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

[BaldiMac]

Very wild theory, $189 million over two years, as you quoted, is a far cry from only break-even.

Not really. Apple has always said that they operate the store a bit above break even. Even when they are releasing financial results (where they have a responsibility to not defraud investors.)

Everything is relative, of course. $189 million was the gross profit. Subtract taxes, interest, and overhead, and you are looking at easily less than 10 million per quarter. Compared to their net profit for the June 2010 quarter of $3.25 billion, we are talking about 0.3% of their quarterly net profit.

Who knows, maybe they're in discussions with Amazon and other big companies to try and work things out, but the guidelines as they exist now make it seem that Apple is attempting to cut competition off from iOS users. The woefully immature ibooks platform will be the only decently priced option left if the guidelines go in place.

I agree.

If the guidelines exist as they do now, people who have bought kindle books will not be able to access them unless Amazon sells books through the app and pays Apple 30 percent.

Why not? What will stop the current app from working? I guess it would prevent new customers from downloading the app, but they would know that going in.

Seems like Apple is requiring Amazon to pay a tax, which would likely be passed on to the end user, in order to allow people to access files they already purchased.

No, they charge a fee to allow people to purchase new content. Taxes are charged by governments.

Under the guidelines, if people were to be allowed to access their ebooks from kindle, Amazon would have no choice but to allow people to purchase books in app, whether they wanted to sell on iOS or not. So it is very plausible that Apple will charge people, directly or indirectly, to access certain files they already own.

How are you charged for the content you already own?

 

[Carniphage]

You've said that a couple of times now. Not a Micro$oft fan, so could you actually give us a link to a story about it, or the agreement that M$ demands companies to sign?

The XBox is a curated platform, just like the Kindle reader, the iPad and the PS3.

To publish a disk for the XBox, you pay the standard Microsoft tax, which I think is somewhere around $8 per disk.

For XBLA digital downloads, MS charges up to 65% of the retail cost. I think for very low cost games. This goes even higher.

http://www.1up.com/news/xna-developer-microsoft-claims-60
http://parveenkaler.com/2008/03/08/iphone-app-store-revenue-split/

C.

 

[BaldiMac]

competition law is quite complex and even things you think are simple can break competition law .were i work for example i sell b2b if i visit a potential customer and he tries to give me his pricing that he currently pays we are both breaking competition law and both of us and our companies can be charged with breaking competition law.

Your scenario is not true at all unless there is some important factor that you are leaving out.

Here's a point. How big share had Micro$oft when they were at their top? 90%? 95%?

Did they ever try to do anything like what Apple is doing now?

Total control over what could and couldn't be installed?
Demand a cut on anything bought?

Things change when you have 95% of the market. The rules are different. And Microsoft had a different business strategy. What they chose to do then has nothing to do with what Apple chooses to do now.

And as pointed out, they do have a curated platform in the xBox.

 

[josephw]

Why not? What will stop the current app from working? I guess it would prevent new customers from downloading the app, but they would know that going in.



No, they charge a fee to allow people to purchase new content. Taxes are charged by governments.



How are you charged for the content you already own?

Sorry, I guess I should've said "tax." It's obviously not a tax.

If Amazon is to provide people on iOS devices a way to read their content in the app, then they have to find a way to recoup the costs. In situations like this, where a fee is levied, the cost almost always ends up being passed on to the consumer. If these guidelines work as they are outlined now, after they take affect people will be paying more for the ability to read on their iOS devices.

Amazon will likely have to raise Kindle prices, or discontinue providing the ability for iOS readers to access their content, unless Apple and Amazon are working on some other solution together that we don't know about. People paying higher prices after the guidelines take effect will be paying a higher price, the "tax", in order to access their files on an iOS device. Like you said, it's a theory, but it's a logical one.

 

[Carniphage]

But really, defending Apple with what Micro$oft is doing.

We have come a long way from the 1984 Apple commercial, haven't we?

We have.

Microsoft continue to make the majority of its revenue from Windows and Office. I think Office is still $200+.

