Monopoly 2.0 – And you thought MSFT was bad!

I have to give Apple credit for having Tony Soprano sized balls with their latest move.  Any tech follower not living under a rock has certainly heard of the new Apple royalty model:

But it seems many, and this is especially infectious among stalwart Apple apologists, seem to be incapable, or unwilling, of actually reading the language.  Here are the arguments I hear in defense of the new policy:

  • Amazon charges more!
  • Just offer your sub outside of the app then!
  • Apple needs to be able to recoup some cost too!
  • These are users you wouldnt have anyway!

Here is why all of the above are either willful ignorance or, well, just plain ignorance.  Lets run down each point in order:

  • Irrelevant because of a number of reasons (the biggest of which is that Apples policy isn’t defined as applicable to any one kind of subscription – it is a blanket platform policy), but lets just write this one off since Amazon certainly does have a 30% royalty band that falls pretty comfortably in a range that covers a broad spectrum of print products (.99-$4.99).  Their higher royalty plan is 35%, so not earth shattering.  And they don’t shackle a publisher with handcuff terms  inside of this policy.  Back when Apple and Amazons price war seemed to be benefiting consumers (you know, before Apple had dominant share of the biggest growth market in computing and the largest market cap on earth) it was nice to see the dueling royalty numbers.  Now Amazon could be charging a 90% royalty and it wouldn’t be nearly as important, or dangerous, as Apples 70% for reasons I will outline…. here
  • Ah ha! But therein lies the rub.  Apple’s terms expressly forbid you from doing this.  Jobs even had the audacity to say this one in the press.  “All we’re saying is that they have to offer the sub for the same price or cheaper inside the app” [or feel free to be removed from the App Store.]  Oh sure, thanks Steve.  So basically you’re now taking a 30% cut of annuity revenue and we aren’t allowed to pass it onto the customer.  Oh, and we don’t own that customer anyway since the customer demographic data is Apples.   Well thats great!  So my $1/month service is now a 70 cent service for me and in return I get… Well nothing actually.  I get to not be thrown out.  If I try to incent people to sub directly with me at a discount (say 90 cents), I get thrown off the store.  That same 90 cents would have to be offered in app.  “Well thats fair!” cry the apologists.  Oh?  Except my 90 cents in the app is now 63 cents post Apple tax.  This new policy is as viral as the GPL. Once you have a subscription service in the App Store, your ability to control your own pricing is gone. I can’t stress that point enough.  If Apple ups the royalty to 50%?  You can leave if you don’t like it.  You can never offer a sub that is cheaper than the one that is subject to the royalty.
  • Apple charges $99/year to each developer hosting an app on the App Store, free or not.  If the app isn’t free, they take a cut.  Each app is a few megabytes at most.  They get amazing deals from carriers on bandwidth since they are now a mobility and internet powerhouse.  On top of that, $99/year is plenty to cover their cost of hosting 100MB of developer code.  Especially in light of the fact that…
  • Apple needs these apps every bit as much as the content providers need subs. What a travesty this argument is.  I’m quite frankly disgusted that many noted journalists are jumping to defend a delivery company against publishers.  Apple is the new Cable company, charging a bigger premium for a delivery commodity than the artist that created the content you’re consuming, except they are lauded for it.  Without the diversity of application, and content offerings on the iPhone, it would not be where it is today.

And lets be real here.  This new policy is all about Rhapsody, Napster, et al.  Apple has watched the entire digital music delivery industry shift to subscription models. They’ve seen pesky Microsoft actually needle them a bit even as Zune failed utterly because the service didn’t, and actually does nicely on XBox Live.  For whatever reason (stubborness, philosophical problems, back room RIAA deals, incompetence, insanity) Apple refuses to implement a streaming subscription service.

So what do they do in the meantime to stem the migration away from pay per download consumption?  Well… They start applying a tax.  Apply it broadly so it impacts any subscription so maybe no one notices the real gambit here.  Well Rhapsody, gotta love em, piped up.  Unfortunately, Apple’s fundamentalist zealot squads are probably going to flame Rhapsody into image oblivion, but their public statements made this issue crystal clear.  The side benefit from Apple’s point of view is that this new broad policy could be applied to, well, really anything!  Maybe eBay is a subscription service!  Maybe PayPal is too!  As a matter of fact, shouldn’t Apple be taking a 30% cut of every transaction on their platform?

Not convinced?  Here is my challenge then… How about if Apple suggests that the nice banking app you use needs to pay up as well.  So 30% of your financial transactions are going to have to flow their way or you can feel free to not use your phone for banking.  Sound fair?

Mmmmm... Come ta POPPA!