9 ms·

Rhapsody passes on Apple's "economically untenable" sub plans

72 points by msabalau 16y ago

SPOTINT 16y ago
AWESOME!
cageface 16y ago
It's deeply disturbing that the people at Apple feel entitled to radically change the rules of the game whenever it suits them. This is like an extortion racket. Submit to their demands today only to find out what new whim strikes them tomorrow. How can iOS legitimately be called a "platform" when Apple pulls a leg out from under it every six months? Thank god Android scares them. I can only imagine what they'd dare without any competition.
- czhiddy 16y ago
  "I can only imagine what they'd dare without any competition." I don't remember anything evil during the height of the iPod era.
  - sudont 16y ago
    Well, there was the iPod accessory rings to jump through, but that’s fairly standard. What’s seen as evil here is really a preference for the user over the content provider, and it’s the content providers who are whining about not getting everything their way. You never hear any users complaining about subscription plans not automatically giving away their information.
    - eavc 16y ago
      How is effectively booting popular services from their devices in the interest of their customers?
      - sudont 16y ago
        Don't try and sell it like that. The "services" you obliquely reference (name one) are most likely intended be used at the OS level, which is against the way the platform is built. The entire model of iOS is a node that downloads from several sources, which 3-rd party content providers are calling foul about. The platform is effectively binary: it either works or it doesnt, out of the box. There aren't any drivers or codecs to install. If you don't like it, build your service for some other platform. I hear there's one that's got more marketshare.
- gvb 16y ago
  See Tim Bray's essay, which should be titled "Are You a Sharecropper?" http://www.tbray.org/ongoing/When/200x/2003/07/12/WebsThePlace http://www.tbray.org/ongoing/When/200x/2003/07/12/WebsThePla... tl;dr: "[Apple] owns the ground you’re building on, and if they decide they don’t like you, or they can do something better with the ground, you’re toast." In this case, if they decide the rent covers your garden plot as well as the fields, you ante up or die.
  - cosmicray 16y ago
    Apple owns a very fertile piece of soil. You can grow 10x the crop there that you can grown any where else. Where do you want to farm your crop ?
    - joe_the_user 16y ago
      Ah yes... "Apple owns a very fertile piece of soil. You can grow 10x the crop there that you can grown any where else." And they can change your rent to 11x normal - just before you sell your crops... "Where do you want to farm your crop ?" Go question but it is actually a real question, not a rhetorical question... Do you want to a golden share cropper or do you want to be independent. There may be no easy answer...
      - loewenskind 16y ago
        Simple solution: sell your crops where it is most profitable. Maybe with 11x normal it's still worth it. As soon as it's not, you switch.
- jodrellblank 16y ago
  Thank god Android scares them. Evidence?
  - cageface 16y ago
    http://androidandme.com/2010/03/news/rotten-apple-htc-sued-over-20-patents/ http://androidandme.com/2010/03/news/rotten-apple-htc-sued-o...
    - shaggyfrog 16y ago
      That link is almost 11 months old, and given all the furor we've heard about HTC and Apple suing the pants off each other during those last 11 months -- i.e. zilch -- I don't think this link supports that argument.
- loewenskind 16y ago
  >It's deeply disturbing that the people at Apple feel entitled to radically change the rules of the game whenever it suits them. What makes you think that's what they're doing? It could also be that they never intended for their platform to be used this way but didn't explicitly deny it because they didn't see this coming. I don't have any way of knowing that is the case, but I don't think you have anyway of knowing your opinion is right either.
dalton 16y ago
Given the challenges subscription services already face re:margins, giving away another 30% is game over. If this stands, the labels are probably going to have to give up on subscription services as a category, or lower their wholesale prices dramatically.
- JamieEi 16y ago
  Rhapsody doesn't have "another" 30% to give. Their margins are probably something like 5%. Crapple is demanding 30% of the sale price, which leaves Rhapsody with a 25% loss. Since that is economically infeasible, Apple is effectively mandating that they are the only ones who can sell content on their platform.
alanfalcon 16y ago
Time to pull the iOS app, build a mobile web app, and have your customers send e-mails to steve@me.com expressing their displeasure.
- anthonycerra 16y ago
  I'll do one better than email Steve. This will be my last iPhone.
  - georgemcbay 16y ago
    The iPhone 3G was my (first and) last iPhone because of other issues (the language lockdown). Actually not just my last iPhone but my last Apple Thing, period. Voting with your wallet is the ONLY thing one can do to really get their attention (governments could step in on anti-competitive grounds, but that's not really something we can help with short of contacting our representatives). If the user base just whines and moans while continuing to line up for the next shiny phone a week in advance of release to help Apple deliver record quarter after record quarter, Apple isn't going to change anything, they are just going to keep pushing and pushing. They've already shown that clearly in the past.. this is hardly the first questionable decision they've made in terms of controlling the iOS platform.
  - anthonycerra 16y ago
    My startup is sponsoring a campaign to raise awareness for this issue. www.mylastiphone.com
blinkingled 16y ago
Might work out well for Apple as do most things they do - Amazon pulls out, garden-dwellers dwell on whatever iBooks offers, Rhapsody and Pandora pull out - there is only iTunes! Apple is in a position where they can get very crafty and evil - just enough to get away with it all without being a monopoly - there is Google to help them there! Envious position for a company indeed!
zach 16y ago
