1 and your customers are only willing to pay $1.05, you are out of luck.

That is not true. Only for subscriptions originated from an IOS device/itunes does this count. If someone signs up on the companies website, Apple gets NONE of the money.

 

[Chwisch87]

There are basically two issues here. One is the fact that the apps cannot link users to providers websites... This can attract scrutiny but the heart of the matter is the "most favored nation" clause where they have to give the app store their best price. According to someone quoted in the wall-street journal, this is so bluntly anti-competitive that it will for sure be struck down by europe.

 

[marksman]

I'm not sure it's 100% legal. Can they add a 30% for subscriptions? Yes. No question there. But telling developers that in app sales (or, more specifically, sales on THEIR SITES) must not be less than what it charges in the app store. That's where it gets questionable. Apple should not be able to dictate what a developer charges on their own site.

Sure they can tell developers what they can charge for their apps. It is part of the condition of being able to sell in their store. This happens in all retail spaces. If they don't like the conditions they are not forced to accept them, they can go sell their product somewhere else.

Actually, it's quite different. Walmart provides shelf space, shipping, distribution, etc. for products it sells. For in-app content, Apple only provides billing services. The actual content is stored on the developer's servers and delivered using the developer's bandwidth. There is no way Apple deserves a 30% commission simply for being the payment processor. People would be up in arms if PayPal, Visa, or Mastercard took a 30% cut of all transactions. That is essentially what Apple is doing with this new in-app purchase policy.

The bottom line is that while 30% may not be a big deal to some types of content providers, it is likely a deal-breaker for many others like Netflix, Rhapsody, Pandora, etc. Their only options will be to raise prices across the board (since they can't raise them in-app only) or withdraw from the platform. Neither of those solutions are good for consumers.

Apple provides the actual downloads of the apps that provides the content, the updates of the apps, the notification of the updates, the ability for people to find the apps in the store and they deliver a captive audience.

Some companies find all of that is worth 30% or even more. Some don't. It is what it is.. but to dismiss it as a 30% credit card charge is either disingenuous or ignorant.

 

[marksman]

If you sell a subscription service for content that is displayed on an IOS device using an app, you must pay Apple 30%, even if the only place to purchase that subscription is your own website. If an IOS device is receiving subscription content, you owe Apple 30%.

That is not true.

You can't just offer it for sale on your website. You have to also make it available from within the IOS App. Any sale made from within the IOS apple will be shared with Apple. Any sale made on the website will not.

 

[deadkennedy]

I'll be suing Apple and probably starting a class action (I'm inspired by recent uprisings in ME .

I purchased iPhone and AT&T plan to consume content based on the conditions as it was at that point in time.

Now what will happen is:

- Some services will move from iOS (I suspect low margin like Spotify, Pandora, etc.)
- Some will increase prices (Amazon, Netflix,..)

That means that my entire situation has changed and I'll be forced into paying HEFTY PRICE for TWO MORE YEARS for something I didn't buy.

I will demand immediate termination of contract by AT&T and return the iPhone to get money back, so I can switch to something that meets my needs, and something that's not driven by insane greed.

It's like renting a house with a swimming pool and tennis court for two years, and then after two month they say you know what, we're going to close the swimming pool and for tennis court you will have to pay additional 1k per month. Well, F.... YOU!!

Anyone with me? Want to raise some hell?

 

[marksman]

You can - it links to the Kindle website which constitutes in-app purchasing under the new guidelines
Apart from anything else, it's completely impractical for Amazon to use the apple in-app purchasing framework for their books - they have over half a million titles: How the hell is that supposed to work through In-App purchasing!

Amazon has had an affiliate program for years. You or I or anyone else for matter can easily sell ANY product that Amazon sells and get paid a commission on it. It would be trivially easy for Amazon to tie this into the in app purchasing.

In a retail store single issues added up cost more than a subscription. The retail store doesn't get a cut of a subscription... so that would be the equivelent of developers being able to sell their stuff on itunes for MORE money which apple is not allowing.

If the retail store had to hold your issue for you every month for you to come pick it up, and handled all the billing and billing support for your subscription you don't think they would deserve more than a cut of just one issue?

