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Greedy, Craven and Shameless

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I'm talking about Apple's new subscription model for its App Store, of course. Effective June 30, Apple will start collecting a 30 percent cut off the top everytime a third party sells a subscription through its App Store (including renewals). So for example, if Wired magazine sells you a $10 iPad subscription, Apple will get $3, while Wired gets $7.

Apple justifies this because at the same time all purchases done through an app within its ecosystem will only be conducted through an iTunes account. For the consumer, it's fall-off-a-turnip-truck simple; one click and, of course, iTunes already has the credit card information. Apple believes one-click access to the 100 million people with an iTunes account justifies a 30-70 split on the profits.

Apple CEO Steve Jobs, who is on medical leave, but still clearly has a hand on the wheel, is quoted in a statement from Apple saying:

"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."

That last part is referring to the new-user agreement that will require these poor third-party companies to not undersell their iTunes subscription rates with their subscription rates on their own websites and elsewhere. Companies will not be allowed to bypass iTunes and just drive traffic from their app to their website making their sale there to avoid the 30 percent commission. 

In other words, these companies are screwed.

And the fur is already flying.

The Wall Street Journal is speculating whether it violates anti-trust laws.

One ZDNet blogger is publicly vowing to sell his iPad in protest.

Digital music subscription service Rhapsody is vowing that it will fight it and withdraw its app if necessary. Here's all you need to read from their press release:

"We will be collaborating with our market peers in determining an appropriate legal and business response to this latest development." 

Why I think this is greedy, craven and shameless:

1. I don't think it's unreasonable for Apple to charge a modest commission for access to its massive iTunes customer base. The key word is modest. Thirty percent is not even in the same time zone as "modest." It's highway robbery. Can you imagine PayPal or Visa charging 30 percent off every transaction.  Greedy!

2. The powers that be at Apple had to have known there would be blowback for this one. For this they trot out a statement from Steve Jobs. It's difficult to speak truth to power when power is a frail man mysteriously recused on medical leave and perhaps fighting for his life. The message is clear, "Saint Steve says its okay, so don't complain." Craven!

2. Apple owes much of its success to its App Store. The number of apps available is in the six figures. People buy the iPhone over Android or Blackberry and now Windows Phone 7 in large part because there are more apps available for the iPhone. This is the thanks it gives to its community of developers? Shameless!

My other complaints:

1. Apple is being a bully. For every large company selling through its Apple app, there's a gazillion little garage start-ups and 30 percent is going to kill them. Perhaps literally. What happens to the start-up that scrapped together the $75,000 it takes to build an app, and now has to hand over 30 percent of its profits back to Apple?

2. It's not like Apple needs a new revenue stream to survive. What's the matter, Apple? Your stock is trading at $360 a share, you just reported record quarterly earnings of $26 billion and you have a cool $600 billion sitting in your cash reserves. Do you really need to do this to all those small businesses that have been key to your iPhone and now iPad success?

3. It's more than a 30 percent commission. Apple gets the data mining bennies, as well. Keep in mind, when a company sells you something within its App Store, you're just logging into your iTunes account and a click later the sale is complete. Apple gets all those juicy details about you when you enter your credit card information with them. The company making the actual sale does not.

4. Companies have until June 30th to change their apps to conform with the new policy. What happens to the company on a shoestring budget that depends on revenues through its app and can't afford to scare up a freelance app developer to make those changes by summer?




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