Of course Rhapsody can't sell their stuff for a 30% margin. It's not their own stuff! They're trying to be the last link in a chain of 90/10 (or more) splits. They repackage record labels' repackaging of artists' content. Do you think the artists would find 30% economically untenable? The App Store is 70/30 because Apple can take things straight from content producer to customer. When the Apple takes the place of publishing, distribution, inventory, sales, payments and shipping, there's real value for that 30%. When all someone wants out of Apple is merely to process the payment and send things down the pipe, gee, who do they think they are? But that's not what Apple is actually holding themselves out as. Apple doesn't want to be in that kind of commodity market anyway. Seems reasonable to me.
- potatolicious 16y ago
  It's not always this way. Think about, say, a Pandora subscription - thin margins, but provides a real value added service that is well above and beyond that of a mere distributor. Can they afford to give Apple a 30% cut of all revenue? It's completely misguided to characterize all payment through a mobile app as cutting out the middleman. In a great number of cases (i.e. subscriptions) Apple role is nothing more than a payments gateway + lead generation. Does that make them deserving of 30% of your entire revenue stream?
  - zach 16y ago
    My point is that Apple doesn't see in-app payments as merely payment processing. They see them as App Store purchases which are delayed in time. Everyone keeps anticipating Apple becoming a payment processor, but it hasn't happened yet. They're still a platform provider. This kind of reminds me of some of the TripAdvisor reviews you see on resorts with a championship golf course and all kinds of amenities. There are always people annoyed that because just wanted a simple room and don't want to have to pay for the amenities. They argue they should be able to pay a lower rate. But they just stayed at the wrong place. A 30% rent is a great rate for what the App Store provides, but if all you want to pay for is a better payment processor, yeah, it does seem outrageous.
    - 16y ago
ajg1977 16y ago
What's going to get really interesting is seeing where Apple draw the line with "subscription apps". The Rhapsody and Magazine apps of this world seem fairly clear cut. Kindle is somewhat less so (since books aren't a subscription service - something most blogs seem to miss). But what about these "Go to my PC", Salesforce.com, or other SaaS sites that basically provide free iOS apps for expensive subscription plans? Are these companies now all going to start adding in-app sign-up options and paying Apple a cut?
- minalecs 16y ago
  amazon offers magazine subscription for kindle. Besides, I think Apple has been known to ignore or allow exceptions. For these SAAS companies, I imagine Apple will allow them to slide, but by their own terms.. it sounds like they shouldn't. I think their only main concerns are profiting from companies that compete directly with Apple revenue streams, music, movies, and books.
  - jcurbo 16y ago
    Kindle magazine subscriptions are only available for the Kindle hardware itself, IIRC.
    - nedrichards 16y ago
      They are now offered in the Android Kindle application as well.
- jkincaid 16y ago
  Actually it does affect the Kindle and other non-subscription apps, as confirmed in this report: http://www.computerworld.com/s/article/9209580/Apple_s_new_App_Store_rules_affect_Amazon_s_Kindle http://www.computerworld.com/s/article/9209580/Apple_s_new_A...
saturdaysaint 16y ago
I'm not happy to have predicted this in comments early today: (some slight paraphrasing) The current state of affairs - where Apple provides a nice sales channel (marketing in a sense) on their already highly profitable devices and where service providers bring attractive service to the platform - is a fairly even trade. Apple is asking for such a drastic renegotiation of this "trade balance" that I predict services will need to reprice for iOS or abandon the platform. Content services are already struggling enough - and Apple has too many viable competitors! - for me to imagine them simply submitting. Sony's withdrawal of their app was the writing on the wall, I'm afraid.
- theBobMcCormick 16y ago
  Could be good news for the Android and Windows Phone 7 ecosystems. Seems like it'd be easy for most of these publishers and services to re-focus their mobile strategies on platforms that are more friendly to their business model.
  - SoftwareMaven 16y ago
    But if end-users don't see any loss (e.g. Apple provides similar capabilities to Rhapsody, et al), then it won't matter. People won't leave the iPhone for another phone over this. My prediction is that Apple will make sure it has similar capabilities.
    - theBobMcCormick 16y ago
      I'm not sure "similar" capabilities will always be enough. If Apple succeeds in chasing off Amazon and B&N, then WP7 and Android phones will look much more attractive than iPhones to Kindle and Nook owners. Netflix availability so far has been an advantage that iPhone/iPad has over Android, but that'll turn around completely quite quickly if Netflix get's chased off the IOS platform by Apple's 30% cut. Let's get serious. iBooks and iTunes are good, but are they really going to be able to take on Pandora, Rhapsody, Last.fm, Amazon, B&N, Netflix, Hulu, etc. all at once? By pissing off all the content providers at once Apple is basically gifting a huge chunk of the app ecosystem to Android and/or WP7.
vizzah 16y ago
How's Rhapsody affected, if they don't offer in-app purchases?? quote: "Today, Rhapsody subscriptions are available for purchase exclusively via Rhapsody.com"
- jaaron 16y ago
  If you'd follow the press releases or read the updated app store guidelines, you'd learn that Apple has changed the rules and is enforcing old ones in new ways that will affect Rhapsody, Amazon Kindle, Rdio, Netflix, and so on. The new rules would require Rhapsody to allow new cusomters to optionally sign up via in-app purchase with an ongoing 30% fee to Apple. The rules stipulate rhapsody _must_ make this offer if they offer an app, despite the fact that such an offer is unprofitable to Rhapsody.
  - cheald 16y ago
