Apple’s subscription rules cause some to utter ‘antitrust’

ZAGGmate iPad caseYesterday, Apple announced a new subscription service available to all publishers of content-based apps on the App Store, including magazines, newspapers, video, music, etc.

Subscriptions purchased from within the App Store will be sold using the same App Store billing system that has been used to buy billions of apps and In-App Purchases. Publishers set the price and length of subscription (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly). Then with one-click, customers pick the length of subscription and are automatically charged based on their chosen length of commitment (weekly, monthly, etc.). Customers can review and manage all of their subscriptions from their personal account page, including canceling the automatic renewal of a subscription. Apple processes all payments, keeping the same 30 percent share that it does today for other In-App Purchases.

Publishers who use Apple’s subscription service in their app can also leverage other methods for acquiring digital subscribers outside of the app. For example, publishers can sell digital subscriptions on their web sites, or can choose to provide free access to existing subscribers. Since Apple is not involved in these transactions, there is no revenue sharing or exchange of customer information with Apple. Publishers must provide their own authentication process inside the app for subscribers that have signed up outside of the app. However, Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app. In addition, publishers may no longer provide links in their apps (to a web site, for example) which allow the customer to purchase content or subscriptions outside of the app.

Protecting customer privacy is a key feature of all App Store transactions. Customers purchasing a subscription through the App Store will be given the option of providing the publisher with their name, email address and zip code when they subscribe. The use of such information will be governed by the publisher’s privacy policy rather than Apple’s. Publishers may seek additional information from App Store customers provided those customers are given a clear choice, and are informed that any additional information will be handled under the publisher’s privacy policy rather than Apple’s.

Nathan Koppel reports for The Wall Street Journal, “Apple Inc.’s new subscription service could draw antitrust scrutiny, according to law professors… ‘My inclination is to be suspect’ about Apple’s new service, said Shubha Ghosh, an antitrust professor at the University of Wisconsin Law School. Two key questions in Mr. Ghosh’s mind: Whether Apple owns enough of a dominant position in the market to keep competitors out, and whether it is exerting ‘anticompetitive pressures on price.'”

MacDailyNews Take: No, and therefore, no. And, when law professors’ “inclinations” become meaningful in a court of law, let us know.

Koppel continues, “‘Millions will be spent litigating how broad the market is,’ said Herbert Hovenkamp, an antitrust professor at the University of Iowa College of Law. Mr. Hovenkamp said digital media is the most plausible market. He said he doubted that Apple, currently, has a sufficiently dominant position in that market to warrant antitrust scrutiny. But, he said, if Apple gets to a point where it is selling 60% or more of all digital subscriptions through its App Store, ‘then you might move into territory where an antitrust challenge would seem feasible.'”

MacDailyNews Take: Then let’s revisit the issue of whether 60% of anything constitutes a “monopoly” if it happens, okay? And, by the way, using 60% share as the criteria would make Coca-Cola a “monopoly” in the carbonated cola market. Surely Pepsi would beg to differ.

Koppel continues, “Mr. Ghosh said courts in antitrust inquiries may look favorably when a company can articulate a legitimate business justification for behavior alleged to be anticompetitive. For this reason, Apple may ‘come up with a business justification’ for some of its restrictive subscription terms, he said. ‘They have invested in a platform so they need to create incentives to use the platform.'”

Read more in the full article here.

MacDailyNews Take: The sooner publishers, especially those of newspapers and magazines, realize that the old rules no longer apply, the better off they will be.

“Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing. All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app. We believe that this innovative subscription service will provide publishers with a brand new opportunity to expand digital access to their content onto the iPad, iPod touch and iPhone, delighting both new and existing subscribers.” – Apple CEO Steve Jobs, February 15, 2011

77 Comments

    1. Actually, the fury is very real and the publishers are losing something here more precious than thirty-precent; they’re losing uncontrolled access to your personal information, which to them, is a gold mine of opportunity.

      Apple said, if a customer comes to us first for a subscription, we will not share their personal information with the publisher. However, if that customer decides to bypass Apple, as a middleman, and goes directly to the publisher for their subscription needs, you are free to share their personal information with whom ever you like.

      This is what the real stink is all about. Magazine publishers have been selling our personal information to advertisers (spammers) for ever. It’s such a lucrative market, they make more money selling our information than they do selling Sports Illustrated off the rack.

      Apple has put a stop to that, if you’re buying through the App Store. Apple is right on this one, it’s their store and if you sign off on the terms of the agreement, your bound to it. It’s very legal.

  1. Once again MacDailyNews is turning blind eye to actual potential issues here.

    “MacDailyNews Take: Then let’s revisit the issue of whether 60% of anything constitutes a “monopoly” if it happens, okay? And, by the way, using 60% share as the criteria would make Coca-Cola a “monopoly” in the carbonated cola market. Surely Pepsi would beg to differ.”

    Your take there is simply wrong. Coca-Cola even having a 90% share over Pepsi is not the same since free market brought the market share to that point. However, Apple restricting free market (by requiring subscriptions in App + 30% for Apple) is monopolistic as it is unfairly manipulating the market to its advantage.

    1. “Apple restricting free market (by requiring subscriptions in App + 30% for Apple) is monopolistic as it is unfairly manipulating the market to its advantage.”

      Completely wrong.

