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

[MarcelV]

Good! This new subscription program by Apple is completely illegal.

Illegal based on what? I don't think asking someone a commission is illegal, and I doubt the high percentage is illegal as well. And neither is the requirement that in-app is available for the same price as when you subscribe outside of the eco-system. Lots of retail pricing in the world is done that way.

If companies don't want to play Apple's game, they can move on to other platforms. Same as that some companies only make Wii games, and others XBox games or PS3 games.

And if Apple thinks they will loose too much market share by companies refusing the provide applications to their eco-system, they can lower their commission rates if they want to. Or they can be just stubborn and do nothing.

Said that, you may not like it and disagree with Apple's percentages or requirements. But I doubt it is illegal. It's not that there aren't alternatives, or that Apple is using their weight to push others out of the market. Because only then monopolies are illegal. It's not illegal to be the only one providing a product. It's illegal to prevent competition. None of which applies to Apple.

 

[Popeye206]

I'm being 100% honest. The reason our company is pulling out is because they can't give Apple 30% of their revenue. All of their apps will be pulled. 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 no reason to lie... I'll let the App Store and the many companies that will pull from it speak for itself.

I guess I don't get it.... you're not selling a subscription, someone is paying their bill or interacting with their account. There's noting to sell in iTunes so why would you give 30%. Something isn't adding up here.

 

[RalfTheDog]

If someone buys through iTunes (which is the ONLY place they get their 30%) it's no different than walking into Walmart and buying something.

This whole discussion is silly.... why not go complain next to the Mall Management near you and protest them taking a cut of sales from their stores. You realize many malls do this?

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.

 

[numbersyx]

I don't think the courts are that much of a threat. The court of public opinion is a whole different ball game though.

Would not take it for granted that the courts or the European executives are no threat. They are and they act quickly: look at their handling of the Microsoft abuse of internet browser.

Apple has been very silly on this one particularly on a nascent market where they have plenty of competition coming down the pipe. The net result of their move - disingenuously touted as an advantage to the consumer - will to be raise prices as publishers look to pay for the 30 per cent increase.

 

[wisty]

No it isn't. It's perfectly legal. The only question is whether it is legal for a company with Apple's level of market control to do it. Now given that the level of market control Apple has is below 50% and falling, I'm hard pushed to see how this could be seen as even remotely an anti-trust issue.

It's a question as to what "market" is. If I own an iPhone, I don't care about the market for Android Apps, they aren't compatible. If Apple has a monopoly (near enough) on the market for iPhone Apps, they shouldn't misuse that power.

It's just like GM can't make restrictions on 3rd party GM parts, because even though Ford makes spares as well you can't put them in a GM car.

 

[Oletros]

I guess I don't get it.... you're not selling a subscription, someone is paying their bill or interacting with their account. There's noting to sell in iTunes so why would you give 30%. Something isn't adding up here.

AT&T Navigator is a subscription app, isn't?

 

[adbe]

I don't know if it is legal or not, I have only said that any companie can't make the rules they want, they must be legal.

And time and the regulator agencies will tell if the new App Store rules are legit or not. Perhaps in USA are legal and in Europe no, or viceversa

There are no true hard and fast rules to the definition of anti-trust, but the case law that informs is broadly similar across Europe and the US.

Generally speaking, having a monopoly is *not* illegal. If the monopoly was lawfully gained, it's yours to keep[1]. Using said monopoly to muscle your way into other markets is bad. The questions then are fairly simple:

1) Is Apple a monopoly in digital media distribution (outside of music and maybe not even there).

2) If so, is Apple trying to break into an existing market via that monopoly.

Apple will argue that a) they aren't a monopoly as the market is too small, they don't command a convincing lead, and their competition is thriving, and b) that there is no existing market - the iPad creates a new market that is distinct from web based subscriptions etc.



[1] Which does not preclude politicians from meddling when they think they can score points, but that's not the domain of the courts.