    I'm sure it wouldn't get past the Apple Censor Board, but that's about the point that I would put in the in-app purchase button (for the item at 130% of my base price) right next to a "Click here for 30% off!" link. All of a sudden, your full retail price is heavily discounted and a lot more attractive!
    - joel_ms 16y ago
      The guidelines stipulate that the in-app price must be the same or less than your regular offer. (You could possibly have a separate offer with iOS availability at a price that compensates for Apple's cut, which means you would get Apple's cut from everyone buying iOS availability outside the app.)
      - sh4na 16y ago
        Technically, they state you must have the same or better offer. Better isn't the same as cheaper, it can mean more expensive with more features, so an "premium iOS offer with added features" for 30% more could be justified :P
elai 16y ago
If the iPhone doesn't have things like Pandora, Evernote and many other cloud services available because of this change, it makes one of the most useful parts of the iPhone disappear.
neworbit 16y ago
I shouldn't wonder if then conveniently enough Apple follows on with a subscription service of their own...
- rdouble 16y ago
  The record labels won't let them do it. That is pretty much the only reason the streaming companies exist.
FirstHopSystems 16y ago
Pretty soon..I'm sure it will be 30% of your advertising revenue. Rent? This is more like taking a chunk out of your paycheck. For all the employees out there I'm sure your company would love to take part of your check for the opportunity to work. 30%? do you get any other benefits from Apple? or is it "you take it and you like it." Apple just has to do is sit there and let the small developers take all the risk. Are they loosing money on each phone sold? I can see charging a payment processing fee like PayPal. 30%? I just hope this doesn't set any precedent.
knowknowledge 16y ago
What if Rhapsody offered a 23% discount for customers that subscribed via their website rather than through the In-App method? They could call Apple's 30% cut a "convenience fee" like online ticket sales.
- natrius 16y ago
  Their app would be pulled from the store. You do business in the App Store at Apple's pleasure. Attempting to flout the spirit of their asinine rules is unlikely to be successful.
jasonjei 16y ago
Just curious: shouldn't Netflix be worried? This entitles Apple, Inc. to not only Rhapsody's income, but also to 30% of the income from Netflix's streaming only plan. Presumably, this policy would also affect Netflix's hybrid distribution model. I think Rhapsody's got a friend in Netflix. This will be interesting, given how much Apple has promoted Netflix in recent store advertisements, and integrated Netflix with Apple TV. Does this mean that Netflix will be required to have subscriptions entered through the App Store? What about the restrictive privacy policy; will that hinder physical distribution?
- zach 16y ago
  I would be surprised if the thought of using in-app purchasing for subscriptions even moved their needle of interest at Netflix. Again, if you're just providing a conduit for your subscription service, all this means is that you can't provide a direct call to action in your app. They seem like the prototypical example of an company that couldn't care less about using the App Store as an app-based advertisement or purchasing platform.
  - dablya 16y ago
    My understanding of the new rule is if your app is used to consume content bought outside of the app, then your app must offer a way to purchase content/subscription through the app for the same price, with apple getting 30%.
    - dmfreck 16y ago
      Precisely. Netflix doesn't get a free pass.
ghshephard 16y ago
I've just realized what Apple is up to here - it took me a day, and some of the excellent comments on HN - but I now get it. My inability to see what was going on, was that I couldn't see how Netflix/Amazon/Rhapsody/etc... could operate, profitably, under this plan. The 30% cut would eat their entire margin (and more). And the plan is brutally straightforward and honest, if you just mediate on it for a few days. Apple isn't interested in hosting Amazon Kindle, Netflix, Pandora, Rhapsody, or _any_ of the middlemen that have been selling their content on the iPad. Effective today - those sellers no longer have a business model. They are middlemen, and, in fact, they'll need to seek other pastures to sell their wares. They will all be removed from the ipad with 3-6 months. Gone. So - what will replace them - well, let's see what's leaving: o Music - Itunes o Movies - Itunes o TV Shows - Itunes o Books - iBooks This is the master plan, and I'm surprised we didn't realize it immediately. Apple will get their 30%, because _they_ will be the platform providing this content, NOT netflix/rhapsody/Pandora/Amazon. I suspect all of those vendors realized this in about 5 minutes, much faster than us "Customers." Apple is going for the whole enchilada, and will henceforth be dealing directly with the publishers, labels, and studios. What's staying? o App Developers o Newspapers o Magazines Basically, anybody who creates _original_ content, will be okay with the 30% cut (they already pay that much or more through other channels), though they may gripe a little at the lack of customer information (That's the bone that Apple tossed in todays release - the "option" for customers to let the publishers know their user information.) This is nothing more, or less, than the continuation of the Apple "Walled Garden" philosophy, where Apple is able to control the entire experience. Jeff Bezos realized this when he ensured that Amazon had a platform of their own to deliver content to the customer. It's customer centric, and, if they pull it off (With a good streaming, book reading, and content delivery platform) - brilliant. I have a huge investment in the Kindle, and it's books - so I'm still unclear on how I'm going to respond as a customer. I would have _never_ purchased a book through iBooks (I like the ability to read books on my e-ink Kindle, and Apple has no comparable platform, yet). I also have both an extensive list of cultivated Pandora Stations, and, have a Netflix AND Hulu Plus account - all of which I'm going to lose on the iPad. If Apple doesn't come up with a compelling alternative for me - I'll actually consider an Android Tablet. They'll be able to replace Netflix, and Pandora, I'm certain - but I do love my Kindle(s) - so, I don't know what my next step is going to be. What I _do_ know is Apple has unambiguously signaled what they will be doing. They don't have a great streaming solution yet, for music, or movies. So they have some gaps in their portfolio of offerings - if I'm correct, we'll see a Netflix and Pandora competitive application being offered fairly quickly - possibly in the next release of IOS.
