Feb 23 2011
I was talking with Robin yesterday and she expressed some concern about what was going on with Apple, what it meant to her as a Kindle user, and whether her content was safe. Essentially she wanted to know what she should be doing now, if anything, to protect herself.
First, what is the problem?
The problem is that Apple is enforcing a term of service requiring that anyone that allows out of app subscription purchases to require in app purchasing. Right now, book apps take you outside the app to Safari (web browser) where you make your purchases. These purchases are then pushed to your app.
The reason that this is a problem is that Apple will take its customary 30% cut of each in app purchase. For books, this means that the App (Kindle, nook, Kobo) will have a loss on every sale that it would make inside the application itself. For Agency priced books, these retailers only get 30% and on the books that it sells via a wholesale relationship, the margin can even be lower. (Margin being the difference between the revenue and costs of the good sold).
The only way that in app purchasing is financially feasible for these book apps is a) if publishers give up Agency so b) the book apps can price the goods ABOVE suggested retail value. Yeah, so not workable. But even if the public outcry over the 30% increase in book prices wouldn’t bring this idea to a screeching halt, the tech problem would. You see, the in app purchasing system of Apple’s is limited to 3000-3500 distinct items. Amazon’s catalog is in the millions.
(This Exact Editions blogpost explains how the problem can extend beyond book apps to create problems for other retailers).
Second, what does this mean!!!???
Book App retailers have three options:
1) comply with Apple’s terms and take a loss for every book sold within the app – unlikely
2) remove themselves from the app store – Apple will kick them out first
3) Go webOs – likely
What this means for consumers who already have the app?
Likely it means that you are safe unless. You won’t get any upgrades for the app but if the app fails and you have to remove it, you won’t be able to redownload it. This does not affect your content and if yo have the app still on your device, you will be able to access your content via the device. In practical terms, if you have a Kindle App on your iPhone and then Amazon takes away the Kindle app from the App Store or Apple kicks them out, Apple is unlikely to pull an Amazon and come onto your phone and delete the app. You should be able to operate business as usual. The problem is if you should delete the Kindle App, you wouldn’t be able to redownload the App. (This is the unless part).
When will the change, if any come?
June 1 is the compliance date for all apps to offer the in app service. Apple will likely pull any app that is not in compliance.
What should I do now?
Sit tight. Amazon and others have a vested interest in keeping its access open. Likely Amazon (and others) are feverishly working on a WebOs plan. Basically this means if you have a browser, you will be able to access your purchases from your iThing devices. This is the cloud folks. I know that HTML5 allows for offline caching which means it can download content and store it on your device for offline access but it isn’t as robust as an App.
In my opinion, Apple only backs down if its message “We are creating a better and easier purchasing experience for you” is outdone by all the other retailers’ message “Apple is a greedy corporation who is trying to raise content prices”.
If you are purchasing a tablet or smartphone soon, you may want to consider that some of the apps that you love or that you have heard are awesome as they relate to books might not be available in the App store.
Is the government doing anything?
I had read reports that both the FTC and the DOJ were looking into this because Apple does own something like 70% of the mobile browsing platform and that is a monopoly. The 30% in app purchasing could be an illegal tying scheme. However, yesterday I read that the reason the FTC was looking at Apple was due to the ease of purchase by kids. So yeah. Who knows.
In Europe, however, Apple’s new policies are under heavy scrutiny and there is major and vocal pushback.
Barnes and Noble’s financial statements came out yesterday and there were two datapoints of interest to me
1) their inshore sales were increased due to toys, games and nooks. Not books.
2) they are currently selling twice as many ebooks as print books on bn.com
Today there is a report that Barnes and Noble may pick up a few of the Borders’ stores that are closing depending on location, favorable lending terms, and profitability.
The Nebula Finalists were announced and this year, there is really something to celebrate. In the novel category, five of the six authors are women:
- The Native Star, M.K. Hobson (Spectra)
- The Hundred Thousand Kingdoms, N.K. Jemisin (Orbit UK; Orbit US)
- Shades of Milk and Honey, Mary Robinette Kowal (Tor)
- Echo, Jack McDevitt (Ace)
- Who Fears Death, Nnedi Okorafor (DAW)
- Blackout/All Clear, Connie Willis (Spectra)
The AAP released its 2010 numbers and it’s good news/bad news. Good news is that ebook revenue is up. Bad news is that everything else is down.
- Adult Hardcover is down 5.1% from $1,653.0 to $1,568.5
- Adult trade paperback is down 2.0% from $1,408.8 to $ 1,381.1
- Mass Market is down 6.3% from $718.9 to $673.5
- Juvenile Hard is down 9.5% from $766.8 to $694.3
- Juvenile Paperis down 5.7% from $ 579.5 to $546.6
- E-Book is up 164.4 % from $166.9 to $441.3
As an aside, Forrester Research predicted $500 million in digital book sales for 2010. Frankly I think the digital book growth is somewhat suppressed given the rate of ebook adoption right now and I do wonder if all the digital book sales are being captured by the AAP. However, the rate of adoption accelerated after Christmas 2010 and thus we are likely going to see a huge jump in the numbers from 2010 to 2011. Dominique Raccah of Sourcebooks indicated that ebook revenue was 35% of all of Sourcebooks’ January revenue.
All About Romance’s 2010 Reader poll results were released. They actually mirror the DA 2010 end of the year lists quite a bit. Loretta Chase, Julie James, Pamela Clare, and Meljean Brooks’ books were all winners.