      “Publishers who use Apple’s subscription service in their app can also leverage other methods for acquiring digital subscribers outside of the app. For example, publishers can sell digital subscriptions on their web sites, or can choose to provide free access to existing subscribers. Since Apple is not involved in these transactions, there is no revenue sharing or exchange of customer information with Apple.”

    2. But surely it’s still a free market? Nobody forced anyone to buy an iPhone or iPad. Apple made the products that people want to buy. If a publisher doesn’t like the terms of the contract they can sell their product a different way.

      1. Yeah, like any other CE manufacturer actually has the competence to compete with Apple on this one.

        Fact is Apple is raising red flags here. In the end there may be nothing to it. Then again, there may be an anti-trust violation. Only a thorough investigation will let us know for sure.

    3. “Apple restricting free market (by requiring subscriptions in App + 30% for Apple) is monopolistic as it is unfairly manipulating the market to its advantage.”

      Clearly, after reading that last statement, you know nothing about the free market. Apple will charge whatever they feel the market will bear and if you agree to the terms and conditions and sign off on the agreement, you will have done so of your own free will.

      Apple is NOT the only game in town for subscription services, meaning, if you don’t like it, leave.

      Caveat emptor!

    4. Uh, no. You are free to choose any number of other platforms and digital stroefronts to hock your wares. If you choose to go with Apple you choose to play by their rules. The free market made Apple’s iPhone the single most popular smartphone on the planet, and the free market made the iPad, out of all the other tablets, the most popular tablet. Third parties wishing to hitch their wagon to Apple’s star are in no way shape or form guaranteed to leverage Apple’s platform for free.

    5. So with this logic, do you not feel Apple is due any compensation for delivery of the content, or the device on which the content is viewed?

      That’s like saying the paper companies should give free paper to the magazine for printing their product. That’s ridiculous.

      Apple is paying for and providing a delivery method and device as a product. If the magazines want to deliver their content on those devices, it will cost them 30%. Period.

  2. The only problem is that line about charging the same both inside and outside the app.

    And I still think 30% is too high. Not everyone has the margins Apple has, so a 30% cut, when forced to do the same price both inside and out, means either publishers take a hit, or they raise prices across the board. One is unsustainable, the other is bad for consumers.

    Anti-trust is a long shot though, because of the combination of a lack of monopoly and other means, both digital and non, of getting the publication out.

    Would this apply to Netflix though? Or Hulu? Or is it just for publications like magazines and newspapers?

    1. I have three apps in the App Store. One has taken over five years of development with an expensive Mac, many expensive plugins and developer tools. Why should a publisher of a book that took six months and a cheap word-processor to write get a larger margin than me?

      1. You can set the price when you debut the app. In the case of publishers, many have been doing so for decades, if not longer, so a sudden price hike would be very noticeable.

    2. @ MrMcLargeHuge,
      “The only problem is that line about charging the same both inside and outside the app.”

      —- Why, is fair not… er….. fair? Apple is taking a pre-emptive effort to say, fair price is fair price… for both.

      “And I still think 30% is too high. Not everyone has the margins Apple has, ”

      —– Er you seem to be forgetting that Apple provides the credit coverge, charging, downloading, overhead, etc to cover the cost of all this stuff. Do you remember when it was 50% to 70 % that other music services charged..??? Apple shocked the industry when it only charged 30 %.

      Just a thought,
      en

      1. Your final point is a valid one. The reason I think 30% is too high is that this is not a one time thing, it’s recurring income. And according to Ars Technica, the subscriptions are not stored on Apple’s servers, they are stored on the publisher’s. Apple is taking 30% as a referral fee. Since it is recurring, I think 10% is fair.

        The first line about requiring the same price inside and out was meant as “the only problem with regards to anti-trust”

    3. All Apple wants is to ensure that the publisher isn’t charging more in the app store than they charge through their own subscription methods, thus undercutting the app store to make it more expensive.

  3. I feel this is right for everyone. People have the right to go where they want when getting Digital Media. I don’t see how this is any different than what Amazon does, except that I think Apple takes a lesser cut at 30%. Not sure about what Amazon’s cut may be. Anyone have that info handy?

    iQ

  4. Better yet, remember that if you don’t like the rules Apple has set for it’s platform you and your business are welcome to not partake in Apple’s realm. The problem for businesses of all sizes, is that because consumers have spoken with their purchases of iOS devices in droves, that is becoming increasingly impossible if one wants to remain relevant to those consumers. So, again the answer that M$ has been so good at showing everyone else is, “If you don’t like our rules or the way we run our platform, go play in someone else’s sandbox.” We as Mac users first hand have seen how effective that option has been, because its lead to the innovations that brought about the MacOSX, the iPod, then the iOS platform itself. Free enterprise allows any of these naysayers a chance at building something better, Apple has no monopoly of any kind, just a very powerful platform for portable devices whereby others can compete unrestricted by constructing their own ecosystems.

  5. If you have a Netflix subscription already Netflix doesn’t owe Apple anything. If you come to Netflix as a new subscriber through the App Store Apple get’s 30% in perpetuity. If you’re Netflix and you don’t want to pay that 30% then you make sure most of your subscribers come to you though your own efforts and not Apple’s. So the only time Apple takes a bite is when Apple brings you new customers. So who’s got their back up against the wall?

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