It's not illegal to charge a 30% fee. What's illegal is to dictate what you can charge on your own website.

They are not dictating anything. They are laying down the conditions for utilizing their Retail Store. Companies are free to use them or not use them if they do not agree.

They are not forcing anyone to do this. If you can't make it work for your business, you can't make it work, they are not forcing anyone to do it. They have conditions for being in their store. They have always had a lot of conditions.

You can't sell an app for .65 cents either.... So the developer either accepts those conditions or they do not.

 

[marksman]

Here is the real problem,

Many app designers have been working on low margin high volume applications. Here is an example:

Company X wants to sell pictures of marmot jugglers. They are required to pay $1 per picture sold to the marmot handlers association. They know, people who are into marmot juggler pictures will not pay more than $1.05. This is not a problem because there are billions of people who want to look at marmot jugglers on their iPhones.

Under the new rules, They must charge $1.35 for each picture. The market just dissipated in a rapidly expanding ball of marmot fluff.

Apple must make it's money from subscriptions. Making money is why every company exists. Apple can not let developers bypass the subscription system. All that said, I think Apple needs to find a better way to do this.

It was a failed business model since they did not take into account distributing their product and marketing it.

So their failure has nothing to do with Apple. It would have failed regardless.

Unless you mean Apple should have subsidized their marketing and distribution efforts for free.

Which is what many companies are doing with Apple now.

 

[marksman]

Great, so have an "instant rebate" on your own site and charge 30% less. Apple doesn't have any rules on instant rebates do they?

Any kind of trickery like that will get the companies removed from the app store.

And that is why Rhapsody will continue to fail.

Agreed. One in Every 500 people you come across MIGHT have a Rhapsody account.

How do they pay commissions on all the referrals that they receive from companies other than Apple? How do they pay for advertising?

People don't realize how much money a company like Netflix spends on Customer Acquisition. Some companies spend more on acquisition then they take in in revenue for several months. I don't know the most recent year, but in the past several years Netflix was the largest advertiser on the entire internet, bar nobody else. They spend a huge amount of money to get people signed up. Heck they pay affiliates between $25-$40 to get someone signed up for them. This is for a service that is $8-$25 a month.

The problem is people just don't understand the basic business principles here, and jump to all kinds of erroneous conclusions. The cost for Netflix to acquire customers and keep them with Apple taking their 30% is probably LOWER than what they are paying now. So when people say netflix just has to pay 30% more so they will lose money, they are just wrong. That is not how it works.

I could get one of you here to sign up for a FREE netlfix trial and I would get $40. $40 just for getting someone to try out netflix for free for two weeks.

Netflix probably spends well over $100 to bring in a single customer who stays with them longer than 6 months.

The marketing advantage and value the app store provides is huge and should not be undersold as much as it is by most of you. For many vendors/publishers/creators it is worth a ton of money.

So please stop saying that anyone will have to charge 30% more to make the same money, or charge 43% more.. It all is seriously ignorant on how all these businesses actual work and what real value the App Store and the services Apple provides are worth to companies.

 

[xyion1]

I'll be suing Apple and probably starting a class action (I'm inspired by recent uprisings in ME .

I purchased iPhone and AT&T plan to consume content based on the conditions as it was at that point in time.

Now what will happen is:

- Some services will move from iOS (I suspect low margin like Spotify, Pandora, etc.)
- Some will increase prices (Amazon, Netflix,..)

That means that my entire situation has changed and I'll be forced into paying HEFTY PRICE for TWO MORE YEARS for something I didn't buy.

I will demand immediate termination of contract by AT&T and return the iPhone to get money back, so I can switch to something that meets my needs, and something that's not driven by insane greed.

It's like renting a house with a swimming pool and tennis court for two years, and then after two month they say you know what, we're going to close the swimming pool and for tennis court you will have to pay additional 1k per month. Well, F.... YOU!!

Anyone with me? Want to raise some hell?

Hell yea! Next up, the gas companies for raising it to $3.00 a gallon when it was $1.25 when I bought my car! Power to the people!

