Feb 23 2011
Wednesday Midday Links: How are Apple’s recent demands going to affect me?
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.
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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.
Send to Kindle
Feb 23, 2011 @ 11:18:49
Yes, Kindle for the Web will likely be the option iThing owners will have to use (once it’s out) if all of this comes to fruition.
http://www.amazon.com/gp/feature.html?ie=UTF8&docId=1000579091
Feb 23, 2011 @ 11:23:53
Would it meet Apple’s new rules if Amazon took away the “buy now” functionality from the iThing app but allowed people to download already purchased books from their archive? Because then they could keep the app in place and we wouldn’t have to deal with in-browser reading (which I for one Do Not Like).
Feb 23, 2011 @ 12:38:30
I hope this makes more customers look past the brand marketing and wonder if Apple really is the user-friendly maverick it claims to be.
Feb 23, 2011 @ 12:52:10
@Sunita: This is what I’ve heard, too. All they need to do is take away the “buy” link in the app and they’ll qualify.
Feb 23, 2011 @ 13:06:09
Years ago, the hot thing for computer and software companies was the subscription model. Rather than selling you software, you would subscribe, like to a magazine, giving them a regular income stream, and not requiring companies like microsoft to work so hard making the next version so much better that every one would upgrade. Apple figured it out. Their products tend o come with free os upgrades, but they’ve captured the regular revenue stream.
Of course it was not a counterculture freebie for the faithful, that stuff, as seen with Linux, comes with so many other sectarian clashes that it fail to meet the needs of the less devout. Apple is successful partly because they are for profit.
However successful in the short term, I can’t see apple taking a 30% cut over the long term. The opportunity for competitors is too great.
Feb 23, 2011 @ 13:27:39
I don’t bother with these stupid companies and their rules. Why cater to them? And their moneymaking schemes??
Hardcopy books all the way!
Feb 23, 2011 @ 13:35:07
One part of your article is inaccurate. It’s not that they will -require- in app purchases, it’s that Apple requires that you can -also- purchase in- app, or simply remove the link to the website. Either way, Amazon has tens of millions of dollars per month of revenue at stake here. They are highly unlikely to pull the app. While there is no doubt that Apple’s move here is wrong, in the end it’s going to make virtually no difference to the owners of iDevices because most of them will continue to do what they already do, and buy on Amazon’s website.
Feb 23, 2011 @ 14:07:50
@Charles Sheehan-Miles:
Either way, they take 30%, in or out, so the effect is the same.
100% – 70% (publisher) – 30% (Apple) – iOS server and development costs = loss.
Yeah. They’ll pull it.
Feb 23, 2011 @ 14:21:07
You guys are right – I should have included the fact that if the “Get Books” link is removed from the Kindle App they would be able to be compliant. Amazon and others may very well do that to maintain an app presence. I guess the question that I haven’t fully resolved is whether it would withdraw fully (better messaging) or stay in (better exposure).
At TOC, a few of us tossed around the idea of embedding purchase links within the book itself which would require Amazon to have contract addendums with publishers but it might be one way to get around it. Amazon might be able to push a “book” of its own to readers that contains a link to the Mobile store. I don’t know if that would violate the policy or not. Or how it would be policed by Apple.
Feb 23, 2011 @ 14:39:23
@Courtney Milan: @Jane: Then this seems like the easiest way out. If Amazon takes away the Buy Now link and replaces it with a message saying the functionality has been removed to comply w/Apple’s rules, then they get to keep the app and remind the reader that Apple has made their lives more difficult.
Even impulse buying from an iThing can continue from within the browser, can’t it? It’s the extra step of opening Safari separately and bookmarking Amazon, rather than having the Buy Now button take you to the mobile site.
Feb 23, 2011 @ 14:42:32
@Sunita good point. Amazon has in the past put up notices saying “it’s not our fault” (ie. publisher set this godawful price not us). It could have a “get books” page in the app that describes where to go without the link.
Feb 23, 2011 @ 14:52:05
You know what else…
If Amazon went, say:
100% – 40% (publisher) – 30% (Apple) = 30% (gross, Amazon)
On the backs of non-agency publishers and self-pubs (with or without the intention of raising our set prices), then gave us the option of opting out of Apple altogether, that would serve as a “it’s not our fault” to the supply side of the chain, as well as the reader’s side.
Feb 23, 2011 @ 15:02:41
@Moriah Jovan: do you know what percentage publishers were being paid before the Agency Model?
Feb 23, 2011 @ 15:04:53
I’m more likely to get upset if the apps are pulled than caring at all about in-app purchasing. I don’t see how running an app store makes Apple deserve 30% (wtf???) of the purchase price. And I don’t tend to buy from an app unless I can help it because on that tiny little screen I have a tendency to occasionally touch the wrong link.
