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?
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)