 

[marksman]

Why is that silly .. think about how many referals to something you give or get every that nobody get a cent for. Why doesn't Apple require "their" cut when I purchase soemthing of ebay using their app? I would maybe have never bought said item if it hadn't been for Apple and there ecosystem.

Because E-Bay pays millions of other people who promote their links and auctions every day with a cut of their sales.


By the way I will note that browsing through this thread, the netflix banner ad is coming up quite often...

 

[Chwisch87]

yes but in reality, apple isn't doing anything to promote some X subscription service.

 

[deadkennedy]

Hell yea! Next up, the gas companies for raising it to $3.00 a gallon when it was $1.25 when I bought my car! Power to the people!

If you signed a contract with Apple Oils for a contract that says you will get X amount of gas for Y per month for next few years, then you are entitled to it.

Fact is I will have a crippled product, not the one that I paid for. If you aren't capable of understanding it you don't have to feel obliged to post totally unrelated examples.

 

[marksman]

yes but in reality, apple isn't doing anything to promote some X subscription service.

Yes they are.. The existence of the App Store with exposure to 100 million consumers is worth a lot of money to companies trying to sell their products.

 

[iEvolution]

In the face of blatant scamming some of you still will defend apple to the end, and for what?

Apple makes some good products, but as a company they are pretty scummy. Other examples would include:

- Gamma correction for the 2007 iPod Touch because they didn't want to pay for a recall, instead they covered the problem.

- The monitor problems they have, several firmware updates to "fix" hardware issues.

- The iPhone4 antenna issue, they stuck to the "non-issue" thought for quite awhile until the media had fun with it...and even then they offered bumpers? Anything to save a buck. Furthermore they attempted to degrade other company's phones on youtube like a little kid, by demonstrating the issue on other phones.

- Pushing retail packaging off the market at their stores in an attempt to get more developers on the Mac App Store..and lets be real here they have even more control over the software now and get more money for themselves this way.


Those of you saying they need to charge 30% for server costs, bandwidth, etc. Give me a break, you are talking about one of the richest tech companies in the world. 30% is outrageous.

The company may make some good tech products but some of their actions are definitely not in consumers interest (I mean really all companies are about making money), and this is one of those moves.

I love the iPod line for music/video and that is about it. iOS will never interest me simply because its ran under a dictatorship.

 

[Stella]

Yes they are.. The existence of the App Store with exposure to 100 million consumers is worth a lot of money to companies trying to sell their products.

Yet the software provider has already paid the yearly subscription fee required for Apple to host the Application in the first place... but Apple (and others) still want more.

Additionally, Apple want to dictate the price of the subscription... that part reeks of anti-competitive - using its market position to dictate pricing.

...how many people don't understand what this is all about.

This is all about companies being able to give apps away for free on the Apple Store and then charge for 'upgrades', 'content', or 'premium' elsewhere, without giving a cut to Apple.

If it is found to be illegal, then there is nothing stopping *anyone* on the Apple store from putting up a free app, and then requiring 'a subscription fee' to activate the app on their web site. I could change my apps to work this way with a day's work and another day's testing. So could everyone else. And given the choice, especially if someone made a 'subscription service' that only charged 3 percent and so there wasn't even that kind of inconvenience, the vast majority of companies that currently charge via the iOS store would switch over.

Apple does not want to give away the bandwidth and infrastructure costs associated with hosting the iOS app store for free. I see very little enforceable middle ground between that and their current stance. (I would be very interested in hearing from a lawyer who thinks otherwise. If you have never taken a course in contract law, please don't bother to debate with me, because the signal to noise ratio of such posts is so small as to be not worth calculating.)

IMO, You've made the most compelling case that supports the Apple subscription model I've read.

However, there is still something wrong about Apple wanting payment for media that has never touch Apple's servers ( payment processing excluded ).

 

[xyion1]

If you signed a contract with Apple Oils for a contract that says you will get X amount of gas for Y per month for next few years, then you are entitled to it.

Fact is I will have a crippled product, not the one that I paid for. If you aren't capable of understanding it you don't have to feel obliged to post totally unrelated examples.

