FTC investigates Apple over new in-app subscription rules

updated 08:50 pm EST, Thu February 17, 2011

Move follows criticism from several groups

The Justice Department and Federal Trade Commission are reportedly looking into Apple's new in-app subscription rules, following public criticism from a number of companies and groups. The US agencies are said to be considering the possibility that Apple may be in violation of antitrust laws by tightening rules for developers that manage in-app purchases outside of Apple's own iTunes payment system.

Although developers are able to sell subscriptions outside of the iTunes service, Apple demands that "the same or better offer" must be made within the app. Customers are seen as more likely to take advantage of the one-click subscription within the app, which also rewards Apple with a 30-percent cut of the revenue.

Many companies have voiced frustration with the new rules, while Rhapsody suggested it may collaborate with 'market peers' to file a lawsuit against Apple. Its service currently exits the app and routes users to Safari to pay for subscriptions, a method which is now banned.

It is unclear if the DoJ or FTC will intervene or even open a formal investigation, as the proceedings are reportedly in the preliminary stage. The European Commission is also said to be "carefully monitoring" the matter for further developments, according to a Wall Street Journal report (sub. required).

By Electronista Staff

Post tools:

TAGS :

iPhone, industry, developer, iTunes, Rhapsody, antitrust, mobile phones, Apple, iPad

poetarchitect

Fresh-Faced Recruit

Joined: Feb 2011

02/17, 10:05pm | report spam | (2 replies) close | reply

Free Delivery

So let me get this straight. Apple has to receive content for publishers, provide servers to hold that content, deliver that content to thousands or millions of subscribers, and do that for free? How or why should Apple give free delivery when the publishers have never had it before? You can argue about how much and how but clearly Apple is due some compensation.

macentric

Joined: Sep 2005

02/18, 12:01am | report spam | close reply

Free Market...

I don't typically like to taut the free market as being the solution to a problem, but in this case the free market can easily resolve this problem. Google is offering, with their new publishing service, to offer subscription services without the cost. Let all of the content providers go "sell" their product on Android. It really is indicative of the content providers desire to sell their product where people spend money as opposed to where people sideload their software for free.

Did all of these publishers forget that someone has to actually pay for all of the bandwidth to distribute as well as store all this content. Don't they pay logistics companies to deliver their product to stores all of the world. If they don't like the offer they should build their own delivery and billing model, just like Apple gave them the option to.

And no, I really don't want publishers to sell my personal info to their advertisers. I am glad to have an intermediary keeping my info out of the hands of their advertisers unless i give them that information of my own accord.

It all seems a little silly to me.

Salty

Professional Poster

Joined: Jul 2005

-2

02/18, 01:53am | report spam | (1 reply) close | reply

Imagine

Imagine if Microsoft was demanding that Amazon give them 30% of their revenue for everything bought on a PC? We'd all be screaming bloody murder. I'm sorry but this is probably one of the worst example of Apple's business practices I've ever seen.

Makes me seriously think that when I buy the laptop after my next I'll be giving serious thought to the WebOS or Android options available on laptops by then.

Inkling

Junior Member

Joined: Jul 2006

02/18, 02:00am | report spam | close reply

No, that's not the reason for the fuss

Poetarchitect remarked: "So let me get this straight. Apple has to receive content for publishers, provide servers to hold that content, deliver that content to thousands or millions of subscribers, and do that for free? How or why should Apple give free delivery when the publishers have never had it before? You can argue about how much and how but clearly Apple is due some compensation."

No that's not what the fuss is about. When Apple handles the content, customers are buying through the iTunes, the iBookstore, or the App store. People aren't begrudging Apple's 30% slice in those cases. It's similar to what other online stores charge.

But starting with Sony's recently rejected ebook reader app, people are objecting to Apple claiming the right to charge that 30% of retail when Sony, B&N and (most important of all) Amazon is handling all the content storage, delivery and display. At most, all Apple is doing is processing a credit transaction for which they should be able to collect 3% rather than 30%. Apple's attempt to force that new policy on other online bookstores is what is creating the fuss.

