Let me explain. No, wait, it's too much, let me sum up: Apple has instituted a new subscription policy for its App Stores that states any in-app purchases or subscriptions must send 30% of revenue to Cupertino, or else the app will be pulled. In addition, any app that sells content or subscriptions outside of the App Store must also sell it within the App Store at an equal or better price, or else the app will be pulled. This puts content providers like Amazon, Netflix, and major media publications in the crosshairs. They will have to make a decision by June on whether or not to comply with these new guidelines or to leave Apple's platform altogether.
Two issues need to be addressed. First, is what Apple is doing right, and if so, for whom? Second, regardless of whether Apple is right or wrong, will content providers flee iOS, or will they pony up the membership fee?
I'm of the mind that what Apple's doing is well within its rights. That's not because I'm an Apple fanboy. It's because I'm a capitalist. Apple built the iOS platform from the ground up. It belongs to the company, and it makes sense that the company benefit from sales being made within the marketplace. Every customer making a purchase within an app or subscribing to content within an app is doing it on Apple's platform using the backend tools that Apple has been developing for a decade going back to the launch of iTunes. Without the work that Apple's done, content providers wouldn't be able to sell to these customers at all. Even if you want to argue about the percentage, it's only right that Apple take some cut.
Some are accusing Apple of leveraging the strength of its platform to exert control over content providers, to which I reply: of course that's what it's doing. But to understand what that really means, I think you have to go back to 1997, when Steve Jobs returned to Apple and took over as interim CEO. With Microsoft at the peak of its powers, this was Apple's "barbarians at the gates" moment. Even software providers like Adobe, whose creative tools defined the Mac as much as anything, were threatening to move on, and were exerting their control over the development of Mac OS. At this point, the only thing that kept Apple going was a small but intensely loyal body of supporters - people who bled seven colors and purchased Macs because they genuinely loved them.
I believe that in those dark days, Jobs and his leadership team made a vow to themselves and, implicitly, to their supporters. They vowed that Apple would never again be dependent on anyone but their customers. That included manufacturers, suppliers, software providers, and retailers. Apple would be completely self-sufficient, and when negotiations arose in the future, it would be Apple that set the terms. It started by killing the Mac clones. Apple would control who ran its software. It continued with the iPod and iTunes. Apple would control how content was purchased and how it was carried. It reached its pinnacle with the iPhone, the App Store, and the iPad. And now it continues with the Mac App Store.
And the key to turning these tools into leverage is this: Apple's products are the most consumer-friendly on the market. Installing applications through an App Store is easier than any other method. Purchasing and managing media in iTunes is easier than any other method. It's all so easy, and it all works to the consumer's benefit. And when consumers use a product, that gives Apple the upper hand over the content providers. Doubt it? Look at the music industry.
And that brings us to the second question: who stays and who goes? I don't think we can name specific companies yet. Each has things of its own to consider. But ultimately, I think you'll see more developers acquiescing to Apple's demands than fleeing. The reason is simple: Apple has 150 million credit cards on file and an audience that has been trained for ten years to buy things with one click. No other company in the world has that, not even Amazon. And that sort of customer loyalty - never mind the infrastructure - is not something that a rival can build overnight. Content providers who want to take their services to Android, for instance, will be in for a rude awakening when they realize that Android users rarely make purchases from their phones. And even a competitor like HP lacks the full ecosystem and focus on consumer-friendliness that brought 150 million users into the fold. There simply isn't a comparable market out there to which content providers can flee.
You'll see someone try, of course, and it'll be NBC all over again. You may remember a few years ago, NBC pulled its content from the iTunes Store because it was upset over the cut that Apple was taking from its sales. Months later, it crawled back and accepted Apple's terms because there was simply nowhere else that had both the infrastructure and consumer support that iTunes has. This example should be at the front of content providers' minds as they ponder the question of who their departure would hurt more: Apple or themselves?
Apple's purchasing system is the simplest ever built for consumers. Its products are among the most successful in the world because they focus on the consumer experience. This isn't something that happened yesterday. It's been happening since Steve Jobs returned to Apple, and has given the company leverage over every industry connected to it. Now Apple is flexing its muscle, and is well within its right to do so. Content providers have the choice of either complying with Apple's demands or leaving its marketplace. History has shown that when even major media firms leave Apple's marketplace, they lose money. The question that content providers have to ask now is whether or not they can afford to abandon 150 million credits cards. My bet is that most will decide its not worth the trouble. Apple will win again, as it usually does, and so will consumers, who will be able to purchase an even wider range of content with a single tap.
Update: As Gruber notes:
Apple won’t share your personal information to publishers without your permission. Publishers want unfettered access to that information because they want to sell it, because that’s what they’ve been doing with subscriber information for decades.
As someone who has worked in direct marketing, trust me: this is better for consumers.