There's a brand new publishing model coming, and Microsoft don't even have a coherent tablet strategy.

Horace Dediu, the analyst who writes they Asymco blog with lots of cool graphs was asked,"What tools do you use for your charts." Answer: Numbers from Apple Inc., Mac App Store - $19.99.

The digital download market creates an amazing amount of choice for the consumer, drives down prices, and encourages developers to create new apps and services. Look at how many new apps have appeared for the iPad in just a year. And look how fricking cheap they are!

And look at developers like this one.

http://www.pixelmator.com/
They made a million dollars in the first few days of the app store, selling their app for $20.

This sky-is-falling nonsense is coming from the old-school media companies who haven't figured this stuff out yet. They are terrified by the competition.

I can see that people might not like this on a political level. But to suggest that choice or freedom is being limited is just not true.

C.

 

[AaronEdwards]

The XBox is a curated platform, just like the Kindle reader, the iPad and the PS3.

To publish a disk for the XBox, you pay the standard Microsoft tax, which I think is somewhere around $8 per disk.

For XBLA digital downloads, MS charges up to 65% of the retail cost. I think for very low cost games. This goes even higher.

http://www.1up.com/news/xna-developer-microsoft-claims-60
http://parveenkaler.com/2008/03/08/iphone-app-store-revenue-split/

C.

The first link is 2 years old, and the fee was waived by Micro$oft that quarter. They were going to look into it. I'm pretty sure that they have by now, any information that they are now demanding a fee for promotion?

The second link is 3 years old and the bit about the content share isn't based on any official documents, just what developers have told Kotaku.

So, what is Micro$oft demanding now? Not 2 or 3 years ago. Do you have any actual documents?

If you want to use old documents to prove things now, then you could prove that Apple doesn't force a 30% AppleTax on Spotify, Kindle books, etc.

 

[Carniphage]

So, what is Micro$oft demanding now? Not 2 or 3 years ago. Do you have any actual documents?

Yeah, I'll upload a recent XBLA contract. And the NDA too!

How do you think MS monetize the Xbox?

Here's another article from 2008 about how M$ play the system.

http://www.gamasutra.com/php-bin/news_index.php?story=19620


C.

 

[BaldiMac]

Sorry, I guess I should've said "tax." It's obviously not a tax.

If Amazon is to provide people on iOS devices a way to read their content in the app, then they have to find a way to recoup the costs. In situations like this, where a fee is levied, the cost almost always ends up being passed on to the consumer. If these guidelines work as they are outlined now, after they take affect people will be paying more for the ability to read on their iOS devices.

Amazon will likely have to raise Kindle prices, or discontinue providing the ability for iOS readers to access their content, unless Apple and Amazon are working on some other solution together that we don't know about. People paying higher prices after the guidelines take effect will be paying a higher price, the "tax", in order to access their files on an iOS device. Like you said, it's a theory, but it's a logical one.

Sorry, the only thing I was disagreeing with is your statement that people will have to pay extra to access their already purchased content. There is a difference between that and having to pay more for new content.

 

[slattery69]

Your scenario is not true at all unless there is some important factor that you are leaving out.



.

please enlighten me on what important factor im leaving out as under eu competition law this is the case

 

[BaldiMac]

please enlighten me on what important factor im leaving out as under eu competition law this is the case

Well, that's one important factor. Are you telling me that b2b auctions are illegal in the EU? It's illegal to publish wholesale pricing? Really? A car salesman can't advertise 10% over invoice?