With all the numbers being batted about, this is all very confusing. I know it is for me. Just remember that Apple wants to collect the same 30% when it simply forces itself between a willing buyer a willing seller, as when it supplies all the storage, processing, charging and display of a ebook. And that same 30% charge for providing vastly less service is likely to be where Apple gets in serious legal trouble. The only real rationale for it is as an attempt to crush competition. There even an illustration of that in anti-trust law. John Rockefeller did something quite similar to his competitors in the late 1800s using Penn Rail. The only difference was that Rockefeller was clever enough to act secretly.

Keep in mind that, during the time period when Apple may be making this policy stick, the cost for the 30% that Apple collects for doing nothing will have to come from somewhere. Apple is also demanding that any ebook sold by any app on their iDevices can't be sold for more on their iBookstore even though the cost is twice as high. (The vendors 30% cost and Apple's 30% surcharge.) The only way publishers, Amazon and others can square that circle is by raising prices everywhere. That means Apple's unearned profit will come out of your and my pocket even if we're reading books bought from Amazon on a Kindle and have never owned an iPhone or an iPad.

charlituna

Joined: Sep 2009

02/18, 02:19am | report spam | close reply

looking over means nothing

They will read over the new rules and move on. It is unlikely that Apple's lawyers didn't consider the risks and already advise or that Justice or the FTC will rule any different than they have on every other attempt related to iOS.

If anything, Justice and the FTC could approve of Apple's rules because it puts the choice in the hands of the consumers and ensures that those that choose to use Apple's system aren't punished with a higher price. Things that they would likely approve of

lamewing

Dedicated MacNNer

Joined: Aug 2004

-6

02/18, 07:20am | report spam | (1 reply) close | reply

@charlituna

I am afraid you are right. The FTC will do nothing to help the situation. Apple should be able to take between 2.5 and 5 percent (at the most), but NOT 30%. There is absolutely no profit in staying on the App Store so I suspect we will see man of these companies that have been part of the App Store for some time, jumping ship. If certain ones do leave such as Netflix, Amazon, Rhapsody, I will have no reason to keep my iPhone as my mobile device. I will keep it as an iPod and Skype phone...unless Skype leaves too (forgot about Skype). There are other mobile OSes "out there" and I have no problems switching to Windows 7 phone or Android if push comes to shove. I hope this doesn't happen as I like my iPhone...

I guess we will see if Apple rectifies this situation and curbs their increases greediness.

Greengo

Joined: May 2010

02/18, 07:42am | report spam | close reply

OK, let's try and look at it this way....

A guy named Dave walks into a successful store. He goes up to the store owner...

Dave: Hey you have a great store here, lots of traffic, I have a product I would like to offer in your store, what are your rules?

Store Owner: Hey no problem, it's quite simple...if you are giving away the product, I don't charge you anything....if you are selling something, then I ask for 30%.

Dave: Ok, I can agree with those terms....I am not charging for the product in your store.

Awhile later, the store owner notices that when people get to Dave's product, they immediately leave the store....he wonders, what is going on??
He finally decides to go over and look at Dave's Product, only to discover that it's just a "free" sign, giving people directions to Dave's Store!!!

So the question is, is it ok for Amazon to give away a link in Apple's store, to merely leave Apple's store and go to Amazon's store to buy stuff??
I think this is the issue...

Comment buried. Show

-10

02/18, 09:29am | report spam | close reply

@Greengo

You make the statement that people are putting free apps up to deceive Apple (The store owner wonders what is going on...). This is NOT the case in any fashion or form. Apple is quite aware and always was aware that people could buy subscriptions to products offered in the App Store. There was NO deception on the part of the App developers. You are misrepresenting Apple's point of view significantly.

The simple fact is Apple should get a small percentage to cover their costs and maybe 1 or 2 percent for profits since it is their store...BUT they are not hosting the software...they are merely taking payment and redirecting the customer. That is NOT worth 30% of the sale price!!! Anyone who believes that is a fool.

Simple fact is that these companies wil loose money on the deal, while Apple rakes in profits for doing practically NOTHING. How is that fair? Who in their right mind would agree to those business terms?

