It seems like almost everyone with a blog is captivated by the debate over Apple’s new policies related to in-app purchases. I read at least one good post on the subject every day. The money issues are important but not really interesting. Apple is leveraging its absolute control over which applications can be installed under iOS to pry away a big chunk of the revenue from application vendors.
The one rationale for the new policy I best understand is that application vendors will modify their pricing model so as to pay Apple the smallest amount possible. So if Apple charges 30% on direct purchases through iTunes and 15% for in-app purchases, many developers will distribute their application for free and then unlock the good features through an in-app purchase. If the percentage is different for subscriptions and for standalone in-app purchases, developers will try to switch to subscription-based pricing. In that sense, Apple has a strong incentive to charge the same price across the board.
What really interests me, though, is Apple’s false confidence in the idea that one payment system will actually work for everyone. Chris Adamson explains why this won’t work:
A client of a client of mine is likely to get caught up in this I-AP drama, and in a meeting this week, we laid out exactly how I-AP works, and what they have to do in order to implement it, including entering every product into the iTunes Connect web interface, a nightmarish prospect when you have thousands of SKUs. When we finished, there was a long silence on the phone, followed by a colleague saying “you can probably imagine the look on everyone’s faces here.”
I’m sure that the iOS team at Apple feels that they have designed an elegant and powerful payment system, maybe the best that anyone has ever created. But it’s apparent that not only is such a system insufficient for any application that might be conceived in the future for iOS, it’s also insufficient for many applications that already exist today.
It strikes me that the core error was when Apple allowed itself to be convinced that a one size fits all payment system would work for the full iOS ecosystem. I do wonder whether it was an executive decision that was passed on to engineers to implement, or the product team came up with a solution that the executives decided could work for everyone.
March 7, 2011 at 11:54 am
I guess I’m still surprised that people assume that this is how the system will work forever — as if nothing would change unless people complained. How often does Apple introduce a product or service and then continue to iterate? Very often. You have to start somewhere, and I understand that people don’t like this starting point, but to not acknowledge that it is just a starting point is missing the point of how Apple does business.
March 7, 2011 at 11:57 am
Sure, this is in some ways reminiscent of Steve Jobs telling everyone that Web apps are enough for anyone when the iPhone was originally launched without support for third party apps. (It’s astounding to think that originally you couldn’t use third party apps on the iPhone, isn’t it?)
Apple tends to overreach and then back off rather than starting modestly and then moving forward, that’s for sure.
March 7, 2011 at 12:57 pm
Since when does one solution work for everyone? I’m not sure that a well designed system can every fit everyones needs. By definition, you have to pick something and focus on it. It seems to me that the evidence suggest Apple’s done a fine job of creating a system that works for most folks. This extends to their hardware as well. Apple’s approach certainly does not meet the needs of folks who like to swap out video cards and what not for example.
March 7, 2011 at 6:16 pm
I see it as an attempt to claw back a large percentage of the surplus value that generally does not accrue to the makers of hardware except through 1) blatantly anti-competitive semi-hidden hardware lock-in measures or 2) just making the device much more expensive in the first place, which would dissuade either 3rd parties or users from using the thing.
So introducing it later is quite a nasty bait-and-switch.
As such I think if I was an Apple developer I’d be very annoyed. I doubt this is legal under anti-competitive laws and I don’t think it’s a good model for the industry to head towards.
It essentially ensures that all prices of stuff sold both on the IOS platform and off it will rise to cover the 30% Apple tax, resulting in a net transfer from non-IOS users to IOS users and higher prices for everyone. Er, hooray?
March 7, 2011 at 7:42 pm
Bait and switch? Yes.
Annoying to developers? Yes.
Illegal? Likely not, considering Apple’s market share and the fact that selling via Apple is optional and some (much?) of the content is available via other sources.
Bad for everyone (including Apple)? Yes.