Please do show said contract? I must have missed it when I checked out of the Apple store...

You signed a contract with AT&T with voice and data service. Not with Apple for Netflix service, and not with Netflix for iOS service. Those features were a bonus.

Remember, Netflix is more than welcome to continue to provide the service on the App Store, assuming they provide with Apple's terms. If their business can't sustain the increased cost then its on their model...maybe ask for a higher margin next time?

 

[xyion1]

Yet the software provider has already paid the yearly subscription fee required for Apple to host the Application in the first place... but Apple (and others) still want more.

Additionally, Apple want to dictate the price of the subscription... that part reeks of anti-competitive - using its market position to dictate pricing.

The time required to vet the apps by Apple is far greater than $100/year. Apple will eat that cost for free apps, but are now closing the loophole for subscription apps. Or all all apps would go to the subscription model.

IMO, You've made the most compelling case that supports the Apple subscription model I've read.

However, there is still something wrong about Apple wanting payment for media that has never touch Apple's servers ( payment processing excluded ).

OK, so you agree that Apple deserves SOMETHING for the service, now to negotiate how much. They are saying 30% because its in line with regular and in-app purchases. Again, everybody would go to "subscription" if it was cheaper.

 

[charlituna]

Seems simple... all Apple has to do is drop the requirement that it "has to be at the same price or lower" part. This way, companies with thin margins just raise the price on iTunes to cover the margin.

From there, it's up to the end user to choose where they purchase. No harm, no foul.

But there is harm. Those that choose to use the iTunes option would be punished for that choice with a higher price.

A couple of things to keep in mind.

The market isn't iPhones or iPads or even the two together. It is mobile internet devices. Just like it was personal computing systems NOT Mac computers. In that market Appleis only affecting their own product, not all the others. This makes anti-trust a bear of a claim to pull off.

Also, when you sign up to be a developer you agree to give Apple 30%. But all these outside payment apps we cutting Apple out of that promised money, or at potentially we're since Apple only knows the sales amounts of the developer provides it. Now under this rule Apple isn't even demanding all the sales due to the app. Just the ones paid for via the app. So all those monthly renewals done on Netflix website, or Hulu's site etc will be free and clear and 100% to the developer. Apple gets nada, even though under the contract it is possible they could legally make the claim they are owed their cut. And by the by, you also agree that the rules can change at any point and could result in your app no longer being eligible for the store. If you don't like this terms, don't agree to them.

 

[Synergie]

But you're not going to sign up for AT&T service from the MyWireless app.

Doesn't matter... If you can sign up for AT&T service through their own website then under the new rules they MUST provide a way to do in the app. And in the app they will lose 30% to Apple. That's not 30% of the profit btw, it's 30% of the total cost! ANd they will also not be allowed to link to their own website.

 

[marksman]

I love the iPod line for music/video and that is about it. iOS will never interest me simply because its ran under a dictatorship.

Two notes.

1) It does not seem like you understand how public US Companies are run.

2) It does not seem like you know what the word "dictatorship" means.

 

[JRoDDz]

Doesn't matter... If you can sign up for AT&T service through their own website then under the new rules they MUST provide a way to do in the app. And in the app they will lose 30% to Apple. That's not 30% of the profit btw, it's 30% of the total cost! ANd they will also not be allowed to link to their own website.

Don't you already have to have AT&T service to even have the app? It's an iPhone remember? Why would you sign up for a service 100% of iPhone users already have?

 

[charlituna]

. You want to know the name of the company.... AT&T. Yes, AT&T's Navigator and a few new projects will be pulled from Apple's App Store.

I have a real hard time crying over any cell service losing a few bucks here and there that they agreed to pay in the first place when said companies are collectively jerking around the customers. If as much as $15 a month of my cell bill is paying back my subsidy when I have finished my two years I shouldn't owe that money. If I walk in with my own fully paid phone, my rate should be $15 less than the guy that buys with the subsidy. And my ETF should go down $15 a month, not merely $10.

The maker probably won't care because in the case of a magazine, for example, the maker loses far more than 30% through distribution, that is why they offer those deals 'save 80% on your magazine subscription if you order directly from us'. How is losing 30% worse and you get your product out to a wider audience, Worldwide!

