Thirty Percent of Nothing

I mentioned the Apple Appstore  earlier with regards to the sale of and subscription to newspapers and magazines. In the area of Music and more recently Movies, TV Shows and Software applications they have certainly made it easy for producers to find a market and consumers to easily purchase content. So, just as with the other content before them they are putting out fire while the Publishers are still fiddling.

I’m not saying I agree with Apple’s 30% cut, but understand the logic behind keeping the model simple and know the market will decide if the terms are acceptable or not. It certainly won’t be the large Media organisations who have so fumbled the move to digital and have no entitlement to dictate terms.

John Gruber, always to be relied on to pick up the baton on behalf of Apple, in his article responding to the “reasonable arguments against Apple’s (in-app subscription) policies” writes:

Apple sees the entire App Store, along with all native iOS apps, as an upscale, premium software store: owned, controlled, and managed like a physical shopping mall. Brick and mortar retailers don’t settle for a single-digit cut of retail prices; neither does the App Store.

In other words, they are providing space, just as a department store does for physical goods, for those without a natural retail presence to sell their goods. It’s up to the creator or the publisher to deliver content and applications which people want to buy.

The difference being that nor do they charge publishers rent for having their products on the shelves, neither do they ask them for under the counter payments to put that product on the best shelves. In other words, without a sale, 30% of nothing is nothing.

I do believe Gruber misses one point which negates many of the complaints about the 30% payment for in-app subscriptions.

Most of the applications providing these in-App subscriptions are likely to be free to download onto iOS devices. So in effect – and just with all the other free Applications which Apple host – the free applications have been subsidised by the 30% cut from paid applications for some years.

And that’s been a good model for them and the application publishers, many of whom have, with the popularity of their free application, felt comfortable introducing a paid for version or in-app purchases over time. But if those free applications – which Apple has no other way of making back the costs of hosting, reviewing and serving – then start to make money through in-App subscriptions, then why shouldn’t Apple get a cut?


2 thoughts on “Thirty Percent of Nothing

  1. Good post. However this isn’t a model that Apple necessarily are pioneers of – they just made it work on a vast scale. There are good reasons why Apple’s own approach is flawed, but the concept of a flat percentage isn’t necessarily one of them. If you, for whatever reason, start up a shop in bricks and mortar retail, you may find that you have to pay the owner of the shopping centre a percentage of your take. That’s not the case in all retail leases, but it does happen. I won’t claim it’s fair 🙂

    How is this different? Apple don’t have a bricks and mortar store, but they do have embedded costs associated with running their online store. As you point out, they also allow free apps and content in the mix – that, if nothing else, is good business. However Apple’s costs are probably higher than the owner of a shopping centre- they don’t incur a cost for every person who walks through the door – and so you could argue that this is a fairer model overall. I’m not going to claim that myself, either, but it seems like a fair point.

    I dislike iTunes intensely, and my own experiences with the Apple online experience has led me to it as horrible – however I will never say that it fails as a business model, and I need only look at services like Xbox Live to see similar successes.

    Also – your link to Print Publishing’s Last Opportunity within the post is broken ..

  2. Pingback: Print Publishing’s last opportunity « Making Hay

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