Wednesday, March 2, 2011

Dirty Percent

John Gruber:

Apple doesn’t give a damn about companies with business models that can’t afford a 70/30 split. Apple’s running a competitive business; competition is cold and hard. And who exactly can’t afford a 70/30 split? Middlemen. It’s not that Apple is opposed to middlemen — it’s that Apple wants to be the middleman. It’s difficult to expect them to be sympathetic to the plights of other middlemen.

Middlemen often provide valuable services. Apple is not willing or able to replace them all, and even if it did it surely wouldn’t do a superior job in all areas.

Why not allow developers and publishers to set their own prices for in-app subscriptions? One reason: Apple wants its customers to get the best price — and, to know that they’re getting the best price whenever they buy a subscription through an app. It’s a confidence in the brand thing: with Apple’s rules, users know they’re getting the best price, they know they’ll be able to unsubscribe easily, and they know their privacy is protected.

This is “best price” as in “you can’t buy it elsewhere for less.” However, even if Amazon et. al. find a way to play ball, Apple’s 30% has to come from somewhere. Prices everywhere will end up being higher than in a world without this Apple policy. Credit card fees, net the cash-back, are perhaps in the range of 1%, which makes Apple’s fee stand out even more.

There’s one striking difference between the subscription controversy today and the App Store controversy in 2008: with subscriptions, Apple is taking away the ability to do something that they previously allowed. There was never a supported way to install native apps for iOS before the App Store. Subscriptions sold outside the App Store, on the other hand, were allowed until last month.

And part of the concern is, what’s next? In another year or two, will Apple try to regulate and tax more types of goods and services? That has to be the operating assumption now.

The whole premise of Windows (and other personal computer systems) is that it is open to third-party software. Apple couldn’t just flip a switch and make Mac OS X a controlled app console system like iOS — they had to introduce the Mac App Store as an alternative to traditional software installation.

Apple can’t flip a switch, but the Mac App Store gives them a ratchet that can produce much the same result over time. There are already some carrots and sticks. App Store apps get automatic installation, updates, and crash reports; non–App Store apps no longer get updated listings on apple.com. The direction of the trend is clear. Would anyone be surprised if future versions of Mac OS X made additional features and APIs available only to App Store apps? There will probably be some sort of pragmatic handwaving, just like the iOS App Store was necessary so that apps couldn’t bring down the cell network, but the bottom line is that Apple could do these things without the App Store and chooses not to.

iOS isn’t and never was an open computer system. It’s a closed, controlled console system — more akin to Playstation or Wii or Xbox than to Mac OS X or Windows. It is, in Apple’s view, a privilege to have a native iOS app.

Exactly. Unstated is that Apple sees a future where most devices run iOS, and Mac OS X takes on more characteristics of iOS (both good and bad).

6 Comments

Come on - I expect better than blatant FUD here.
"And part of the concern is, what’s next?"
"Would anyone be surprised if future versions of Mac OS X made additional features and APIs available only to App Store apps?"

On other topics,
"Prices everywhere will end up being higher than in a world without this Apple policy."
I'd dispute that in many cases. Profit margins will be lower, but there's little reason to expect prices to be higher. As Gruber pointed out (and you avoided), that 30% cut hasn't brought higher prices on the iPhone store - unless you think enormous swaths of software for $2.99 and less would somehow all be cheaper minus the 30% cut.

I'd also note that Gruber addressed the "credit card fees" comparison, but you judiciously avoided quoting that when bringing up the same issue.

You don't strengthen your argument by omitting good points from the other side - all that does is make your argument look weak.

@Joshua Ochs Where is the line between FUD and extrapolation? When the App Store was announced, people made predictions that were dismissed as FUD, yet some of them have already come to pass. Apple has already changed the rules regarding the reasons they would reject apps (first it was to protect against malware, now you can’t even make a dashboard) as well what developers would be allowed to charge for. They’ve not taken the opportunity to clarify their plans for what counts as content and given only a minimal assurance that the Mac App Store will be optional. An information vacuum feeds speculation. You may disagree with specific predictions, but labeling them as FUD is a poor argument. Would you like to go on record saying that Mac App Store apps will never receive any further benefits?

I’m not aware of any good points that I omitted. It’s already been discussed to death that if the 30% gives you a zero or negative profit margin you can’t make it up in volume. Gruber knows this, too, which is why he says “Something’s got to give…there must be more news on this front coming soon.” That some apps/publications with small but positive margins can make it up in volume is an unrelated point.

I think Gruber’s credit card example actually highlights the absurdity of price matching—because of the difference between 1% and 30%. I think I read last year that Congress had passed a law restricting debit card interchange fees, which are in the small single digits. If Mastercard, Visa, et al. all charged 30%, prices would most certainly rise, and people wouldn’t stand for it.

It seems to me that the people making the comparison between videogame consoles and iOS devices are missing something: videogame consoles are mostly used as toys and for entertainment. I don't particularly care if my Nintendo DS doesn't play PSP games, because it's just games. I don't *rely* on my DS, and if there's a game on the PSP I really want to play, I can just buy a PSP as well, and take the one handheld with me that I want to play each day, without missing much.

The iPhone isn't a toy. If there's something on an Android device I need that I can't get on the iPhone, I can't just buy an Android device as well and leave my iPhone at home for a day. I *rely* on my iPhone for stuff that actually matters!

So whenever people make the console/iOS comparison, I feel like they're saying that to them, Apple's devices are just toys that don't matter too much, so we shouldn't be upset if they don't quite work the way we need them to. Strangely, these are often the same people who also insist that the iPad isn't just for consumption.

So which is it: a serious device that we use for content creation and that we can rely on for actual work, or something along the lines of a console, mainly used for entertainment, and not something we truly rely on?

"So which is it: a serious device that we use for content creation and that we can rely on for actual work, or something along the lines of a console, mainly used for entertainment, and not something we truly rely on?"

iOS devices are game consoles. The lack of viable alternative platforms at the moment tends to obscure that fact a bit.

But a game console model is a game console model. iOS is a kick-ass game console, but it only is what it is.

[...] notes that the Apple Design Awards 2011 are only for products in the App Store. I doubt that anyone is surprised, and of course it’s an improvement over last year’s awards, which were only for iOS [...]

[...] Last March, I wrote “Would anyone be surprised if future versions of Mac OS X made additional features and APIs available only to App Store apps?” and was immediately called out for “blatant FUD.” Less than a year later, not only has this has come to pass, but people seem to be treating it as expected. [...]

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