possibilistic 16y ago
Why hasn't a massive antitrust case against Apple been launched? Their behavior strikes me as far more anticompetitive than that of Microsoft during the "Browser Wars". Apologists: I don't care that Apple created something this profitable--that is not the issue. Desiring complete control over the mere act of computing on your own machine* is the problem. Apple is doing a wonderful job of absorbing a large swath of the marketshare and turning it into a closed ecosystem for developers, content providers, service providers, and owners. Apple should not have the authority to control everything one does with their devices. Why is this happening? Maybe I worry too much, but I don't want to see our electronic freedoms erode.
- Pooter 16y ago
  Apple doesn't even come close to having a monopoly. Microsoft most certainly did have one during the browser wars, and were leveraging it to get people to increase IE marketshare. With Windows on the desktop, you didn't really have much of a choice but Windows if you were going to use pre-package software, play games, or do business. With the iPhone, you've got tons of competition - Android, RIM, and WP7. If you don't want to work in that model, nothing forces you to, either as end user or VAR.
  - ladon86 16y ago
    They're pretty close to having a monopoly on paid digital music downloads, and perhaps portable music devices, and they're shutting out competitor streaming music services with this move.
- Cadsby 16y ago
  I'm not saying I agree with this move by Apple, but it's worth mentioning that browsers/the internet =/= the app store.
trotsky 16y ago
In the meantime, we will be collaborating with our market peers in determining an appropriate legal and business response to this latest development. Eurozone based content rights holders such as Spotify, Vivendi and Amazon should take this to the Directorate General for Competition. iTunes music enjoys a dominant position in online music sales. ITMS operates on only ~15% net margins [1] the other ~15% attributed to marketing, R&D, bandwidth, support etc. App store or video margins should be even lower due to increased bandwidth, hosting costs, editorial review, etc. Clearly Apple's own content businesses would be unsustainable or would constitute dumping if forced to pay their public rate card for the payment platform. Traditional remedies like content divestiture or substantial regulatory oversight could stifle innovation and raise consumer costs. Instead: - Allow end-users to specify an alternative root trust authority. - Unbundle application signing from packaging, allowing N signers per binary - Allow application side loading. Effectively this would allow a competitor like Amazon to sidestep Apple requirements but only if they were willing to provide the entire infrastructure - payments, app store, bandwidth, support etc. Other root authorities could potentially be an open industry alliance, a privacy organizations like EFF, FOSS signers like FSF, code auditors like OBSD, security firms like Kaspersky or Secunia etc. Apple as an apple signer would be able to continue to select and sign applications arbitrarily to maintain a high user experience, mandate platform changes, provide preferential payment terms to in house content businesses and avoid breaking out detailed incomes and revenues in public. Competitors would gain a plan of last resort to split from the ecosystem if the only alternative is exiting the platform entirely. Consumers would gain from competition driving down margins and overhead, alternative signing would discourage consumer unfriendly behavior by trust authorities. Simple to enforce, easy to implement, solves competition concerns even in markets that haven't developed yet. [1] http://seekingalpha.com/article/90735-how-much-will-the-app-store-contribute-to-apple-8217-s-bottom-line http://seekingalpha.com/article/90735-how-much-will-the-app-...
loewenskind 16y ago
I can understand Apple wanting to cut out middle men. I've never been a big fan of middle men myself, for the most part. But the biggest thing that bugs me about this is: iBooks doesn't have any books where I am! I buy all my stuff on Kindle because it's the only place I can legally buy a book at all. They can't try to shove everyone off the platform when they don't have any viable alternative themselves.
ololololollol 16y ago
lol
dataskills 16y ago
Good. Rhapsody suuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuux.
Vicaria 16y ago
Once again, Apple is underestimating the average consumer's willingness to take the path of least resistance. Apple became very niche for graphics & layout artists back in the day and lost a market they could have owned. By trying to hold its customers hostage, they enabled IBM & Microsoft to become household names and the Apple name was "that other kind." They came back because they innovate, but innovation only stays innovative for so long. They need to distinguish better between their "average Joe" and their "power user" products & strategies because "power user" products will sooner or later become "average Joe" products. If they wish to limit themselves to a niche market then this move makes perfect sense. If they want volume and to continue market domination, they're repeating history and, regardless of how smart their executives are, I don't think they can pull if off because we don't live in that kind of a world. I've been wanting an iPad and iPhone like you couldn't believe. But I'm patient and they made me nervous with their exclusive AT&T arrangement so I wanted to see what their next move was. I've been enjoying my Android phone very much. Looks like I'll be doing the same with whichever non-Apple tablet I choose. Too bad.