And to answer your question regarding Amazon....YES (even h*** YES)!!!! Why? Because that Amazon Kindle App (and other apps) WILL HELP SELL IPADS, and we all know Apple doesn't take a loss on its hardware!!!! Some folks will choose the iPad over a competing device based on the content, so it is in Apple's best interest to host Amazon's (and others' apps, even if they don't make a profit on the app subscriptions themselves.

Apple's actions and your flawed thinking process are endemic of the short-sightedness business seem unable to move past. Apple should be looking at this in the long term, not trying to rake in extra $$$ now. h***, Apple has BILLIONS of $$$ sitting in overseas banks they won't even bring back to the U.S. because they feel they should only pay 5% in taxes versus what they legall owe.

It is all about GREED, nothing more. Anybody who believes Apple is some fluffy, customer-oriented corporation is a fool. It is ironic that so many Apple fans (and I own a lot of Apple equipment...and have done so since my first Apple IIc) complain about Microsoft, yet ignore Apple's own GREED.

nat

Joined: Mar 2002

02/18, 09:45am | report spam | (1 reply) close | reply

please

it's a frickin company. of course "greed" is part of the deal.

love those that say they will look for other options because of apple's "greed".

my gawd, were you people on your soap box's when every pc maker had to pay microsoft whether they used ms os's or something else? your "ethics" hold true across the board don't they?

for all those who claim this is the last straw i wish you well in finding a company that isn't greedy.

aristotles

Grizzled Veteran

Joined: Jul 2004

02/18, 11:45am | report spam | close reply

Short memories on the net

umyeah

Joined: Oct 2009

-1

02/18, 02:01pm | report spam | (1 reply) close | reply

Apple is providing NO service for 30%

I'm with Inkling here. Apple isn't doing anything for that 30%. They aren't hosting the content beyond the initial app download. They aren't creating the content. There's no guarantee they will market your content. They are just demanding a recurring "finders fee" because it's their hardware.

It's also unfair competition for apples own services. If the same content is in iBooks and in the Sony e-Reader, but Sony still has to pay 30% to apple for each sale, how is that fair competition?

It's also a little frustrating that the only way to distribute apps is through the app store. If there was an alternative app store or way to install apps, this wouldn't be an issue, everyone could just go to the app store they want. When you buy a PC you don't have to buy the software through MS.

In the short term I think content providers should pass the charge directly to the iOS users. Let it cost $1 an issue on android and $1.50 an issue on iOS. It's the same offer through in App as online and consumers can see the true cost of their platform.

Long term there should be a push to allow thirdparty app stores on the iOS so there is always competition and another avenue for people to use.

testudo

Forum Regular

Joined: Aug 2001

-3

02/18, 02:18pm | report spam | close reply

Re: Short memories on the net

When the Kindle was the only game in town, Amazon was charging 70% for e-book purchases. Then when iBooks offered 30% Amazon dropped their take down to 30% but not without some price fixing where the e-Book had be a certain price relative to the physical book in their store.

And those restrictions on price were all (a) from the publisher, and (b) forced upon Amazon because that's what Apple was offering, and Apple's the big gorilla in the room.

On the topic of "in-app" purchases, Apple does have to host that stuff for security purposes as they have to vet those add-ons for bugs and security issues.

Sorry, no. There's two types of in-app purchases. One is for features, one is for content. On the feature, the code is already there, you just pay to enable it (this is done through the app store process, however). For content, it's just content. Do you really believe Apple is examining each and every issue of every periodical to make sure it is 'secure'?

So for 30%, Apple is offering delivery of the intial free app to the customer and any subsequent issues.

I'm sorry, but you're wrong. Kindle content all comes from Amazon. That is how it works now. Amazon has no need to host any of their content on the AppStore, it's just more work that way. In fact, I'm not so sure Apple is even hosting the content itself. It is more likely Amazon is just being told what was bought, and Apple processes the fee.

02/18, 02:34pm | report spam | close reply

Re: OK, let's try and look at it this way....

Sorry, your analogy is wrong. Let's try to fix it:

A guy named Dave is minding his own business when in walks a successful business man... (let's call him Steve)

Steve: Hey, I'm opening this new store that should go through the roof. We'd like you to put your stuff in our store, this will help both of us!

Dave: what are your rules?