Most folks don't realize it but the mags offer those deals because the real money is in the ads. But they need demo info to charge good prices. And they don't get that info from newsstand bought copies. So they drop the prices to encourage subscriptions and get the details

Firstly. They aren't requesting. They are demanding. Secondly margins are very thin for services such as Pandora or Netflix.

Not really a good argument. Places like Pandora and Netflix have long standing, website based customer lists that will continue to pay via that recurring charge set up on the website with a penny going to Apple. They will be fine.

Great, so have an "instant rebate" on your own site and charge 30% less. Apple doesn't have any rules on instant rebates do they?

Although they don't spell out instant rebates in the rules, the use of one lowers the price at time of purchase and thus would likely run afoul of the rules

This time? How about not letting you install MAC OS X on third Party hardware? That's Anti-Trust written all over, but they got away with it.

They didn't 'get away' with anything. As codified in case law during the whole Psystar incident, there is no Mac computer market. The Mac lineup is merely part of the personal computer market. Apple lacks anything close to a strong, much less dominant position in hardware or software in the market and thus there is no strength for them to be abusing

 

[Oletros]

Sure they can tell developers what they can charge for their apps. It is part of the condition of being able to sell in their store. This happens in all retail spaces. If they don't like the conditions they are not forced to accept them, they can go sell their product somewhere else..

We are not talking about apps

 

[Oletros]

Also, when you sign up to be a developer you agree to give Apple 30%. But all these outside payment apps we cutting Apple out of that promised money, or at potentially we're since Apple only knows the sales amounts of the developer provides it. Now under this rule Apple isn't even demanding all the sales due to the app. Just the ones paid for via the app. So all those monthly renewals done on Netflix website, or Hulu's site etc will be free and clear and 100% to the developer. Apple gets nada, even though under the contract it is possible they could legally make the claim they are owed their cut. And by the by, you also agree that the rules can change at any point and could result in your app no longer being eligible for the store. If you don't like this terms, don't agree to them.

No, you agree give Apple 30% or the price of the app, not 30% of the items bought for the app.

 

[tatonka]

People don't realize how much money a company like Netflix spends on Customer Acquisition. Some companies spend more on acquisition then they take in in revenue for several months. I don't know the most recent year, but in the past several years Netflix was the largest advertiser on the entire internet, bar nobody else. They spend a huge amount of money to get people signed up. Heck they pay affiliates between $25-$40 to get someone signed up for them. This is for a service that is $8-$25 a month.

The problem is people just don't understand the basic business principles here, and jump to all kinds of erroneous conclusions. The cost for Netflix to acquire customers and keep them with Apple taking their 30% is probably LOWER than what they are paying now. So when people say netflix just has to pay 30% more so they will lose money, they are just wrong. That is not how it works.

I could get one of you here to sign up for a FREE netlfix trial and I would get $40. $40 just for getting someone to try out netflix for free for two weeks.

Netflix probably spends well over $100 to bring in a single customer who stays with them longer than 6 months.

The marketing advantage and value the app store provides is huge and should not be undersold as much as it is by most of you. For many vendors/publishers/creators it is worth a ton of money.

So please stop saying that anyone will have to charge 30% more to make the same money, or charge 43% more.. It all is seriously ignorant on how all these businesses actual work and what real value the App Store and the services Apple provides are worth to companies.

I guess the point we disagree is the value of being in the app store. You think it is enough to have an app out and that is well worth the cost.
I think, having an app out is only rather small portion of the whole package and that companies still need to run a huge amount of advertisement and marketing. What Apple charges here comes on top of all the things you listed, virtually no costs can be saved or avoided by using Apples system. Apple does not do any sort of marketing for you, if you are a new small company, chances are you are not even going to show up on any app store front page. Marketing wise this is worth very very little.

Commission fees, like the $40 per new customer, that is something companies do pay for the initial subscription. After that, the idea is that most customers will remain subscribers and spend more money than they cost initially. Apple wants this fee for every renewal ..

T.