72 points by msabalau 16y ago

AWESOME!

It's deeply disturbing that the people at Apple feel entitled to radically change the rules of the game whenever it suits them. This is like an extortion racket. Submit to their demands today only to find out what new whim strikes them tomorrow. How can iOS legitimately be called a "platform" when Apple pulls a leg out from under it every six months? Thank god Android scares them. I can only imagine what they'd dare without any competition.

czhiddy 16y ago
"I can only imagine what they'd dare without any competition." I don't remember anything evil during the height of the iPod era.
- sudont 16y ago
  Well, there was the iPod accessory rings to jump through, but that’s fairly standard. What’s seen as evil here is really a preference for the user over the content provider, and it’s the content providers who are whining about not getting everything their way. You never hear any users complaining about subscription plans not automatically giving away their information.
  - eavc 16y ago
    How is effectively booting popular services from their devices in the interest of their customers?
    - sudont 16y ago
      Don't try and sell it like that. The "services" you obliquely reference (name one) are most likely intended be used at the OS level, which is against the way the platform is built. The entire model of iOS is a node that downloads from several sources, which 3-rd party content providers are calling foul about. The platform is effectively binary: it either works or it doesnt, out of the box. There aren't any drivers or codecs to install. If you don't like it, build your service for some other platform. I hear there's one that's got more marketshare.
gvb 16y ago
See Tim Bray's essay, which should be titled "Are You a Sharecropper?" http://www.tbray.org/ongoing/When/200x/2003/07/12/WebsThePlace http://www.tbray.org/ongoing/When/200x/2003/07/12/WebsThePla... tl;dr: "[Apple] owns the ground you’re building on, and if they decide they don’t like you, or they can do something better with the ground, you’re toast." In this case, if they decide the rent covers your garden plot as well as the fields, you ante up or die.
- cosmicray 16y ago
  Apple owns a very fertile piece of soil. You can grow 10x the crop there that you can grown any where else. Where do you want to farm your crop ?
  - joe_the_user 16y ago
    Ah yes... "Apple owns a very fertile piece of soil. You can grow 10x the crop there that you can grown any where else." And they can change your rent to 11x normal - just before you sell your crops... "Where do you want to farm your crop ?" Go question but it is actually a real question, not a rhetorical question... Do you want to a golden share cropper or do you want to be independent. There may be no easy answer...
    - loewenskind 16y ago
      Simple solution: sell your crops where it is most profitable. Maybe with 11x normal it's still worth it. As soon as it's not, you switch.
jodrellblank 16y ago
Thank god Android scares them. Evidence?
- cageface 16y ago
  http://androidandme.com/2010/03/news/rotten-apple-htc-sued-over-20-patents/ http://androidandme.com/2010/03/news/rotten-apple-htc-sued-o...
  - shaggyfrog 16y ago
    That link is almost 11 months old, and given all the furor we've heard about HTC and Apple suing the pants off each other during those last 11 months -- i.e. zilch -- I don't think this link supports that argument.
loewenskind 16y ago
>It's deeply disturbing that the people at Apple feel entitled to radically change the rules of the game whenever it suits them. What makes you think that's what they're doing? It could also be that they never intended for their platform to be used this way but didn't explicitly deny it because they didn't see this coming. I don't have any way of knowing that is the case, but I don't think you have anyway of knowing your opinion is right either.

dalton 16y ago

Given the challenges subscription services already face re:margins, giving away another 30% is game over. If this stands, the labels are probably going to have to give up on subscription services as a category, or lower their wholesale prices dramatically.

JamieEi 16y ago
Rhapsody doesn't have "another" 30% to give. Their margins are probably something like 5%. Crapple is demanding 30% of the sale price, which leaves Rhapsody with a 25% loss. Since that is economically infeasible, Apple is effectively mandating that they are the only ones who can sell content on their platform.

alanfalcon 16y ago

Time to pull the iOS app, build a mobile web app, and have your customers send e-mails to steve@me.com expressing their displeasure.

anthonycerra 16y ago
I'll do one better than email Steve. This will be my last iPhone.
- georgemcbay 16y ago
  The iPhone 3G was my (first and) last iPhone because of other issues (the language lockdown). Actually not just my last iPhone but my last Apple Thing, period. Voting with your wallet is the ONLY thing one can do to really get their attention (governments could step in on anti-competitive grounds, but that's not really something we can help with short of contacting our representatives). If the user base just whines and moans while continuing to line up for the next shiny phone a week in advance of release to help Apple deliver record quarter after record quarter, Apple isn't going to change anything, they are just going to keep pushing and pushing. They've already shown that clearly in the past.. this is hardly the first questionable decision they've made in terms of controlling the iOS platform.
- anthonycerra 16y ago
  My startup is sponsoring a campaign to raise awareness for this issue. www.mylastiphone.com

blinkingled 16y ago

Might work out well for Apple as do most things they do - Amazon pulls out, garden-dwellers dwell on whatever iBooks offers, Rhapsody and Pandora pull out - there is only iTunes! Apple is in a position where they can get very crafty and evil - just enough to get away with it all without being a monopoly - there is Google to help them there! Envious position for a company indeed!

