This week in Apple’s publisher relations

The secrtion covering the new subscription options in the Terms of Conditions in Apple's App Store

Since my last post on Apple’s subscription plans quite some things have happened, especially in this week:

Monday

On monday  the NYT reported: “Apple Moves to Tighten Control of App Store” that the iOS version  the Sony ereader app was rejected by Apple.

Some application developers, including Sony, say Apple has told them they can no longer sell e-books within their apps unless the transactions go through Apple’s system. Apple rejected Sony’s iPhone application, which would have let people buy and read e-books from the Sony Reader Store.

But Steve Haber, president of Sony’s digital reading division, said on Monday that Apple had told his company that from now on, all in-app purchases would have to go through Apple.

Obviously, in the wake of the situation this story was taken up within minutes by quite a number of  outlets, e.g:

PaidContent: Bad News For The Digital Newsstand: Apple Rejects Sony Reader App

The Sony Reader Store is designed to work both with Sony Reader devices and third-party hardware. Installed on other devices, such as an iPad, the Sony Reader app acts as a digital locker and lets users access their e-books, magazines and newspapers, as well as purchase more content.

The move throws into question what might happen with similar digital reading apps, such as the popular Amazon’s Kindle store. Like Sony Reader, the Kindle store is designed both to use with Amazon’s Kindle devices as well as third-party products for which the Kindle app is available. Up to now, users have been able to use the Kindle app to read already-downloaded/purchased content; as well as buy new publications.

AppleCore: App Store bans direct sales and outside content, is Kindle next? (updated)

Even more troubling is the news that Apple is telling app developers that providing access to content purchased outside the App Store is also a no-no.

This is a dramatic change of policies for Apple that could have huge implications on other contents that provide access to “outside content.” Amazon’s Kindle app, for instance, gives users access to books purchased outside of the Apple ecosystem.

MG Siegler on his private blog merely commented that this is normal business.:

ParisLemon: Apple States The Obvious And Inevitable

In other news, most restaurants still don’t want you bringing in food from other restaurants to eat there.

and reminds that Amazon doesn’t offer  neither an Apple nor an Sony Store can be found on the Kindle.

Can you read iBooks on the Kindle? What about Sony’s books? Nope.

Rem.: The same is true for Sony reading devices, on which neither an Apple nor a Kindle store can be found.

Tuesday

On Tuesday Apple issued a “clarification” basically saying that the rules of the store have not changed, but they are now starting to enforce them. As Jim dalrymple reported on The Loop: Apple responds to Sony in-app purchase report

“We have not changed our developer terms or guidelines,” Trudy Muller, an Apple spokeswoman, said Tuesday. “We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase.”

This was also “well received” within the media ( a lot of them drawing the obvious connection to Amazons’s Kindle app).

PaidContent: In Wake Of Sony’s Complaint, Apple Explains In-App Requirements

But this also raises more questions. For example, if Amazon, or another “app store” operator (selling books, games, music or anything else, for that matter) is already sharing revenue on apps within it, will that secondary revenue share be a split of that 70 percent that the publishers are getting from Apple?

And does this mean that if Sony adds the iTunes IAP into the Reader app (which might be messy or confusing on something the size of an iPhone screen), that everything will be fine?

TechCrunch: Apple: Nothing Has Changed. Except For This One Thing.

Now, Amazon’s Kindle app doesn’t conduct its purchases through the app itself — users are instead kicked off to a browser where they actually buy their books, and that content is then synced to the Kindle app. Apple’s rule is worded vaguely enough that it can claim this workaround is in violation of the guidelines. But it obviously hasn’t been enforced like this before now, so the notion that nothing has changed is clearly false.

It also doesn’t make a whole lot of sense from the user’s perspective. Apple is effectively telling developers that they can offer two purchase flows for content: one through the browser, and another via in-app purchases. Apple is obviously assuming people will prefer the latter because it’s quicker and simply requires the user to enter their Apple password. But developers have an incentive to push users toward the browser flow so that they don’t have to give Apple a 30% cut of each purchase. Which could mean we start seeing some bizarre checkout flows that are anything but user friendly.

John Gruber also offers a summary in his post on Daring Fireball: Oceania: We Have Always Required Books From the Eurasian E-Bookstore to Be Sold Through Our In-App Purchasing System. He also asks some follow up questions:

Does the new policy really only apply to “books”, specifically? Apple gave the identical statement to several publications, each time specifically saying “books”. I would assume, though, that this applies to any purchased content, not just books. Books are simply the first type of content for which these rules are being applied.

What about pricing? Can Amazon comply with these new rules by selling its Kindle books through Apple’s in-app purchasing system with a 43 percent markup, to account for Apple’s 30 percent cut through the in-app API? Consider a Kindle book that Amazon sells for $10. Can they sell it for $14.30 through in-app purchasing? That way Amazon’s cut would remain $10. Or will Apple insist on price matching, meaning Amazon can only comply by accepting 30 percent less revenue on books purchased in-app compared to those purchased from Amazon directly.