 

[slattery69]

Well, that's one important factor. Are you telling me that b2b auctions are illegal in the EU? It's illegal to publish wholesale pricing? Really? A car salesman can't advertise 10% over invoice?

if the pricing is in the public domain then you aint breaking any competition law. ill expand the example as i can see it wasnt totally clear.

in my job i sell certain products b2b, if during the course of my meeting with the customer he attempt to give me the competitions pricing he currently enjoys(in an attempt to get better pricing off me for the same/similar product) , under competition law we could both be in trouble and our companies.
if an attempt like this is made im required to leave the meeting and report it.
it all stems from some high profile price fixing cases like the british airways and virgin altantic one and the milk price fixing

 

[BaldiMac]

if the pricing is in the public domain then you aint breaking any competition law. ill expand the example as i can see it wasnt totally clear.

in my job i sell certain products b2b, if during the course of my meeting with the customer he attempt to give me the competitions pricing he currently enjoys(in an attempt to get better pricing off me for the same/similar product) , under competition law we could both be in trouble and our companies.
if an attempt like this is made im required to leave the meeting and report it.
it all stems from some high profile price fixing cases like the british airways and virgin altantic one and the milk price fixing

What does your example have to do with price fixing? Price fixing is when multiple companies in the same market work together to fix prices. What you described seems to be a normal negotiation. How is pricing not protected by free speech laws? Is there an NDA involved?

I admit ignorance of EU Competition Laws. I'm genuinely interested in the answers to these questions. I'm not trying to be argumentative.

 

[slattery69]

What does your example have to do with price fixing? Price fixing is when multiple companies in the same market work together to fix prices. What you described seems to be a normal negotiation. How is pricing not protected by free speech laws? Is there an NDA involved?

I admit ignorance of EU Competition Laws. I'm genuinely interested in the answers to these questions. I'm not trying to be argumentative.

price fixing doesnt have to done on the big scale can be done on the small scale as suggested above , the idea is to make competition fair if you know what your competitor is selling at and its not in the public domain you have an un fair advantage and can price him out of the market.
we dont really have free speech laws like in america its not in a constitution so doesnt apply. as for a non disclosure agreement you may sign one with you own company, i had to sign one to say i would disclose pricing to the competition.

What information can be exchanged between competitors?

The factual/economic background of each market needs to be taken into account, as some are inherently more transparent than others.

However, exchange between competitors of information which is not in the public domain and concerns the parameters of competition, such as resale price, production capacity or costs is more likely to be caught by competition rules than exchange of information that is commercially less sensitive.

thats a bit from EU competition law, to be fair its quite interesting to go through or maybe ive just got an odd mind

 

[AaronEdwards]

Yeah, I'll upload a recent XBLA contract. And the NDA too!

How do you think MS monetize the Xbox?

Here's another article from 2008 about how M$ play the system.

http://www.gamasutra.com/php-bin/news_index.php?story=19620


C.

2008? Isn't that also like 3 years ago?You don't have anything more current? Because, you know, the fact that there isn't it anything newer might actually mean that what was true in 2008 isn't anymore.

Things change. Like Apple forcing a 30% AppleTax on companies.

 

[Carniphage]

2008? Isn't that also like 3 years ago?You don't have anything more current? Because, you know, the fact that there isn't it anything newer might actually mean that what was true in 2008 isn't anymore.

Things change. Like Apple forcing a 30% AppleTax on companies.

The information is up to date as dar as I am aware.
I think the PSN and WII Ware terms are a bit more favourable. But stll not as good as Apple.

I'd be surprised if they have changed.

C.

 

[BaldiMac]

price fixing doesnt have to done on the big scale can be done on the small scale as suggested above , the idea is to make competition fair if you know what your competitor is selling at and its not in the public domain you have an un fair advantage and can price him out of the market.

That's not what price fixing is though. Price fixing is collusion with competitors. Not pricing competitors out of the market.

we dont really have free speech laws like in america its not in a constitution so doesnt apply.

Not in a constitution, but freedom of speech is still guaranteed to some extent in all countries in the EU.

http://en.wikipedia.org/wiki/Freedom_of_speech_by_country#Europe

as for a non disclosure agreement you may sign one with you own company, i had to sign one to say i would disclose pricing to the competition.

So, maybe it was your NDA that prevents the disclosure and not any competition laws?

What information can be exchanged between competitors?

The factual/economic background of each market needs to be taken into account, as some are inherently more transparent than others.

