Tuesday, February 15, 2011

Apple subscription policies get skewed by those confused by the change; focus in on the words "in-app purchases"

Quite a number of posts have appeared online about the new Apple subscriptions policy, and the forum boards have been lively, to say the least. Unfortunately, some of the discussion on the boards have gone off the deep-end, either because the trolls are out, or because of a basic misunderstanding about what is being said in the Apple press release.

MG Siegler, writing on TechCrunch, does a pretty good job of summarizing the issues, but does tend to skip past a few points when he starts talking about Hulu and Netflix. For many who read these stories one would think that Netflix might be tempted to pull their app. Not at all. This policy change won't effect the vast majority of those who like to stream their movies. Why? Because most Netflix customers were subscribers to the service before the iPad ever appeared. They went onto the Netflix website and signed up. The iPad app simply provided them another way to view the content. Nothing in the subscription policy changes effects those who bought their Netflix subscriptions this way -- they can still stream their movies as usual.
So where would the change be? It would involve those "in-app" purchases. Remember that phrase: in-app purchases. If you are not currently a customer of Netflix you can use would have to sign-up, right? Well, if you do that through the app then Apple wants its cut. Right now many apps go around Apple's App Store, and that is what Apple wants to stop. Basically they are saying "look, you are acquiring new customers because we created this wonderful device. We won't charge you or your existing customers for using it, but if you add a new customer and make money at the same time, well then we want our cut."

So what will these kinds of services do? I predict that it will vary from company to company. Some won't mind paying a finder's fee to Apple, many will. The solution will simply be to have your customers sign up online, outside the app. That would make your app simply a "reader" of the content. You would have to eliminate the ability of your app to sign-up customers.

That is why it is possible that this change will not effect Amazon or Netflix, or any of the other companies that have created reader apps for iOS devices. This might hurt Amazon slightly, but I personally prefer to go online and buy things directly anyway. I do question whether Amazon's shopper app, Windowshop, might get a look, however. But the Kindle app? No problems as far as I can see.

So why did the Sony Reader app get rejected? That remains a mystery. The current thinking seems to be that it included some sort of subscription element, maybe a way to subscribe to newspapers and magazine directly through the app that bypassed Apple's App Store. If so, making the Sony Reader app purely a "reader" app would solve the issue. But then again, maybe Apple was playing bad in the sandbox with a perceived competitor -- it is certainly their right to do that.

Peter Kafka of the WSJ seems to echo the sentiments of many of the European newspaper publishers: we'll pick up our ball and play elsewhere, Apple.

Kafka ends his post this way: "Apple’s plan will have significant ripple effects, but one of them won’t be a flood of digital magazine offers from big publishers like Time Warner’s Time Inc., which has been quite clear that it’s not happy with Apple’s terms, and will work with other platforms like Google’s Android instead."

But if you read the comments after the story you get a bit of stark reality. As one commenter who claims to be a developer states "iOS is where the money is. Android users expect to get things for free. If Time hasn't figured that out yet, they certainly will, sooner rather than later."

The next comment goes much further by talking about the user experience of the App Store (good), the fact that most apps are paid in Apple's system, free in Google's. And that's one of the points of Siegel's post: the Apple App Stores are designed to make developers money. Apple sells things: hardware, software, apps. Google's system is designed to make things free so that they can aggregate as many eyes as possible to sell advertising.

So if Kafka is right we will start seeing publishers pulling their publications from the App Store soon. But if the developers are right, Time won't do something that foolish. Right now the iPad is where the game is being played. They will have to wait at least another six months before the Android tablets have any traction. And things may look very different six months from now . . . or maybe they won't.