Apple Fires the Opening Shot at Amazon’s Kindle App

Amazon Kindle iPhone App in trouble

Amazon Kindle iPhone App in trouble

A couple weeks back, we covered a story about Apple’s rejection of Sony’s eReader application, a story that touched off a lot of discussion around Apple’s overall policy and fairness around 3rd party apps in the App Store. Apple followed that up yesterday with a clear shot across Amazon’s bow setting the date for the showdown.

App Store rules require developers who offer the ability to purchase content from an external source to allow in-app purchases of the same content. As reported earlier, this is not a new policy for Apple – just an existing policy that was not consistently enforced. This weekend, though, Apple told application developers that they have until March 31 to comply with the policy requiring in-app purchasing of external content, giving offending applications time to incorporate the new purchasing model into their app or risk being pulled from the store.

Of course, the first application that comes to mind is Amazon’s Kindle app, which allows Amazon customers to read ebooks (purchased from Amazon directly and with Amazon’s DRM attached) on their iOS devices. With this policy enforced, Amazon would be required to allow for in-app purchases of that same material. Of course, in-app purchases are subject to the 30% cut directly to Apple, which would seriously affect Amazon’s ability to profit from ebooks. Remember, Amazon just recently told investors that so far this year ebooks are outselling traditional books. There are several ways to look at this, and I’m very interested to see which side blinks first as they both have quite a bit to lose.

First off, Apple risks alienating a strong user-base with what are often described as greedy and draconian policies. Since Amazon is selling so many ebooks, Apple would like to get a cut of that. With over 15 million iPads sold to date, and most likely an even more successful one right around the corner, that’s a huge audience and staggering amount of potential revenue if Amazon changed the app to allow for in-app purchases. More revenue equals happy shareholders, which is ultimately what Apple’s core mission is. And from the end-user’s standpoint, this would improve the usability of the app. I mean, it’s already pretty easy to buy books from the Kindle app even though it takes you to Safari to search and purchase books. But, buying books without having to leave the app? As long as it’s the same price there’s no negative impact on the end-user. It might suck for Amazon, true, but the average end-user? Better end-to-end experience. Of course, tech-heads like you and me will still be a little tweaked that Apple isn’t really playing fair, but let’s be honest – is Amazon playing fair? I mean, say I buy a book in the iBooks application. Can I read that on my Kindle? No, I can’t, as the Kindle is a closed system. Apple is providing an additional distribution method for Amazon, and thinks that they deserve a little kickback for providing it rather than giving them a free ride. Can’t say I blame them for that, to be honest. But how many users are going to balk at Apple’s practices and jump ship to the coming Android Honeycomb tablets? And will that actually be enough users to make a significant dent in Apple’s dominance in that market?

Amazon Kindle app currently opens Safari for eBook purchases

Let’s look at it from Amazon’s point of view. Amazon has turned the corner on selling more ebooks than physical books. The success of the Kindle on their bottom line is undeniable. But, in order for people to read those ebooks, they either need a Kindle, a reader application on Windows or Mac, an iOS device, Android, or Blackberry. Now, of all of those devices, the latest Kindle is probably the best device to read on, with the iPad coming in at a close second. Of course, the iPad can do so many other things, it certainly wins the war of functionality over the Kindle. Reading ebooks on an iPod, iPhone, or Android device is passable, but not an ideal device for that kind of content. While Amazon has never officially released sales numbers for their Kindle devices over the years, estimates from companies such as Forrester Research put the overall base around 4 million – a far cry from Apple’s 15 million iPads, and they had a two and a half year head start. Amazon cannot deny that many people are purchasing ebooks that do not own Kindles, simply using the iPad application to consume the content, so this policy really puts them in a difficult position. Do they reject Apple’s policy and pull their app from iOS devices (potentially alienating many users who can no longer read the books they’ve purchased), and bank more on the Android app and coming tablets that can legitimately compete with the iPad? Or do they bite the bullet and give Apple their 30% so they can keep the user base? This could result in a higher overall cost to end users, as Amazon has to mitigate their revenue loss – remember, they have to keep shareholders happy too.

What do you think? Leave your thoughts in the comments below. Who is going to blink first in this game of chicken? Or, will there be another option of Amazon working out some kind of backroom deal to enable in-app ebook purchases with a lower percentage to Apple? Both sides have a lot to lose if either side wins, so a compromise could be better for both companies. Either way, this is going to be an interesting decision to follow, and we’ll be keeping our eye on how this develops.