However, exchange between competitors of information which is not in the public domain and concerns the parameters of competition, such as resale price, production capacity or costs is more likely to be caught by competition rules than exchange of information that is commercially less sensitive.

But you weren't talking about exchange of information between competitors, you were talking about an exchange of information between a buyer and a seller.

thats a bit from EU competition law, to be fair its quite interesting to go through or maybe ive just got an odd mind

I enjoy these type of discussions.

 

[quetzalcoatl]

Why does that matter? They are referring a customer and processing the payment.

No they are claiming they referred the customer. Show me how buying within the app directly correlats to being refered. There is no way to tell who brought the customer to whom just because you choose to click a button to buy it within the app. How many people were customers already and then buy an apple product find the app for said product? Apple did not refer that customer but they claim if you buy anything within the app that they did. And of course they only way to buy from within the app is from apple so they get a cut. How many people will just click it out of ease? Having nothing to do with being referred.

I know when I bought my iPad I wanted something that could read any format of books for the most part. I considered the nook color since I could root it and get the apps as well. But I liked the screen size of the iPad better. So I was brought to apple by all those other companies. Yet apple in their arrogance whats to assume that they brought me to those companies if I buy anything within the app. And how many customers like myself are out there? But unlike myself how many will not have a clue as to what they might be doing to the business that broght them to apple?

 

[Avalontor]

<snip>

They are letting the vendor gain access to the 50 million wealthiest people on the planet. Is there a cheaper way to get to that market?

C.

so much BS from one troll.

are you sure everyone with an iPhone is insanely wealthy?

everything you say from now on is considered useless because it comes from a raving lunatic fanboy, there is no other label for one who thinks iDevices are only for the wealthiest.

I got news for you, there is a much larger market out there then apples and it's called the world wide web and everyone that doesn't need their hand held is able to use that. Apple has nothing that cannot be bought elsewhere on the net.

 

[BaldiMac]

No they are claiming they referred the customer. Show me how buying within the app directly correlats to being refered.

No problem. The customer gives Apple the money. Apple gives the money to the developer in exchange for the customers information. The developer uses that information to provide content to the customer. That's a referral.

There is no way to tell who brought the customer to whom just because you choose to click a button to buy it within the app. How many people were customers already and then buy an apple product find the app for said product? Apple did not refer that customer but they claim if you buy anything within the app that they did. And of course they only way to buy from within the app is from apple so they get a cut. How many people will just click it out of ease? Having nothing to do with being referred.

That's the whole point. Apple's IAP is easier. That's part of what Apple is providing in exchange for the 30%. If not, then the customer could use the developers alternative purchase method. I'd be willing to bet that the purchase rate for IAP is significantly higher than the current alternatives.

I know when I bought my iPad I wanted something that could read any format of books for the most part. I considered the nook color since I could root it and get the apps as well. But I liked the screen size of the iPad better. So I was brought to apple by all those other companies. Yet apple in their arrogance whats to assume that they brought me to those companies if I buy anything within the app. And how many customers like myself are out there? But unlike myself how many will not have a clue as to what they might be doing to the business that broght them to apple?

I agree with you completely, other than the arrogance comment.

 

[slattery69]

That's not what price fixing is though. Price fixing is collusion with competitors. Not pricing competitors out of the market.

price fixing is price fixing doesnt have to be with the aid of competitors can be done with the aid of your customers, thus disadvantaging the market



Not in a constitution, but freedom of speech is still guaranteed to some extent in all countries in the EU.

http://en.wikipedia.org/wiki/Freedom_of_speech_by_country#Europe

it is but law takes precedent over the guarantee i couldn't go out and make racist remarks in public and claim freedom of speech as there are law which would rightly prevent me from such things


So, maybe it was your NDA that prevents the disclosure and not any competition laws?

no the NDA was re wrote in light of the changes to competition law


But you weren't talking about exchange of information between competitors, you were talking about an exchange of information between a buyer and a seller.

