Why You Should Be Outraged by iPad Subscription Model

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A few months back, Apple unveiled its subscription service for content distribution on the iPad. The model first used by The Daily news app is now available to all app content makers, such as magazines, newspapers, and even video and music. Anything that’s published can be delivered automatically to your iPad without the need for individual in-app or App Store purchases, if you wish.

On the surface, this sounds great. It will certainly make life easier for iPad users. It’s just like the difference between having to run down to your local magazine stand to pick up your favorite rag, vs. having a subscription that sends your magazine directly to your house. The latter is just more convenient. But there’s more to it than just subscriptions. This is a grand, sweeping change that goes into effect on June 30th, and requires any content provider to sell their content from within their app — not just subscriptions.

The old way of doing things, for example, was if you want to buy an ebook for your Kindle app, you have to go to Amazon.com in your web browser and purchase the ebook there. Amazon would then send the ebook to your iPad’s Kindle app. Now, Apple’s requirement means that Amazon has to make all of their ebooks available to buy from inside the Kindle app.

This doesn’t sounds so bad at first, until you look at Apple’s new policy of taking a 30% commission on every in-app purchase. Amazon and other content providers can sell their stuff outside of their app, but they must also offer it inside the app, at the same price or lower. And no longer does Apple allow developers to include links to websites for purchasing content — which makes it a lot harder for consumers to know that they can buy content for their apps on the Net. Adding insult to injury, Apple had the gall to announce this new policy in a happy/shiny press release that makes it sound as if Apple is doing everyone a favor.

Because of this new commission structure, one app has had to pull its own plug, after a quarter of a million downloads. And they’re not taking it lying down. iFlow Reader, a slick ebook app that took 15 months to develop and cost its makers over a million dollars to create, is shutting down as of May 31st (the app has already disappeared from the App Store), because the commission that Apple is demanding equates to more than the profit that iFlow Reader itself makes on each book. Meaning they have to take a loss for every ebook they sell.

BeamItDown software, the company behind the iFlow Reader, has fired off an angry tirade against Apple for essentially screwing them over after selling them on the dream of digital content. And I can’t blame them for being upset. In fact, as a writer myself, I’m siding with BeamItDown on this one.

Whatever else your sentiments toward Apple — and I love their products more than I love some people — this policy is just plain evil. I want to believe that Apple never foresaw how this content model would negatively impact the little guy developers out there, but this feels way too calculated a move for that kind of innocence.

The folks at BeamItDown go so far as to call this move “an eviction notice” from a “totalitarian dictator” who wants all ebook purchases on the iPad to come from iBooks and nowhere else.

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10 thoughts on “Why You Should Be Outraged by iPad Subscription Model

  1. I’d bet Apple knew exactly what it was doing. The biggest gripe I have with Apple is that things are done Apple’s way or no way.

    Microsoft has caught a lot of flack over anti-competitive behavior, but Apple is even worse.

  2. Have Beam it Down confirmed that this was NOT a DRM issue. It seems mighty strange that they are claiming that it will stop after a given date…

    The hissy fit publishing is one thing but there are a lot of reader apps on the App store perhaps they just couldn’t compete.

    Making their own books with Adobe DRM makes this actually feel more like a Plays for Sure issue rather than the issue that they are claiming it is.

  3. Have Beam it Down confirmed that this was NOT a DRM issue? It seems mighty strange that they are claiming that it will stop after a given date…

    The hissy fit publishing is one thing but there are a lot of reader apps on the App store perhaps they just couldn’t compete.

    Making their own books with Adobe DRM makes this actually feel more like a Plays for Sure issue rather than the issue that they are claiming it is.

  4. beamitdown is not a publisher, it is not a media producer, it is not a content creator; beamitdown is a middleman. Apple is also a middleman.

    It has already been established that 30% is the rate at which the App Store breaks even, given it’s mix of paid and free apps and content. It is one thing to complain that Apple is forcing paid apps and content to subsidize free apps and content. It is another thing to complain that Apple is cutting out middlemen that resell paid content without subsidizing free content.