So if they don’t allow in-app purchasing, I’m happy. If they pull the kindle and nook apps, I’m going to be really, really upset. Because there are so many ways it’s just convenient to read from my phone in places where the nook just doesn’t cut it (in the dark, in the hot, in the cold, when I don’t want to carry anything outside of my pocketses…). And I don’t even own a kindle; I was reading all my kindle books on my phone. This fear of being very, very unhappy has led me to convert my kindle books so I can put them on my nook.
Feb 23, 2011 @ 15:10:37
@Lynnd:
Yeah, it was 35%. I didn’t like it, but *I* (in my weird wholesaler way) saw the other 65% as an expense–a stall rental fee at the big flea market.
If Amazon went back to that, everyone would scream, but as long as Amazon can point to Apple and say, “Yeah, but you can keep your 70% if you opt out,” we’ll do that.
Feb 23, 2011 @ 15:12:22
@Lynnd:
And I’ll add: Amazon is too big not to have a spot at their table. Apple is negligible to me, and, at a max-out capacity of 3,000 titles, I suspect most everybody else too.
Feb 23, 2011 @ 15:31:34
I was thinking of getting an iPad2 but until this app mess is straighten out — no iPad2 for me!
Feb 23, 2011 @ 15:35:40
If I keep the current version of the Kindle for iphone app and do *not* update it, if and when it’s updated to conform to Apple’s standards, I wonder if I’d still be able to use the “buy a book” link within the app. I assume so.
Feb 23, 2011 @ 17:30:41
I own no iThings and I find the whole subject of in app/out of app to be kind of incomprehensible – all I know is what Jane and MoJo and Mike Cane talk about.
Cain loves webOS, so he was excited about the Samsung Galaxy Tab (I think). I had planned to buy an iPad but now I’m seriously considering the Galaxy Tab. Apple is like Westlaw, they’d love for you to believe that they’re unavoidable, and I just don’t like rewarding that attitude.
Feb 23, 2011 @ 18:42:40
Well, bugger. I was going to buy an ipad2 specifically to use as a reader, with the added benefit the kids could use it as a mobile entertainer. Now I’ll have to buy something else. Books are just too important to me.
This is a slippery slope for longtime mac users like me. The way all their products seamlessly integrate (iphone, desktop, ipad) is a big sell for me. Once I step outside the apple temple for one purchase, there’s no incentive to stay with apple when I upgrade/replace the others. They are being pennywise and pound-foolish with this app business.
Feb 23, 2011 @ 19:23:37
@Jane: “At TOC, a few of us tossed around the idea of embedding purchase links within the book itself which would require Amazon to have contract addendums with publishers but it might be one way to get around it.”
Amazon currently has links in some ebooks within their iPhone app. Under “Contents” there is a “Book Extras” option that may have links to “Series” and “Books Like This”. If you select an book from one of those lists, you have the option to “View in Kindle Store” or “Learn more at Shelfari.”
I currently only have a few ebooks in the app, and not very many of those have the “Book Extras” option active. But I like the “Series” and “Books Like This” links within the book much better than the Kindle Store link on the home page.
I just used the “View in Kindle Store” link from within Jo Goodman’s “Marry Me” to go to the Kindle store and purchase “Never Love a Lawman.”
Feb 23, 2011 @ 19:56:30
Last year Apple convinced 5 of the big 6 publishers to switch to a 70/30 agency pricing model.
This year Apple is tightening their in-app purchasing rules which could take away the 30% that would normally go to their iBooks’ competitors, making it unprofitable for those competitors to continue selling on iOS devices.
Whatever Apple has planned for next year, is it too much to hope that the end result has the Agency 5 Publishers waking up covered in fleas?
Feb 23, 2011 @ 19:58:38
@brooksse: This is one of the reasons that I think Agency pricing is going to die a quick death this year. Random House has stood back and reaped the profits of not going Agency and for all those “big books”, publishers are losing around 10-15%, I think, than what they could have earned if they stuck with wholesale.
Feb 23, 2011 @ 20:58:33
@Jane: I hope you’re right. The biggest impact of agency pricing for me has been that now I’m much more aware of which books are published by which publishers. I’m not buying less ebooks, I’m just not buying very many from the agency 5 publishers.
Feb 24, 2011 @ 04:55:57
It just means that like Danielle, I’m holding off buying an e-reader/iPad and in addition, I’ll back away from e-books as I do all my e-reading on a MacBook and an iPod touch and I don’t want to get caught in the crossfire. I’ll try and protect my content, but where I was getting into a mindset of buying maybe $10-20 of books per month, over the last 4-5 months, I’ll go back to paper copies where the book is mine.
This especially holds true of academic stuff that I need. I am currently reading a very academic text that I needed quick access to, but I know I have to get myself a hard copy as well. I’ll just skip the e-book stage.
So basically, this latest brouhaha means that one little person is going to save around $1000 this year and that’s $1000 less to apple and amazon. sigh, my heart bleeds for them.
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May 11, 2011 @ 11:48:55
[...] More here about Apple’s change in policy and how this may affect readers who use a non iBooks app on their iThing devices. Apple is expected to have over 400 million iDevices out in the wild by 2012. [...]