Apple enforcement of in-app purchase clause may imperil e-book apps
January 24, 2011 | 11:21 pm
A shot fired by Apple in the ongoing e-magazine controversy could end up having profound implications for reading non-iBooks e-books on iOS devices.
It’s no surprise that speculation has been rife about whether Apple was going to kill other e-book apps on its iOS platform ever since in-app purchases were first made available, and again when Apple launched iBooks. After all, apps like eReader and Kindle and Nook and Kobo allow people to buy and download content completely outside the auspices of its in-app purchase store, without Apple getting its 30% cut of the take. So far all our paranoia has come to naught.
But that may be changing. I’ve already mentioned Apple’s prohibition on providing free e-subscriptions to print subscribers, and the Belgian anti-trust investigation it has provoked., but Monday Note has a look at an issue that’s related but not quite the same.
It seems that, since the implementation of in-app purchases, Apple has historically allowed the purchase of magazine subscriptions by redirection to the magazines’ web sites (just as they’ve allowed Amazon, Fictionwise/eReader, Kobo, and others to sell e-books from their websites that could be downloaded into the iOS e-book app). These purchases, since they were made outside the in-app purchase store, also don’t give Apple its 30% take.
But it does not appear that this situation is going to last.
The bad news hardly came as a surprise to many of us who found strange that Apple allowed content providers to bypass its transaction system for the most promising part of their revenue stream. In the long run, how could Apple limit itself to its 30% cut on a $0.99 purchase, and leave a $100 or $150 yearly subscription unmolested? It was just a matter of time before Apple decided to plug this revenue leak. The grace period was probably the time needed to build a subscription system able to match the App Store’s global scale.
And so for the last three months, Apple has been rejecting magazine apps that use the subscription loophole, and subsequently emailing the developers calling attention to section 11.2 of the App Store Review Guidelines:
11.2 Apps utilizing a system other than the In App Purchase API (IAP) to purchase content, functionality, or services in an app will be rejected
And, the e-mail noted:
For existing apps already on the App Store, we are providing a grace period to bring your app into compliance with this guideline. To ensure your app remains on the App Store, please submit an update that uses the In App Purchase API for purchasing content, by June 30, 2011.
The Monday Note article does not say one word about e-books or e-book apps, but if Apple intends to enforce this provision across the board, it could have the effect of killing off every commercial e-book app except for iBooks. I find it highly doubtful that Amazon, eReader, Kobo, Barnes & Noble, or any other e-book company is going to be willing to sacrifice 30% of its iOS revenue to Apple—or that consumers would be willing to buy the e-books if the stores raised their prices to compensate. If they were even allowed to raise the prices under agency pricing.
But I also find it hard to believe that Apple would be willing to kill off all other e-book apps, given that they help to produce demand for Apple’s pricey device which has a lot higher margins than iBooks e-books, at no cost to Apple itself. After all, e-book reading is widely considered to be one of the iPad’s killer apps. But if they don’t cost Apple anything, they’re also not making it any money, which is something it’s going to be trying to squeeze out of magazine publishers.
I guess we’ll just have to wait and see how this all works out.