  5. The app store is created for well creators and prime developers and not for middle men.

    Middle men have to buy their wares from someone and then mark up before selling to the consumers and in the app stores they simply can’t compete with those who produce their own because of the 30% commission.

    This particular guy who whined because his business model simply does not work in the app store. Who or which landlord will be so kind as allow someone to sell goods in their property without having to pay rent. So Apple wants him to cough up 30% as commission and he cried blue murder. Does he honestly think that he can make money by selling goods on someone’s property without having paying a single cent in rent.

    Bur let’s see what Apple will do to Amazon and from then we will get a better picture. In the mean while let’s enjoy the whines from the tech sphere.

  6. I’m surprised at how many of our readers are so quick to condemn BeamItDown. These repeated “middle men” arguments don’t wash for me. By that logic, Apple should launch its own news content agency and push out all the news apps, like CNN, The Daily, and USA Today. Or create its own video game development arm and stop publishing games by all the thousands of iOS game creators out there, so that only the games made by Apple itself are the ones we’re allowed to purchase and play.

    Should *only Apple* be allowed to deliver content or products to our Apple devices? That’s the fundamental issue at the heart of this entire thing, and it’s not like it’s the first time Apple’s policies have been questioned about this. It’s just one of the most potent recent examples of someone suffering because of those policies.

    I understand what you guys are saying, and I’m not disagreeing that Apple was well within its rights to change the App Store’s policies for pretty much anything. The issue is not the legality of the situation, but the morality of it. And I would’ve thought that a company that was once the “little guy underdog” start-up would know all too well what it feels like to get stepped on by the big guys. Read some of the articles I linked to in this article in their entirety, and you might come away with a different perspective.

    1. CNN, The Daily, and USA Today, are, in effect, content creators. They create the content; they are not the newsstand where you buy the product at retail. For Apple to try and recreate the depth and sophistication of these organizations would be ludicrous. But even as USA Today goes out to news stand, they have to give the retailer a discount so they will buy the product wholesale, and then sell it at MSRP. In the periodical trade this margin is somewhere in the area of about 50%. That means the newsstand takes 50% of the cover price, and the publisher gets the other 50%.
      This is not new. I’ve worked selling periodicals back in the 80s and 90s. Depending on volume and distribution source, I could get anywhere from a 40% to a 70% discount on my periodicals; and on things like books and collectible merchandise, I could receive a discount between 25% and 45% MSRP.
      Publishers are used to these deep discounts offered to retailers. Typically a magazine came from the publisher to a distributor, which added 5% to 10% to the price, further reducing the publishers take to about 40%.
      What needs to be understood here is that BeamItDown is in the role of distributor, and it has to build its business model on being able to live on that 5% to 10%, as the middleman distributor. If it can’t, then it doesn’t have a viable product.
      People seem to think that just because everything is going digital that business practices all change. They don’t. Want to build a good computer manufacturing system, first build a system that works well on paper, and then digitize it. You will gain efficiencies by having it done by computer, but the system has to WORK first.
      Apple taking only 30% as the “retailer” Point-of-Sale in this model is far more generous then publishing has had it for the last four decades. BeamItDown could take its 10%, and there would still be 60% to return to the publisher. Or return the more traditional 40% to the publisher, which would let them get 30%. If the publishers are not allowing them to keep that much, then the problem is how they made agreements with the publishers, not the rules that Apple has placed on all these middlemen distributors.

  7. Face it BeamItDown has the wrong business model and the appstore is no place for squatter middlemen.

  8. I agree with Mr. parish. It is a moral issue. BeamItDown played by the rules and then the rules changed. And the houses that sell the content are all middle-men. Amazon does not produce, they re-sell, as does Barnes & Noble Etc. Blind followers of a platform are indeed misguided. I switched from the other guys to get away from all or nothing policies. I may go back to Redmond. At least they screw you from the front.

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