Apple enforcement of in-app purchase clause may imperil e-book apps

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.

16 Comments on Apple enforcement of in-app purchase clause may imperil e-book apps

  1. Two assertions here will prove false, though:

    1. “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”

    Since most book apps own rights to their content, and are essentially publishers (or are commissioned by publishers), the 30% payment would actually be very favorable compared to the 30% MARGIN retained by many reading-system apps which must partner with large distributors and payment systems.

    2. “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.”

    The clear purpose of Apple is to control content. I’m not convinced that the margins on that are somehow inferior to those on the hardware, which they clearly pour a lot of money into (engineering, design, marketing, etc).

  2. Very interesting. I wonder if Apple will reject Kindle/Nook applications for the Macintosh next. Apple has never believed in open systems, but this seems like a very major step in the wrong direction.

    Rob Preece

  3. This may be a good time to leave the evil Apple ecosystem and look to Android alternatives.

  4. How long has the iPad been out now, and how many millions of ebooks have been purchased thru non-iStore apps specifically for the iPad only users? Apple would probably face a major class action suit or two if this occurs. Since the iBook site never delivered much, and readers were forced to go outside of the Apple wall to get the books they wanted, I would imagine there are lots of grounds for the lawyers to come in on this full-force.

  5. Hopefully it will just drive HTML5 web apps for all these folks. Like what Playboy is doing to get around the Apple censors. Certainly I’d like to see HTML5 web apps for all these folks (especially magazines and newspapers) rather than isolating standalone applications.

  6. Wow! This sounds so like Apple doesn’t it? On the other side, for our authors, Apple is so hard to work with which seems counteractive as many of our quality authors are uploading their books to be put on sale in the Apple iBookstore and many of these authors will never even see a payment although Apple will be gladly accepting purchases.

    Further, compared to the other eRetailers, Apple’s customer service is non-existent.

    So, does this surprise us, not really, I guess it has to do with their bottom line and they are in business to make money – let’s see how long the consumer puts up with it. Apple may have cutting edge technology on some things but how long does that really last?

    Kudos to the other comments above!

    Signe Nichols
    eBook Conversions

  7. Will Apple next close iTunes to only music purchased through them, rather than allowing any music format to be added to iTunes regardless of the source? Will they close iTunes to files? How closed is Apple going to get?

  8. Interesting. From what I’ve read here at TeleRead and on other blogs, more people buy books for their iPad through the Kindle or nook apps than through the iBook app. If Apple stops allowing iPad owners to purchase K or B&N books on their iPad and tries to force them to use the IBook store exclusively, they will be making a huge mistake.

    Apple’s closed system may have worked with music, but only because the iPod was THE digital music device at the time when the digital music business was in its nascent period.

    There are just too many e-book devices out there now for Apple to catch-up in any cost-effective way. Does anyone really believe that Apple will choose to improve and expand its iBookStore enough to compete with Amazon?

    On the other hand, I don’t see Apple letting the big booksellers continue as they have. Apple is too greedy not to want a piece of that very profitable pie. How they go about getting their taste should prove interesting. The Agency 5 contracts expire in April. That would seem to be the time for Apple to flex its muscle again. Should make for a fun Spring.

  9. Yada yada yada yada …… all speculation built on speculation and then lots of outrage.


  10. As a book author and publisher I am disheartened to know that Apple is planning to cut off its nose to spite its own face. Part of its popularity requires that it make content available to its customers no matter where it comes from, and if it closes the system even more, its customers will go elsewhere. I sell my ebooks through the Kindle and Nook apps to the iPad, as making my content Apple compatible is all but impossible. If Apple discontinues carrying those content channels, I won’t be harmed. My ebooks will continue to be sold. But it’s not likely I will be buying an Apple device of any kind anytime soon.

  11. Slow news day?

    I think people are misreading that and drawing conclusions based on FUD.

    It clearly (to me anyway) says that IF your app includes a method to purchase content WITHIN the app, you need to use Apple’s In-App purchase API instead of your own.

    Extrapolating that, based on no real evidence, to say that you, the consumer, can’t load content purchased elsewhere (pdf, epub, music, etc.) into an app is pure speculation. Or that it will affect apps like Zinio which do not do in-app purchasing in the first place seems a bit like the typical internet over reaction to anything Apple does that is more appropriate to slashdot or Engadget than here.

    And the firestorm of negative publicity this maneuver would generate isn’t something that even Apple could ignore so I’m very skeptical about this speculation as more than a post to generate page hits on the site you found it.

  12. Andy: Except that the magazine apps in question didn’t include a method to purchase content within the app. They launched the web browser to the magazine’s website, and the subscription was purchased there.

    Just like the aforementioned e-book apps do.

  13. Theresa – “I am disheartened to know that Apple is planning …. ”

    Except that you, nor we, KNOW anything. This is all speculation and guessing and conjecture.

  14. Link bait, pure and simple. Any EPUB or PDF can be “side loaded” into iTunes if it is not DRM encumbered. So buy such an eBook from wherever you please and read it on an iOS device if you like.

  15. Frank: And this helps people who buy Kindle, Nook, Kobo, or eReader titles how, exactly?

  16. 11.2 would only prevent the apps from enabling purchases outside the in-app system. It doesn’t say they can’t access content obtained that way, however. Recall that the Kindle app originally couldn’t even redirect you to the Kindle store in Safari. The worst outcome would be that Amazon is required to take that feature back out. A minor annoyance, perhaps, but I still have the Kindle store bookmarked in Safari.

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