(Via Business Insider)

Comments

  1. says

    I’m happy I had the time to check this out. It cleared up several things for me. On a side note, you folks keep this place looking pretty darn good

  2. says

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  3. Nuno Lopes says

    In my opinion Apple is just being evil.

    I explain, if Apple said to the market that books on its platform would cost more 30% then the rest of the platforms would they have sold has many iPad as they did? A lot of people decided for the iPad for its functionality, in particular the ability to run apps such as Kindle.

    Apple capitalize this more open position in market share, now that it has it is closing down on its customer that will end up paying for this tax.

    On another note, does the iBookStore pat 30% of its books to the AppStore? If this is going through, it would be ethical to separate this departament into a company because fairness is not part of their vocabulary. It would not be so much a problem if they did not had the market share they have.

    Cheers,

    Nuno

  4. Zoran says

    In my opinion this is just Apple being a greedy control freak. My only hope is that Amazon, Netflix, Hulu… and others come together and give Apple the middle finger! I know my reaction is a bit out there but I own an iPhone and iPad and now if Amazon, Netflix and others just give in they will have to raise their prices to cover the 30% loss, which means the users get screwed. I don’t understand how Apple gets away with all the stuff that they do. If Microsoft tried to even think of something like this, you would easily have a lawsuit. I think this a dumb move by Apple, and hopefully other OS and device manufacturers take advantage of the situation to get users to switch.

  5. Jason says

    My only complaint is that the article ignored the sheer dominance of Amazon by way of their vague but rrvealing statement that the new kindle is their most sold item ever. This puts the 3g at over 10 million. Combined with the two previous models and 15 million is not out of the question. And to extend on this point, with more than 300,000 droid devices coming on every day, Apple is about to blow their position based on thinking they are in the lead.

    Go ahead Apple…

  6. says

    I don’t really have a problem with the BASIC idea of Apple getting a piece of the pie here, but there are two problems.

    First of all, Apple sells books themselves through their iBooks setup, so if Amazon has to give Apple a cut, that automatically gives Apple a big advantage on what they can do with pricing. The question is, is it an unfair advantage? Frankly, I think it is.

    The other thing is, 30% is WAY too big a cut for Apple in this scenario. They’re really doing nothing whatsoever in this equation beyond providing the hardware. Taking a 30% cut for apps is much more reasonable, since they are hosting the downloads, maintaining the store, and providing marketing. However, they do NONE of that in the case of Kindle books, so a 30% cut makes no sense at all. Give them 5% instead of 30% and they’re still coming out way ahead, and it becomes much easier for Amazon, Sony, Barnes & Noble, etc., to accept.

    The other thing that concerns me about this scenario is this: Apple has not indicated anything about stopping Amazon/Kindle or anybody else from making sales through the web. They’ve said only that they *ALSO* have to support in-app purchases. The smartest thing Amazon could do would be to simply raise prices for in-app sales to cover Apple’s 30% cut, and maybe put a big notice saying “To save 30%, buy this book through the website instead”, but there’s two problems with this. First, raising prices selectively might play havoc with Amazon’s deals with publishers. Second, if they DO raise prices to cover Apple’s 30% cut, my guess is that the majority of the users will simply accept the inconvenience and go to the website to save money.

    Once that happens, does anybody foresee Apple being happy with the situation? My guess is that they’ll move to eliminate the website sales and force everything to be an in-app purchase.

    Gosh, I sure hope the FTC starts giving Apple hell for a long shopping list of issues before it gets that far.

    • Avatar of Andy Martin says

      Great points there, Mike. I was thinking more about the examples I made earlier, and I might have a better example around providing a platform for others to sell content – Amazon.com itself. Amazon built a platform, a framework that many, many different vendors can use to sell merchandise. Apple built a platform that many developers and vendors can use to sell merchandise, as in applications, games, and digital content for consumption. Let’s say the price to entry is Amazon’s merchant registration and Apple’s SDK. You go through those, and you’re good to put whatever you want on the platform (with restrictions in both cases, though Apple is stricter). Now, a merchant sells something on Amazon, he has to pay a cut. A developer sells someone on the iOS app, and they have to pay a cut. So, in a sense, since the Kindle app itself is free, Kindle’s been distributing it’s content on the iOS without any fees whatsoever. Pretty good deal for them.