zach 16y ago

Of course Rhapsody can't sell their stuff for a 30% margin. It's not their own stuff! They're trying to be the last link in a chain of 90/10 (or more) splits. They repackage record labels' repackaging of artists' content. Do you think the artists would find 30% economically untenable? The App Store is 70/30 because Apple can take things straight from content producer to customer. When the Apple takes the place of publishing, distribution, inventory, sales, payments and shipping, there's real value for that 30%. When all someone wants out of Apple is merely to process the payment and send things down the pipe, gee, who do they think they are? But that's not what Apple is actually holding themselves out as. Apple doesn't want to be in that kind of commodity market anyway. Seems reasonable to me.

potatolicious 16y ago
It's not always this way. Think about, say, a Pandora subscription - thin margins, but provides a real value added service that is well above and beyond that of a mere distributor. Can they afford to give Apple a 30% cut of all revenue? It's completely misguided to characterize all payment through a mobile app as cutting out the middleman. In a great number of cases (i.e. subscriptions) Apple role is nothing more than a payments gateway + lead generation. Does that make them deserving of 30% of your entire revenue stream?
- zach 16y ago
  My point is that Apple doesn't see in-app payments as merely payment processing. They see them as App Store purchases which are delayed in time. Everyone keeps anticipating Apple becoming a payment processor, but it hasn't happened yet. They're still a platform provider. This kind of reminds me of some of the TripAdvisor reviews you see on resorts with a championship golf course and all kinds of amenities. There are always people annoyed that because just wanted a simple room and don't want to have to pay for the amenities. They argue they should be able to pay a lower rate. But they just stayed at the wrong place. A 30% rent is a great rate for what the App Store provides, but if all you want to pay for is a better payment processor, yeah, it does seem outrageous.
  - 16y ago

ajg1977 16y ago

What's going to get really interesting is seeing where Apple draw the line with "subscription apps". The Rhapsody and Magazine apps of this world seem fairly clear cut. Kindle is somewhat less so (since books aren't a subscription service - something most blogs seem to miss). But what about these "Go to my PC", Salesforce.com, or other SaaS sites that basically provide free iOS apps for expensive subscription plans? Are these companies now all going to start adding in-app sign-up options and paying Apple a cut?

minalecs 16y ago
amazon offers magazine subscription for kindle. Besides, I think Apple has been known to ignore or allow exceptions. For these SAAS companies, I imagine Apple will allow them to slide, but by their own terms.. it sounds like they shouldn't. I think their only main concerns are profiting from companies that compete directly with Apple revenue streams, music, movies, and books.
- jcurbo 16y ago
  Kindle magazine subscriptions are only available for the Kindle hardware itself, IIRC.
  - nedrichards 16y ago
    They are now offered in the Android Kindle application as well.
jkincaid 16y ago
Actually it does affect the Kindle and other non-subscription apps, as confirmed in this report: http://www.computerworld.com/s/article/9209580/Apple_s_new_App_Store_rules_affect_Amazon_s_Kindle http://www.computerworld.com/s/article/9209580/Apple_s_new_A...

saturdaysaint 16y ago

I'm not happy to have predicted this in comments early today: (some slight paraphrasing) The current state of affairs - where Apple provides a nice sales channel (marketing in a sense) on their already highly profitable devices and where service providers bring attractive service to the platform - is a fairly even trade. Apple is asking for such a drastic renegotiation of this "trade balance" that I predict services will need to reprice for iOS or abandon the platform. Content services are already struggling enough - and Apple has too many viable competitors! - for me to imagine them simply submitting. Sony's withdrawal of their app was the writing on the wall, I'm afraid.

theBobMcCormick 16y ago
Could be good news for the Android and Windows Phone 7 ecosystems. Seems like it'd be easy for most of these publishers and services to re-focus their mobile strategies on platforms that are more friendly to their business model.
- SoftwareMaven 16y ago
  But if end-users don't see any loss (e.g. Apple provides similar capabilities to Rhapsody, et al), then it won't matter. People won't leave the iPhone for another phone over this. My prediction is that Apple will make sure it has similar capabilities.
  - theBobMcCormick 16y ago
    I'm not sure "similar" capabilities will always be enough. If Apple succeeds in chasing off Amazon and B&N, then WP7 and Android phones will look much more attractive than iPhones to Kindle and Nook owners. Netflix availability so far has been an advantage that iPhone/iPad has over Android, but that'll turn around completely quite quickly if Netflix get's chased off the IOS platform by Apple's 30% cut. Let's get serious. iBooks and iTunes are good, but are they really going to be able to take on Pandora, Rhapsody, Last.fm, Amazon, B&N, Netflix, Hulu, etc. all at once? By pissing off all the content providers at once Apple is basically gifting a huge chunk of the app ecosystem to Android and/or WP7.