Steve: it's quite simple...if you are giving away the product, I don't charge you anything....if you are selling something, then I ask for 30%.

Dave: Ok, I can agree with those terms....I am not charging for the product in your store.

Steve: Oh, but I approve everything before it goes in my store. I don't want kids buying a game that shows naughty parts or something.

Dave: Hey, what about products that make farting sounds?

Steve: Those will be no problem.

Dave: Great, I agree.

Awhile later, the new store has taken off as predicted. Money is just rolling in. Dave and his friends really helped bringing in customers. However, Steve noticed that, after getting Dave's product, people used it to purchase more stuff from Dave. Even though Steve has to do nothing at all with storing, stocking, advertising, or anything else of that product, he feels slighted.

So Steve finally decides that Dave should be required to allow Steve to sell all his other stuff in his store. And Steve gets 30%.

Dave: That's OK. I can handle the rest of this stuff.

Steve: You don't understand. If you don't let us sell that other stuff, we won't let your product be in our store. We let you give it away, for goodness sakes.

Dave: Well, what if I charge for it, then you can get that upfront cost?

Steve: Nope, sorry.

Dave: Well, maybe I'll just leave.

Steve: Go ahead. Where are you going? We're the biggest store with the most traffic. Feel free to try to make a living in those boutique stores.

So Dave, realizing he now has no choice, relents and let's Steve sell his stuff and earn 30%.

02/18, 02:39pm | report spam | close reply

Re: Free Market...

Let all of the content providers go "sell" their product on Android. It really is indicative of the content providers desire to sell their product where people spend money as opposed to where people sideload their software for free.

Except, as many point out, Apple has such a large marketshare, publishers will be at a disadvantage to leave the iPhone platform.

And what do you mean to imply by 'sell'? That no one uses android? Oh, there you go.

If they don't like the offer they should build their own delivery and billing model, just like Apple gave them the option to.

Apple is NOT giving them this option. Amazon has no problem now delivering and billing their content. Apple doesn't like the fact that Amazon is making money with their device. So they want a piece of the pie. Hence, Apple telling them all "If you're going to have any way for users to get content from you via the web, we demand that you sell it via us as well".

And note it isn't just "Get rid of the link to the web site from the app". For the kindle, since you can buy content via the web, apple wants to be able to sell it to. It isn't even about in app purchases!

02/18, 02:45pm | report spam | close reply

And no, I really don't want publishers to sell my personal info to their advertisers. I am glad to have an intermediary keeping my info out of the hands of their advertisers unless i give them that information of my own accord.

OK, so the 'intermediary' is keeping your information from the publishers.

But who is the intermediary sharing your data with? If you were on google, you know they're using it for something. Apple has their own ad service that they are really trying hard to push on companies. You don't think Apple will be using your information, regardless of your 'permission', for their own purposes?

It all seems a little silly to me.

Yes it does. Next thing you know, Barnes and Noble will be insisting that all magazine publishers give them a percentage of all subscriptions, for without the exposure of being in their store, people might not subscribe to it.

And your local GM dealership should be asking for 30% of all sales and services made by anyone purchasing a truck from them. For without the truck, they wouldn't be going to the jobs to make the money. So GM should get a cut!

02/18, 04:10pm | report spam | close reply

your wrongs are too numerous to go into (take a breath boy, relax, sit down). let's just say you are so wrong on so many issues that it's amazing you felt like publicizing all of them.

-4

02/18, 06:03pm | report spam | close reply

Oh, yes, just so wrong... And so wrong in so many ways you can't even mention one. How about just one?

02/18, 06:18pm | report spam | close reply

Re: Aple is providing NO service for 30%

You're right, all except for building the entire damn content distribution system, building the awesome storefront which people use to discover that content, and developing an entire hardware-software ecosystem for the delivery and consumption of that content -- none of which is trivial nor happened overnight, and none of which any competitor has been able to get close to and/or replicate with any success thus far even after several years.

Gee, who knew. All those people with Kindles now, who use Amazon's kindle store to buy and download content, that's actually all thanks to Apple.

If a publisher or company wants to use Apple's distribution system, that's perfectly fair for Apple to demand payment. h***, I think they should actually work with the publishers to come up with a one-time payment rather than percentages, but whatever. I have no problem with that.