      To your point, though 30% is WAY too much for this kind of content, I agree wholeheartedly. That’s why I’m hoping that Amazon and Apple can come to an agreement around digital content distribution like this. Apple shouldn’t have gotten into the iBooks business at all, in my opinion, and would have been better served to partner with Amazon early on to have it’s content inside the iBooks app (I do like the reader experience more with iBooks than the Kindle app, but the iBooks store could use a LOT of improvement to compete).

  7. Fernando says

    I sincerely feel that many in the tech are missing key facts from their conclusions. The main fact is how did the Sony eReader app intend to process purchases. To my knowledge Sony has simply stated that their app was rejected. The 2nd presumption being touted as fact is that in app purchases of content not supplied through Apples systems are subject to 30% cut to Apple.

  8. says

    None of this addresses the biggest problems with eBooks — their price, regardless of platform. Let these players stare each other down, shake each other around, and get the market stable for readers — then hopefully we can address the issue with price. There’s no (good or valid) reason an eBook should cost as much or more than a physical book.

    • Avatar of Andy Martin says

      Agreed, and that’s been a stumbling block for adoption for many people (me included). I’ve only purchased a handful of eBooks, and they were mostly because it was something I either,a) wanted to read right then without having to wait, b) was a new release still in hardcover that did happen to be cheaper than the physical book, or c) the eBook was on sale making it the least cost alternative. In this time of instant gratification, my kids see a book shopping from the nook Kids app (which goes to the kids section of the nook store in Safari, not actually in-app, which would also be impacted by this policy) and they want to read it right then. They don’t want to wait 2 days for it to get to the house, or have to go out to the bookstore and hope that it’s in stock.

      In hindsight, I think that’s one of the factors in the cost of these eBooks. “If you want it right here, right now, you’re going to pay what we say” seems to be the message. And keep in mind, the publishers have as big of a stake in this as anyone else. They are the main reason why there’s such a crappy selection in Apple’s iBooks store – they didn’t agree to Apple’s cost structure. But they have been hesitant to fully jump on with Amazon’s model too – old media has a hard time embracing new technology as a whole, changing business models is a scary thing to them.

  9. Heather says

    As a new iPad owner and a user of the Kindle app, just do what they want, charge more if you buy stuff through the app and I will buy stuff with my phone and then Whispersync it on my iPad without paying the surcharge. Anyone who does not want to use the workaround can pay more and buy it through their iPad. Apple will then make money and get all the nice complaint emails too.

  10. says

    I don’t understand how you can say Amazon isn’t playing fair because you can’t put a book purchased through iBooks on your Kindle. You can’t read it on your Nook, Kobo, Sony Reader, etc. either (or vice-versa). Why? Because publishers force ebook sellers to implement DRM. It’s not much different than the days when iTunes music purchases could only be played on iTunes.

    At least Amazon has apps that allow you to read a Kindle book on nearly any device (as do B&N, Kobo and others). Apple locks you into iOS devices with iBooks and won’t even let you read a purchased book on you Mac or Windows PC through iTunes!

    • Avatar of Andy Martin says

      I was trying to keep the conversation simple by just limiting to one provider – I could easily say that B&N and others also have skin in the game, but didn’t want to cloud the discussion with too many different sandboxes to look at.

      My point was that in Amazon’s Kindle app on the iOS devices (not just 15 million iPads, but many many more iPod touches and iPhones) gives them a free outlet to distribute their content. Technically, it cost Amazon $100 for an SDK license to create the app, but nothing else (other than internal development costs to update and improve the app over time). They don’t have to make any Kindles, or pay for any piece of the platform they are using to distribute their content. Does that seem fair? Even factoring in a small percentage of iOS users that might be using the Kindle app, there are far more people reading their content on those devices than on Kindles themselves. Is it fair that they can use that platform without paying a dime?

  11. says

    Clearly, someone at Apple is looking at the iBook sales, comparing them to Kindle sales and saying, “I WANT!” But iBooks have a really hard time competing with Kindle. Why? iBooks are just single platform. If I invest in a book, I’m going to buy the Kindle book because I know I’ll be able to read it on any platform I get in the future.

    So here’s Apple’s iBook sales chief and they’re saying, “how can I increase iBook sales?” The answer is to get the Kindle (and others) off iOS devices, so people have to use iBooks. So they insist on Kindle using in-app purchasing.