vizzah 16y ago

How's Rhapsody affected, if they don't offer in-app purchases?? quote: "Today, Rhapsody subscriptions are available for purchase exclusively via Rhapsody.com"

jaaron 16y ago
If you'd follow the press releases or read the updated app store guidelines, you'd learn that Apple has changed the rules and is enforcing old ones in new ways that will affect Rhapsody, Amazon Kindle, Rdio, Netflix, and so on. The new rules would require Rhapsody to allow new cusomters to optionally sign up via in-app purchase with an ongoing 30% fee to Apple. The rules stipulate rhapsody _must_ make this offer if they offer an app, despite the fact that such an offer is unprofitable to Rhapsody.
- cheald 16y ago
  I'm sure it wouldn't get past the Apple Censor Board, but that's about the point that I would put in the in-app purchase button (for the item at 130% of my base price) right next to a "Click here for 30% off!" link. All of a sudden, your full retail price is heavily discounted and a lot more attractive!
  - joel_ms 16y ago
    The guidelines stipulate that the in-app price must be the same or less than your regular offer. (You could possibly have a separate offer with iOS availability at a price that compensates for Apple's cut, which means you would get Apple's cut from everyone buying iOS availability outside the app.)
    - sh4na 16y ago
      Technically, they state you must have the same or better offer. Better isn't the same as cheaper, it can mean more expensive with more features, so an "premium iOS offer with added features" for 30% more could be justified :P

elai 16y ago

If the iPhone doesn't have things like Pandora, Evernote and many other cloud services available because of this change, it makes one of the most useful parts of the iPhone disappear.

neworbit 16y ago

I shouldn't wonder if then conveniently enough Apple follows on with a subscription service of their own...

rdouble 16y ago
The record labels won't let them do it. That is pretty much the only reason the streaming companies exist.

FirstHopSystems 16y ago

Pretty soon..I'm sure it will be 30% of your advertising revenue. Rent? This is more like taking a chunk out of your paycheck. For all the employees out there I'm sure your company would love to take part of your check for the opportunity to work. 30%? do you get any other benefits from Apple? or is it "you take it and you like it." Apple just has to do is sit there and let the small developers take all the risk. Are they loosing money on each phone sold? I can see charging a payment processing fee like PayPal. 30%? I just hope this doesn't set any precedent.

knowknowledge 16y ago

What if Rhapsody offered a 23% discount for customers that subscribed via their website rather than through the In-App method? They could call Apple's 30% cut a "convenience fee" like online ticket sales.

natrius 16y ago
Their app would be pulled from the store. You do business in the App Store at Apple's pleasure. Attempting to flout the spirit of their asinine rules is unlikely to be successful.

jasonjei 16y ago

Just curious: shouldn't Netflix be worried? This entitles Apple, Inc. to not only Rhapsody's income, but also to 30% of the income from Netflix's streaming only plan. Presumably, this policy would also affect Netflix's hybrid distribution model. I think Rhapsody's got a friend in Netflix. This will be interesting, given how much Apple has promoted Netflix in recent store advertisements, and integrated Netflix with Apple TV. Does this mean that Netflix will be required to have subscriptions entered through the App Store? What about the restrictive privacy policy; will that hinder physical distribution?

zach 16y ago
I would be surprised if the thought of using in-app purchasing for subscriptions even moved their needle of interest at Netflix. Again, if you're just providing a conduit for your subscription service, all this means is that you can't provide a direct call to action in your app. They seem like the prototypical example of an company that couldn't care less about using the App Store as an app-based advertisement or purchasing platform.
- dablya 16y ago
  My understanding of the new rule is if your app is used to consume content bought outside of the app, then your app must offer a way to purchase content/subscription through the app for the same price, with apple getting 30%.
  - dmfreck 16y ago
    Precisely. Netflix doesn't get a free pass.

ghshephard 16y ago

I've just realized what Apple is up to here - it took me a day, and some of the excellent comments on HN - but I now get it. My inability to see what was going on, was that I couldn't see how Netflix/Amazon/Rhapsody/etc... could operate, profitably, under this plan. The 30% cut would eat their entire margin (and more). And the plan is brutally straightforward and honest, if you just mediate on it for a few days. Apple isn't interested in hosting Amazon Kindle, Netflix, Pandora, Rhapsody, or _any_ of the middlemen that have been selling their content on the iPad. Effective today - those sellers no longer have a business model. They are middlemen, and, in fact, they'll need to seek other pastures to sell their wares. They will all be removed from the ipad with 3-6 months. Gone. So - what will replace them - well, let's see what's leaving: o Music - Itunes o Movies - Itunes o TV Shows - Itunes o Books - iBooks This is the master plan, and I'm surprised we didn't realize it immediately. Apple will get their 30%, because _they_ will be the platform providing this content, NOT netflix/rhapsody/Pandora/Amazon. I suspect all of those vendors realized this in about 5 minutes, much faster than us "Customers." Apple is going for the whole enchilada, and will henceforth be dealing directly with the publishers, labels, and studios. What's staying? o App Developers o Newspapers o Magazines Basically, anybody who creates _original_ content, will be okay with the 30% cut (they already pay that much or more through other channels), though they may gripe a little at the lack of customer information (That's the bone that Apple tossed in todays release - the "option" for customers to let the publishers know their user information.) This is nothing more, or less, than the continuation of the Apple "Walled Garden" philosophy, where Apple is able to control the entire experience. Jeff Bezos realized this when he ensured that Amazon had a platform of their own to deliver content to the customer. It's customer centric, and, if they pull it off (With a good streaming, book reading, and content delivery platform) - brilliant. I have a huge investment in the Kindle, and it's books - so I'm still unclear on how I'm going to respond as a customer. I would have _never_ purchased a book through iBooks (I like the ability to read books on my e-ink Kindle, and Apple has no comparable platform, yet). I also have both an extensive list of cultivated Pandora Stations, and, have a Netflix AND Hulu Plus account - all of which I'm going to lose on the iPad. If Apple doesn't come up with a compelling alternative for me - I'll actually consider an Android Tablet. They'll be able to replace Netflix, and Pandora, I'm certain - but I do love my Kindle(s) - so, I don't know what my next step is going to be. What I _do_ know is Apple has unambiguously signaled what they will be doing. They don't have a great streaming solution yet, for music, or movies. So they have some gaps in their portfolio of offerings - if I'm correct, we'll see a Netflix and Pandora competitive application being offered fairly quickly - possibly in the next release of IOS.