Jim Dovey, Apple Platforms Team Lead at Kobo in Toronto, Ontario writes from the perspective of a store provider, also reminds us of the obvious economic consequences in his post:

iBooks & the App Store vs. The Rest (Google Cache Version):

At present, all in-app purchases require payment of 30% of list price to Apple. At present, this represents 100% of the profits granted to us eBook distributors by the publishers. Therefore, under the present rules, the details provided by Apple spokesperson Trudy Muller would require that 100% of our profit on a sale go to Apple:

Wednesday

On Wednesday Rupert Murdoch launched his daily iPad newspaper “TheDaily”. The daily is also the first iOS app that is able to use  Apple’s news subscription plan. Apple’s Eddy Cuestated twice, one in the presentation and once in the Q & A that subscriptions are going to be available soon to other publishers. See for example Engadget’s live blog:

11:29AM When will the subscription model be available to other publishers? Eddy Cue: Available on the Daily today, and there’ll be an announcement for other publishers soon.

This was followed by another round of reporting.

Wall Street Journal: Apple to Tighten Control on Content

Apple is now requiring publishers that conduct sales of content—which includes books as well subscriptions—to offer a way to do so within apps, which will be handled by the iTunes billing system. The policy, which the company says isn’t new, was cited in Apple’s rejection of a Sony Corp. app for reading digital books earlier this week.

Yudu, a U.K. developer of digital editions for publishers, said it recently was informed by Apple that newspaper and magazine apps that don’t take payments through the iTunes store will be rejected, beginning March 31. The company was alerted to the impending change when it applied for a new app and received an email outlining Apple’s plans, Yudu Chief Executive Richard Stephenson said.

ReadWriteWeb: New Subscription Service Tightens Apple’s Control Over Content:

Apple traditionally takes a 30% cut from developers’ app sales, but it’s not known what the company’s share of subscription revenues would be. For its part, Apple contends that by managing the billing, it will help publishers sell more content.

Thursday

On Thursday the European Publishers raised their voice again, by telling the media that they “felt betrayed” and are planning a summit on February 17th. See e.g.

Paid Content: Apple’s In-App Rules: ‘Betrayed’ European Publishers Convene A Summit:

Grzegorz Piechota, the European president of the International Newsmedia Marketing Association—which represents some 5,000 members in 80 countries worldwide—told us that the INMA will be meeting with the European Online Publishers Association and the magazine association FIPP in a invitation-only roundtable on February 17 in London, to compare notes on Apple’s new subscription charging rules.

Up to now, a lot of publishers have been able to send users to an HTML page to manage their subscriptions, but the recent change in how subscriptions can be managed for newspaper and magazine apps—with new rules apparently coming in that mean a publisher has to also offer users the option to pay by Apple’s own in-app payments service, has some publishers feeling “They’ve been betrayed by Apple. Some are confused by Apple’s actions; but some say they feel betrayed.”

Why the confusion? According to Piechota, Apple has been inconsistent how it has been communicating, and implementing, its new policies. “Apple said yesterday that that in their policy with Sony Reader, they are not changing anything, just enforcing existing rules. But when they talk to publishers direct, they are saying something else.

“Apple has been contacting some publishers, and not contacting some. Some get emails, others get informal phone calls,” he said. “The whole process of accepting or rejecting apps is not transparent. It’s very hard to explain why some apps are being accepted and some are being refused; some apps allow you to read content that is bought somehwere else and others that won’t let you do this.”

While i agree with Piechota that Apple is inconsistent in its communication and still a lot of questions are open. I happen to to disagree on the following part:

Interestingly it seems like they did not bother to read the respective section in the changed App Store Terms and Conditions of the Apple App Store (see above screenshot). They all had to accept these T & C’s before they were able to download “The Daily” which i bet they all did. This sections is definitely not for “The Daily” only and publishers should be able to make an educated guess what kind of subscriptions they will get and what kind of user data they could expect to get from Apple. So to make sure they are able to read them again. Here they are (emphasis mine):

iTunes US

IN-APP SUBSCRIPTIONS

Certain App Store Products may include functionality that enables you to purchase content on a subscription basis (“Paid Subscriptions”). Paid Subscriptions are non-refundable. Paid Subscriptions will automatically renew for the applicable time period you have selected, and your Account will be charged no more than 24-hours prior to the expiration of the current Paid Subscription. You may cancel automatic renewal by selecting Manage App Subscriptions in your Account and selecting the subscription you want to modify. The auto-renew feature of the subscription will be turned off if the Licensor increases the price of the subscription. Certain Paid Subscriptions may offer a free trial prior to purchase. If you decide to purchase a Paid Subscription prior to the end of the free trial period, your Paid Subscription will start immediately. Also see additional information about the Paid Subscription offer at the point of sale within the App Store Product. We may ask for your permission to provide the name, email address and zip code listed in your Account to the Licensor so that the it can send you marketing messages about its own products in accordance with its publicly posted privacy policy. Once the Licensor has this information, it will be treated in accordance with the Licensor’s privacy policy. We encourage you to learn about the privacy practices of the Licensor before agreeing to give them your personal information. For more information, please review the Licensor’s privacy policy or contact the Licensor directly.