    Amazon will never give Apple 30% of it’s sales. They’ll pull off the iOS platform before they do that. But I think Apple needs Amazon more than the other way around. The fact that the iPad can read Kindle books so people can buy an iPad instead of a Kindle and get both I think has driven the sales of iPads.

    With the tablet market heating up with new Android and WebOS tablets coming out, Apple will just shoot itself in the foot if they insist on this.

    Ultimately, it won’t matter to me. I have plenty of Kindle books I read on my iPhone. All Apple can do is pull the Kindle app from the App Store, but I still have mine (and lots of other already-pulled apps!), so it’s not going away for me. The upshot for me is no upgrades to the Kindle app. But having said that, if/when I decide to buy a tablet, it WILL make me think twice before I buy an iPad.

  12. John s says

    iBooks wraps books with apple drm, amazon wraps it with their drm both are annoying.
    Can the kindle load a .mobi file yep, can an iPad old a ePub. Yes.

    Both happily load nondrm files but so far publisher aren’t happy to let eith sell them.
    Apple are just trying to bully publishers both big and small and hopefully amazon will show the 30% apple tax for what it is.

  13. Jeremy K says

    I am curious why you targeted Amazon for this as currently users cannot purchase content inside the Kindle application which means this doesn’t even apply to their application. Barnes and Noble does the same, this is also how Netflix and Hulu handle it. The issue with the Sony application is that they put the store inside their application and tried to sell through their own ecosystem in-app.

    Further, as far as I can tell no one has reported that this current model needs to change. It typically leads to lower sales for developers because you are sending the user off to Safari to handle purchase, but that is the balance.

    • Avatar of Andy Martin says

      Not entirely accurate – Sony’s eReader app was doing the same thing as Amazon. You’d click the “shop” button and it would then take you to the book store in Safari, formatted for the iOS device. From the original report from the NYT:

      “Apps like the Kindle app from Amazon.com and the one that Sony submitted open up a browser window when a user wants to buy something. This allows the app makers to argue that technically the purchase is happening on the Web, not within the app.

      Apple is now saying the app makers must allow those purchases to happen within the app, not in a separate browser window, with Apple getting its standard 30 percent cut of the transaction. At the moment this applies only to e-book purchases.

      “We have not changed our developer terms or guidelines,” Trudy Muller, an Apple spokeswoman, said Tuesday. “We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase.” ”

      I chose Amazon to discuss, as that’s the largest app that will be affected by this policy from Apple, and the one with which people are most familiar. Barnes & Noble’s nook application will certainly be affected as well. Netflix, Hulu, and Audible get a little tricky though, as you’re paying for a subscription service, not individual downloads, and we all know Apple’s limitations to subscription services (that might change with the success of “The Daily”, we’ll have to see how that pans out). Apple’s also remarked that at this time, this only applies to eBooks.

      • Jeremy K says

        Interesting, if this is the case then Sony should make a legal push. Dev guideline 11.2 which is what Apple is rejecting it on clearly only deals with purchases made within the application. Most devs who have ever done in-app know this well. So IF a true version of Safari is being opened outside of the application and not within a Webview inside the app, then legally Apple cannot reject it without modifying the guidelines. IF and none of us have seen it to know for sure, Sony shelled a web view inside their app then they violated. Using the word Safari is ambiguous, I would love for Sony to step up and show us how their app worked, video demo even.

  14. Mike krus says

    If I were amazon I would implement in app purchase but mark up everything 30%, explicitly stating it’s to cover Apple’s take…
    Let users decide which option they prefer, price or convenience.

    It would the same as Apple (and others) passing on VAT increase or media player tax to the customer, except in this case customer would have a choice

  15. DJ says

    Apple wins a lot of battles, but I don’t see them winning this one against Amazon. It’s hard to see Amazon giving in and handing over 30% of their ebook profits to Apple. Neither do I think they’ll cancel the Kindle app. They’ll probably just take out any links to buying books. You’ll have to go to Safari on your own and find the book and send it to your Kindle app. Not really that much worse than what they’re doing right now, and I could live with it.

  16. Craig says

    Question. What is the actual Apple policy. Because if Amazon only has to offer the same content – do they have to at the same cost? Could they charge $10 through their website and $15 via in app? Then they’d adhere to the rules and consumers could just choose to buy as they always have….