possibilistic 16y ago

Why hasn't a massive antitrust case against Apple been launched? Their behavior strikes me as far more anticompetitive than that of Microsoft during the "Browser Wars". Apologists: I don't care that Apple created something this profitable--that is not the issue. Desiring complete control over the mere act of computing on your own machine* is the problem. Apple is doing a wonderful job of absorbing a large swath of the marketshare and turning it into a closed ecosystem for developers, content providers, service providers, and owners. Apple should not have the authority to control everything one does with their devices. Why is this happening? Maybe I worry too much, but I don't want to see our electronic freedoms erode.

Pooter 16y ago
Apple doesn't even come close to having a monopoly. Microsoft most certainly did have one during the browser wars, and were leveraging it to get people to increase IE marketshare. With Windows on the desktop, you didn't really have much of a choice but Windows if you were going to use pre-package software, play games, or do business. With the iPhone, you've got tons of competition - Android, RIM, and WP7. If you don't want to work in that model, nothing forces you to, either as end user or VAR.
- ladon86 16y ago
  They're pretty close to having a monopoly on paid digital music downloads, and perhaps portable music devices, and they're shutting out competitor streaming music services with this move.
Cadsby 16y ago
I'm not saying I agree with this move by Apple, but it's worth mentioning that browsers/the internet =/= the app store.

trotsky 16y ago

In the meantime, we will be collaborating with our market peers in determining an appropriate legal and business response to this latest development. Eurozone based content rights holders such as Spotify, Vivendi and Amazon should take this to the Directorate General for Competition. iTunes music enjoys a dominant position in online music sales. ITMS operates on only ~15% net margins [1] the other ~15% attributed to marketing, R&D, bandwidth, support etc. App store or video margins should be even lower due to increased bandwidth, hosting costs, editorial review, etc. Clearly Apple's own content businesses would be unsustainable or would constitute dumping if forced to pay their public rate card for the payment platform. Traditional remedies like content divestiture or substantial regulatory oversight could stifle innovation and raise consumer costs. Instead: - Allow end-users to specify an alternative root trust authority. - Unbundle application signing from packaging, allowing N signers per binary - Allow application side loading. Effectively this would allow a competitor like Amazon to sidestep Apple requirements but only if they were willing to provide the entire infrastructure - payments, app store, bandwidth, support etc. Other root authorities could potentially be an open industry alliance, a privacy organizations like EFF, FOSS signers like FSF, code auditors like OBSD, security firms like Kaspersky or Secunia etc. Apple as an apple signer would be able to continue to select and sign applications arbitrarily to maintain a high user experience, mandate platform changes, provide preferential payment terms to in house content businesses and avoid breaking out detailed incomes and revenues in public. Competitors would gain a plan of last resort to split from the ecosystem if the only alternative is exiting the platform entirely. Consumers would gain from competition driving down margins and overhead, alternative signing would discourage consumer unfriendly behavior by trust authorities. Simple to enforce, easy to implement, solves competition concerns even in markets that haven't developed yet. [1] http://seekingalpha.com/article/90735-how-much-will-the-app-store-contribute-to-apple-8217-s-bottom-line http://seekingalpha.com/article/90735-how-much-will-the-app-...

loewenskind 16y ago

I can understand Apple wanting to cut out middle men. I've never been a big fan of middle men myself, for the most part. But the biggest thing that bugs me about this is: iBooks doesn't have any books where I am! I buy all my stuff on Kindle because it's the only place I can legally buy a book at all. They can't try to shove everyone off the platform when they don't have any viable alternative themselves.

ololololollol 16y ago

lol

dataskills 16y ago

Good. Rhapsody suuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuux.

Vicaria 16y ago

Once again, Apple is underestimating the average consumer's willingness to take the path of least resistance. Apple became very niche for graphics & layout artists back in the day and lost a market they could have owned. By trying to hold its customers hostage, they enabled IBM & Microsoft to become household names and the Apple name was "that other kind." They came back because they innovate, but innovation only stays innovative for so long. They need to distinguish better between their "average Joe" and their "power user" products & strategies because "power user" products will sooner or later become "average Joe" products. If they wish to limit themselves to a niche market then this move makes perfect sense. If they want volume and to continue market domination, they're repeating history and, regardless of how smart their executives are, I don't think they can pull if off because we don't live in that kind of a world. I've been wanting an iPad and iPhone like you couldn't believe. But I'm patient and they made me nervous with their exclusive AT&T arrangement so I wanted to see what their next move was. I've been enjoying my Android phone very much. Looks like I'll be doing the same with whichever non-Apple tablet I choose. Too bad.