And for my german readers iTunes Germany:

IN-APP ABONNEMENTS

Bestimmte App Store Produkte können Funktionalitäten enthalten, die es Ihnen ermöglichen, Inhalte auf der Basis eines Abonnements zu erwerben („Bezahlte Abonnements“). Bezahlte Abonnements verlängern sich automatisch um die von Ihnen gewählte Laufzeit. Ihr Konto wird nicht mehr als 24 Stunden vor dem Ablauf des derzeitigen Bezahlten Abonnements belastet. Sie können die automatische Verlängerung ausschalten, indem Sie in Ihren Kontoeinstellungen auf „App Abos verwalten“ gehen und das Abonnement auswählen, das Sie ändern wollen. Die automatische Verlängerungsfunktion des Abonnements wird ausgeschaltet, wenn der Veröffentlicher den Preis für das Abonnement erhöhen. Gewisse Bezahlte Abonnements bieten gegebenenfalls eine gratis Testphase vor dem Kauf an. Wenn Sie sich dazu entschließen, ein Bezahltes Abonnement vor dem Ende der gratis Testphase zu erwerben, beginnt Ihr Bezahltes Abonnement unverzüglich. Zusätzliche Informationen über ein Angebot zu Bezahlten Abonnements gibt es auch beim Kauf desselben über das App Store Produkt. Wir holen gegebenenfalls Ihr Einverständnis ein, um den in Ihrem Konto angeführten Namen, die entsprechende Emailadresse und Postleitzahl dem Veröffentlicher zur Verfügung zu stellen, damit Ihnen dieser in Übereinstimmung mit seiner Datenschutzrichtlinie Werbung zu seinen eigenen Produkten zusenden kann. Wenn der Veröffentlicher diese Informationen erhält, werden diese in Übereinstimmung mit seiner öffentlich bekanntgemachten Datenschutzrichtlinie verarbeitet. Wir empfehlen Ihnen, sich mit den Datenschutzpraktiken des Veröffentlichers vertraut zu machen bevor Sie Ihr Einverständnis erteilen, dass Ihre personenbezogenen Daten an diesen weitergegeben werden. Für weitere Informationen siehe die Datenschutzrichtlinie des Veröffentlichers oder kontaktieren Sie den Veröffentlicher direkt. Kaufpreisrückerstattungen (die anteilsmäßig berechnet werden und dabei die von Ihnen bereits erhaltenen Inhalte des Bezahlten Abonnements berücksichtigen) sind innerhalb von 14 Kalendertagen ab dem Kauf des Bezahlten Abonnements möglich. Für diesen Zweck steht das Email-Formular unter http://www.apple.com/de/support/itunes/ zur Verfügung. Es gibt keine weiteren Kaufpreisrückerstattungen, keine Rückgabe oder Vertragsaufhebung nach dem Kauf.

Friday

It looks like today it is going to be a quiet one. At least nothing of significance happened until now.

Outlook

Overall i think my predictions from the last post are still valid and i’m going to argue about this in a follow up post.

This post will also include some technical difficulties i see when Amazon, Sony etc will try to adapt to the In-App Purchase rule and some thoughts about the problems third party reading apps will face, as well as some thought experiment that shows that under some interpretation iBooks will violated Apple’s stated rules.

All this is more or less subject to the interpretation on “if an app offers customers the ability to purchase books outside of the app” phrase in Apple’s statement.

Economically the big question for me right now is if Apple is going to change it’s stance wrt. the percentage of it’s cut from in-app purchases right now. As i’ve argued in my last post, and others are arguing also, this rate should be definitely lower because Apple’s services are  of lower value. Ideally the rate should be closer to a billing service /credit-card payment provider than to 30%.

But the following passage from an interview with Rupert Murdoch after the launch of the daily  lowers my hopes for that:

PaidContent: Murdoch Hopes Apple Will Lower Its Share Of ‘The Daily’ Take:

Cavuto: I want to ask you, how much are you making on that?  Because it’s $0.99, but typically, typically Apple takes a third.

Murdoch:  That’s correct.

Cavuto: Now, is it taking a third here?

Murdoch:  At least the first year, yes.  We’ll be getting $0.70.

Cavuto: All right.  But it goes—so you say at least the first year.  It goes down after that?

Murdoch: We—no.  Up, we hope.

Cavuto: But down for Apple.

Murdoch: That’s subject to negotiation.

Other reasons for not being bullish on lowering the cuts are that both Google and RIM introduced In-App Purchases to their AppStores this week see e.g. here and here). Yes , they both didn’t have  In-App Purchase until now. And both are following Apple’s route to use the same cuts as for the initial delivery of the App: 30% in Google’s case and 20% in RIM’s case.

But maybe i’m taken by surprise and Apple is lowering this rate when it is opening up the subscriptions to all publishers in the app store. And this has to happen until Feb. 16th because than the sponsored period of “The Daily” will end.