The United States Federal Trade Commission and Justice Department have raised their collective regulative eyebrow at Apple’s latest pricing plan.
There’s no official investigation yet, but the company could be looking at antitrust allegations over new subscription options in iTunes. The Wall Street Journal quoted a spokesperson for the European Commission saying that they, too, were “carefully monitoring the situation.”
It started with a digital-only newspaper, The Daily. When The Daily premiered earlier this month, it was the first publication to make use of a subscription model on iTunes. Everything else you bought for your iOS devices — your iPod, iPhone or iPad — through iTunes was based on a one-time charge for content delivered right then.
Within days, Apple announced that subscriptions would now be available right in the app for services like magazine, video and music. Convenience for the users, however, was not without its caveats for the publishers.
In the words of Steve Jobs, or at least the people Steve Jobs hires to create his quotes for press releases, “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.”
Apple also forbids apps from providing a link to buy a subscription outside the app.
I can’t say whether or not it’s legal. But it’s certainly greedy.
Say I have a downtown shop. Business is good, but more and more people are buying on eBay. So I start listing some of my items on eBay to supplement my sales. eBay charges a fee for the privilege, but whatever, that’s their prerogative.
What eBay doesn’t do is tell me how to price things in my downtown shop. They couldn’t care less. If I mark up my items on eBay to compensate for some of the fees and keep prices in my shop a bit lower, that’s my prerogative. (I might not sell anything given vicious price competition online, but that’s not eBay’s fault.)
Apple’s requirements do tell vendors what to charge. If they can’t recover the 30 percent charge by marking up in-app purchases, and they can’t offer subscribers a price incentive to buy outside the app, what value does the app hold? Not many subscriptions are running at a 30-percent profit margin, and if a company can’t make money in the iWorld, they very well might pull out of it altogether. Sure, they’ll lose market share, but market share you essentially pay for won’t be worth it to a lot of providers.
The alternative is for providers to raise prices for everyone. You end up subsidizing the folks who sign up through the app even if you sign up independently.
What’ll be really hilarious is if the same subscription for another platform — Android, Windows Phone, WebOS, BlackBerry — is cheaper than for the iOS app. The cost is lower, and Apple really can’t control what you charge on other devices, right?
Right, Apple? You don’t think you can do that, do you?