your buyer can still be your competitor at the same time. look at apple im sure they have deals with google for search bar in ios let are still competitors. the rules apply be it competitor or non competitor the law doesnt seem to make the distinction

I enjoy these type of discussions.

yes and it makes a change from the he said she said that the thread turned into , much like the readablity one has gone by a quick flick through it

the repercussions are quite good if your found breaking it as well-
Consequences of breach

Contravention of Chapter I or Article 101 can have serious consequences for a company:

firms engaged in activities which breach these provisions can face fines of up to 10% of group global turnover;
provisions in agreements which breach Chapter I or Article 101 are void and unenforceable (which may lead to the entire agreement being unenforceable);
firms in breach of Article 101 or Chapter I also leave themselves exposed to actions for damages from customers and competitors who can show they have been harmed by the anti-competitive behaviour; and
breach of Chapter I can result in individuals being disqualified from being a company director and lead to criminal sanctions.

a company i use to work for fell foul of this and had some dawn raids on there homes and offices

 

[BaldiMac]

price fixing is price fixing doesnt have to be with the aid of competitors can be done with the aid of your customers, thus disadvantaging the market

I can't find anything using Google that supports this claim. Any links?

your buyer can still be your competitor at the same time. look at apple im sure they have deals with google for search bar in ios let are still competitors. the rules apply be it competitor or non competitor the law doesnt seem to make the distinction

That would be a different case. I assumed in your original scenario that you and your buyer are in different markets.

the repercussions are quite good if your found breaking it as well-
Consequences of breach

Contravention of Chapter I or Article 101 can have serious consequences for a company:

firms engaged in activities which breach these provisions can face fines of up to 10% of group global turnover;
provisions in agreements which breach Chapter I or Article 101 are void and unenforceable (which may lead to the entire agreement being unenforceable);
firms in breach of Article 101 or Chapter I also leave themselves exposed to actions for damages from customers and competitors who can show they have been harmed by the anti-competitive behaviour; and
breach of Chapter I can result in individuals being disqualified from being a company director and lead to criminal sanctions.

a company i use to work for fell foul of this and had some dawn raids on there homes and offices

I still don't see how knowing a competitors prices is unfair or anti-competitive.

 

[slattery69]

I can't find anything using Google that supports this claim. Any links?



That would be a different case. I assumed in your original scenario that you and your buyer are in different markets.



I still don't see how knowing a competitors prices is unfair or anti-competitive.

im sure ive got some stuff in the office so ill dig it out .

doesn't matter if your in competition or not the rules still apply its all designed to promote fair business

knowing your competitors pricing if there not in public domain puts you at a massive advantage and is both un fair and anti competitive. if youve got there pricing you can structure deals to undercut them and force them out of the market, business should be conducted on a level playing field.
why do you think that knowing the competitions pricing model is fair and helps foster a level playing field ? what are the rules in your country relating to competition law ?

 

[quetzalcoatl]

No problem. The customer gives Apple the money. Apple gives the money to the developer in exchange for the customers information. The developer uses that information to provide content to the customer. That's a referral.



That's the whole point. Apple's IAP is easier. That's part of what Apple is providing in exchange for the 30%. If not, then the customer could use the developers alternative purchase method. I'd be willing to bet that the purchase rate for IAP is significantly higher than the current alternatives.



I agree with you completely, other than the arrogance comment.

Except it is not easier. I have had my amazon account for over 10 years and use one click buying. Even under the new system it will have to have a way for me to find books to buy. Right now it uses amazons site, I am guessing under the new system it would use the app store, we really don't know. But I have to find it then click that I want to buy it enter my password from app store. Under current system I have to find the book click the button to buy it enter my password. How is one easier than the other? They are the same.
But apple will not allow the seller to have in app buying except through them. I am sure in app purchaces are higher than out of app but that is because people are like water and will take the path of least resistance. But because it is done within the app once again has nothing to do with them being referred by apple.