 

[rtztgue]

I do not think this will be much of an issue with legality. While that may be settled by the courts and Apple, it may become a moot point before that. Apple has a big share, but this marketing has been done before. Think of VHS vs Beta or the original Apple vs the PC. Apple has a great product and good quality, but in order to maintain that they have had to keep it restricted. The pc went with open architecture... many hardware manufactures such as IBM, HP, DELL and no-namers... same with the Software end. The machines had a wide variety of hardware and software quality, but much more appealing and versatile.
We are seeing the same here. Apple has the lions share at the moment and I am sure they will continue with a quality product and software line. But others are catching up with Android and other platforms as well as everyone else ramping up with new tablets and phones. Give it time and Apple will get passed again. If not by a particular company, then by the industry as a whole..... I wonder if one company will rise to the top. Might be time for a new google or microsoft. I can certainly see the potential.

 

[adbe]

Would not take it for granted that the courts or the European executives are no threat. They are and they act quickly: look at their handling of the Microsoft abuse of internet browser.

Sure, but MS were flat out on the wrong side of anti-trust precedent. MS weren't even really fighting for their innocence, mostly they were stalling on the payments, hedging the damage they could do until forced to stop it, and arguing the toss over how much they should be fined.

Apple has been very silly on this one particularly on a nascent market where they have plenty of competition coming down the pipe. The net result of their move - disingenuously touted as an advantage to the consumer - will to be raise prices as publishers look to pay for the 30 per cent increase.

That I don't argue. I think Apple are being douches, but I don't think their action are anti-competitive under normal understandings of that area of law.

 

[Oletros]

If someone buys through iTunes (which is the ONLY place they get their 30%) it's no different than walking into Walmart and buying something.

Yes, it's different because nor the content, nor the marketing, nor the bandwith and nor the hosting is done by Apple.

The correct analogy is that AT&T gets a 30% cut from any iPhone app because this iPhone is using AT&T coverage.

 

[thunderclap]

No it isn't. It's perfectly legal. The only question is whether it is legal for a company with Apple's level of market control to do it. Now given that the level of market control Apple has is below 50% and falling, I'm hard pushed to see how this could be seen as even remotely an anti-trust issue.

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.

 

[Oletros]

There are no true hard and fast rules to the definition of anti-trust, but the case law that informs is broadly similar across Europe and the US.

Generally speaking, having a monopoly is *not* illegal. If the monopoly was lawfully gained, it's yours to keep[1]. Using said monopoly to muscle your way into other markets is bad. The questions then are fairly simple:

1) Is Apple a monopoly in digital media distribution (outside of music and maybe not even there).

2) If so, is Apple trying to break into an existing market via that monopoly.

Apple will argue that a) they aren't a monopoly as the market is too small, they don't command a convincing lead, and their competition is thriving, and b) that there is no existing market - the iPad creates a new market that is distinct from web based subscriptions etc.



[1] Which does not preclude politicians from meddling when they think they can score points, but that's not the domain of the courts.

Oh, no, at least in Europe a company can have a fine not being a monopoly but for anticompetitive practices.

 

[adbe]

It's a question as to what "market" is. If I own an iPhone, I don't care about the market for Android Apps, they aren't compatible. If Apple has a monopoly (near enough) on the market for iPhone Apps, they shouldn't misuse that power.

It's just like GM can't make restrictions on 3rd party GM parts, because even though Ford makes spares as well you can't put them in a GM car.

That's a close analogy, and you're right: "It's a question as to what 'market' is."

The key point is that in many cases, content can equally be delivered by the web, or bundled as part of an external subscription (print news offer free digital subscriptions are allowed).

Moreover, you may not care about Android, but the market does, and if Apple prices itself out of the market, then this discussion becomes moot.

 

[tigres]

I'm being 100% honest. The reason our company is pulling out is because they can't give Apple 30% of their revenue. All of their apps will be pulled. 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 no reason to lie... I'll let the App Store and the many companies that will pull from it speak for itself.