But Apple's "awesome" storefront (awesome? Seriously? It's good, at best. On the iPhone/iPod, it's barely passable trying to find anything. But it isn't "Awesome") isn't pushing everyone's content, just a select few. Most is hidden on various sub-categories and pages that most people will never find it unless they're specifically looking for it (just like with apps).

As to this ecosystem for the delivery of content, you're right, it didn't happen overnight. In fact, it just appeared within the last two weeks. Which is why a lot of apps have their own delivery mechanisms. And yet, now that Apple has this system, they seem to think they should require everyone to offer content through it.

I'd like to see how happy you'd be if you had your own ebook app, selling titles and delivering them with no problems for two years, then be told by Apple "Oh, you allow people to buy content. Then you must let them buy content through our store. And we get 30% for the privilege. And you have no choice but to do this." Oh, and don't think you could ever do a deal with any other company for any content, because they also insist that they get the same or better price than you offer.

Yeah, I'm sure you'd be thrilled with that.

elroth

02/18, 10:28pm | report spam | (1 reply) close | reply

re: lamewing

Your hatred of Apple is blinding you. First of all, Apple is a retail store. If you buy a magazine in a retail store, what percent of the price do you think the store keeps? More than 30% (actually as much as 50%). If you buy a magazine subscription through Publisher's Clearinghouse or some other entity, how much of the subscription price do you think they keep? More than 30%.

Second, Amazon has a policy that if you offer something for sale on Amazon.com, you cannot offer that item for sale at a lower price anywhere else online. That's been their rule for a long time - it's nothing new.

If the publisher finds its own customer, it keeps 100% of the price, even though the magazine is still distributed by Apple and iTunes. Only if the customer finds the magazine through Apple does Apple gets its 30%.

The real complaint of the publishers is that Apple won't give them your personal information without your consent. Bravo to Apple on that one.

sacrums1

Joined: Jan 2010

02/21, 04:11pm | report spam | close reply

moving on to Android?

If Rhapsody and Amazon/kindle leave ipad and iphone, do will I.
I thought Apple would provide a healthy environment for content providers to grow... I think Google does a much better job so far...
yes, I smell greed too, just didn't expect it coming so fast and so big from Apple. I was told Apple was different... time to sell the stock.

05/17	Mozilla delays plans to block third...
05/17	Yahoo schedules press event for May...
05/17	MacBook Air stock beginning to evaporate...
05/17	'iRadio' announcement may miss WWDC...
05/17	Apple devices officially OK'd for secure...

05/19	Mini review: Samsung Galaxy S4 with...
05/17	Mozilla delays plans to block third...
05/17	Yahoo schedules press event for May...
05/17	'iRadio' announcement may miss WWDC...
05/17	Apple devices officially OK'd for secure...

FTC investigates Apple over new in-app subscription rules

updated 08:50 pm EST, Thu February 17, 2011

Move follows criticism from several groups

Free Delivery

Free Market...

Imagine

No, that's not the reason for the fuss

looking over means nothing

@charlituna

OK, let's try and look at it this way....

@Greengo

please

Short memories on the net

Apple is providing NO service for 30%

Re: Short memories on the net

Re: OK, let's try and look at it this way....

Re: Free Market...

Re: Free Market...

testudo

nat

Re: Aple is providing NO service for 30%

re: lamewing

moving on to Android?

Login Here

Most Read

Electronista Marketplace

FTC investigates Apple over new in-app subscription rules

updated 08:50 pm EST, Thu February 17, 2011

Move follows criticism from several groups

Related Articles

Recent Articles

Free Delivery

Free Market...

Imagine

No, that's not the reason for the fuss

looking over means nothing

@charlituna

OK, let's try and look at it this way....

@Greengo

please

Short memories on the net

Apple is providing NO service for 30%

Re: Short memories on the net

Re: OK, let's try and look at it this way....

Re: Free Market...

Re: Free Market...

testudo

nat

Re: Aple is providing NO service for 30%

re: lamewing

moving on to Android?

Login Here

Recently Commented Articles

Related Forum Posts

Most Read

Electronista Marketplace