That is not a direct corelation to being referred. A refferal is someone being pointed at something that they would not have gone to in the first place. Kindle ebooks had a large impact on me choosing the iPad. So anything I would buy through the app, if there was a choice, would not be apple referring me to amazon but me using the service that brought me to apple in the first place. And this is where the arrogance comes into play. They assume anything that you buy through the app that is something that they had a hand in doing. When if it was not for the item being bought through the app you might not of ever bought their device to begin with.

Now I understand this will not pertain to everyone or even me in all cases. But I currently can't think of any service I use on my iPad that I was not already using before I got it. That includes netflix, kindle, pandora and kobo just to name a few.

 

[AaronEdwards]

The information is up to date as dar as I am aware.
I think the PSN and WII Ware terms are a bit more favourable. But stll not as good as Apple.

I'd be surprised if they have changed.

C.

No. You don't have any clue about the current terms. And you "think" that the others have better terms, yet not as good as Apple.

Listen to yourself. You have no clue what so ever.

 

[BaldiMac]

im sure ive got some stuff in the office so ill dig it out .

doesn't matter if your in competition or not the rules still apply its all designed to promote fair business

knowing your competitors pricing if there not in public domain puts you at a massive advantage and is both un fair and anti competitive. if youve got there pricing you can structure deals to undercut them and force them out of the market, business should be conducted on a level playing field.
why do you think that knowing the competitions pricing model is fair and helps foster a level playing field ? what are the rules in your country relating to competition law ?

For the most part, antitrust laws only apply when a company has "significant and durable market power." Basically, they have to dominate the market enough to be able to control pricing outside of normal market forces.

How is knowing the competitions pricing unfair? How is it anti-competitive? It lets you compete on price. It lets you underbid them. But they could come back and underbid you. That's how we get lower prices. At some point, someone can't underbid because they won't make enough money for the transaction to make sense. It obviously can't be too unfair or anti-competitive considering that (I assume) most retail stores publish their prices. Why is it normal for retail stores and unfair or anti-competitive for b2b?

This is actually a significant part of why the Mac is so much more profitable than other PC companies. They aren't selling the same thing as anyone else, so they have a different value. They can be slightly more expensive than a Windows box, because Mac OS X adds value. But they can't price it obscenely, or people will find more value in a Windows PC.

Except it is not easier. I have had my amazon account for over 10 years and use one click buying. Even under the new system it will have to have a way for me to find books to buy. Right now it uses amazons site, I am guessing under the new system it would use the app store, we really don't know. But I have to find it then click that I want to buy it enter my password from app store. Under current system I have to find the book click the button to buy it enter my password. How is one easier than the other? They are the same.

If it's not easier, then people won't use it, and it's not really a big deal.

But you're missing how it's easier. It's right there in the app. And, more importantly, it isn't just Amazon. It could be many, many apps. Is it easier to have one account with iTunes and not share your credit card with anyone else, or have 5 or 10 or 20 or more different accounts? I feel more comfortable with one company having my credit card than 20 companies.

But apple will not allow the seller to have in app buying except through them. I am sure in app purchaces are higher than out of app but that is because people are like water and will take the path of least resistance.

Yep. That's my point.

But because it is done within the app once again has nothing to do with them being referred by apple.

That is not a direct corelation to being referred. A refferal is someone being pointed at something that they would not have gone to in the first place. Kindle ebooks had a large impact on me choosing the iPad. So anything I would buy through the app, if there was a choice, would not be apple referring me to amazon but me using the service that brought me to apple in the first place. And this is where the arrogance comes into play. They assume anything that you buy through the app that is something that they had a hand in doing. When if it was not for the item being bought through the app you might not of ever bought their device to begin with.

You are using Apple's service (IAP) to make a purchase. If you don't want to call that a referral, fine. I was just using referral to explain a similar value to what Apple is providing.

Now I understand this will not pertain to everyone or even me in all cases. But I currently can't think of any service I use on my iPad that I was not already using before I got it. That includes netflix, kindle, pandora and kobo just to name a few.

Cool.