Well, there is some news right there.

 

[The Phazer]

No it isn't. It's perfectly legal. The only question is whether it is legal for a company with Apple's level of market control to do it. Now given that the level of market control Apple has is below 50% and falling, I'm hard pushed to see how this could be seen as even remotely an anti-trust issue.

Apple's level of market control for mobile application distribution is 84%, not 50%. More than enough in Europe to qualify for having monopoly level market power.

Remember that the reason that applications built using Flash were allowed into the App Store was because Apple U-turned when threatened with a European anti-competition case over it. Apple don't seem to be nearly as confident as you are that they are in the clear monopoly wise.

Also remember that monopoly market power in other areas makes regulators more inclined to act. The EU already found Apple had monopoly market power in digital music distribution during it's price fixing investigation into iTunes. Hence this issue will not be looked at upon kindly, especially given the angle that these terms make it impossible to run a music subsciption service on the platform, opening the market up for Apple to launch one to build on their existing music sales monopoly. That is the sort of thing that makes constructing an anti-trust case very easy indeed.

Phazer

 

[adbe]

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.

msrp.

 

[RalfTheDog]

Just a random thought, how about replacing a subscription with an in app purchase of one year of service?

 

[Plutonius]

Oh, no, at least in Europe a company can have a fine not being a monopoly but for anticompetitive practices.

It's just more EU protectionism against a US company.

 

[thunderclap]

msrp.

Manufacturer Suggested Retail Price? That's not what Apple is doing.

 

[Popeye206]

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.

Sorry... Wrong. You're mis-informed.

Go back and read the official response... it said clearly.... the publisher can sell on their own site and pay nothing to Apple. ALL Apple says is, if you allow people to sign up for a subscription from your APP, then you MUST also have an option to sell through iTunes and that it has to be at the same price or lower in iTunes.

Is that it? Are people not reading and don't know what's been said?

 

[FriarNurgle]

It's not the policy as such that is raising questions, it is the issue that the iOS (especially the iPad) is a major player in the market and companies who need that 30% as their profit margin cannot bring anything to the App Store, so they are essentially stuck with just Android, Symbian, BlackBerry OS and Windows 7 Phone OS etc, and the whole point is that due to Apple's policy, companies are losing out big time because Apple know that they can maintain the 30% cut because they own a considerable amount of the OS market

I'm not sure why this is such an issue. It's the price of doing business. I can buy a song on iTunes or I can buy it at the mall. Guess which is easier and cheaper? I can buy PvZ through the app store or buy it for my PC. Guess which is easier and cheaper. Looks at the all the offerings at Steam. Apple isn't instructing these customers what they can charge.

Instead of thinking about it like These companies can't sell their stuff cheaper outside the app store, maybe we should look at it like they can't charge more on the app store.

And why would they? You want to compete and get the high volume sales in a high traffic area... then you need to price your products accordingly and the trend indicates Apple's policy is the status quo.

 

[RalfTheDog]

It's just more EU protectionism against a US company.

Only if EU companies are not required to live by the same rules.

 

[BaldiMac]

steve jobs did the same thing with the Mac back in the day. he got too greedy back then as well and all the developers went to windows

That's pretty amazing considering that Steve Jobs did not even work for Apple in the time period that you are referring to.

 

[Nothlit]

If someone buys through iTunes (which is the ONLY place they get their 30%) it's no different than walking into Walmart and buying something.

This whole discussion is silly.... why not go complain next to the Mall Management near you and protest them taking a cut of sales from their stores. You realize many malls do this?

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.

 

[i hate phones]

Question is... ? why don't they go after Sony for the PS3 or Microsoft for the Xbox not allowing ANY SERVICE/APP/FEATURE. Will Sony Allow iTunes on the PS3?? Nope. It would hurt their PSstore.

Perhaps they should allow itunes on the xbox and ps3. Just force apple to let sony and xbox handle the billing and keep 30%. Wait that would leave apple making nothing wouldn't it?