About Me 0047: Making Money Online With

The tech behemoth’s onerous new subscription rules, requiring app developers to make their products available through Apple’s own store, have some wondering whether the company is pushing things too far, writes Dan Lyons.

Dennis Morin has spent a year of his life and about $1 million developing an e-reader application for Apple’s iPad and iPhone, devices that run Apple’s iOS mobile operating system. And now, with one little change in its rules, Apple has put him out of business, Morin says.

“It is not possible for anyone but Apple to sell e-books at a profit on iOS under these rules,” says Morin, founder and CEO of BeamItDown Software, which makes an e-book app called iFlow Reader and sells books via its own online store.

Daniel Acker/ Bloomberg via Getty Images

Apple’s new rules, announced yesterday, say that developers such as BeamItDown must make their products available through Apple’s own store, where Apple takes a 30 percent cut of revenues. The change will affect companies that make their content—everything from books to movies and videos to TV shows—available to owners of Apple devices.

Until now, Morin and others, like Amazon, have sidestepped Apple’s store by employing a clever workaround—when you click on a button to buy a book, you are taken out of the app to a browser, where the transaction takes place.

Morin says Apple has told him in the past that this was perfectly fine.

“The bottom line is that unless the FTC intervenes, this will put us out of business,” says one developer. “Given Apple’s political clout, this probably will not happen."

But now Apple has changed its tune. Its new policy says that booksellers can keep selling books outside the Apple store, but only if they also make the same books available inside Apple’s store as well.

Thing is, most customers will buy via Apple, because it’s more convenient. And that’s where the problem arises.

Morin says he makes less than 30 percent profit on the books he sells. So if he has to sell via Apple’s store, he will lose money on every book he sells. On a $10 book, he will lose $1.15.

“The bottom line is that unless the FTC intervenes, this will put us out of business,” Morin says. “Given Apple’s political clout, this probably will not happen. But there is no doubt that their practices are anti-competitive. We have a much better e-reader than Apple, but that is utterly irrelevant in the totalitarian world of iOS.”

Even the big guys, like Amazon and Barnes & Noble, will suffer under Apple’s new rules, Morin says. Amazon and Barnes & Noble did not respond immediately to requests for comment. Neither did Apple.

Worse yet, Morin says, Apple’s new policies will prevent small developers from dreaming up new ideas for the iPad. “This is the death of innovation in e-readers on iOS,” Morin says.

Apple’s new rules also have huge implications for companies like Netflix and Hulu, which sell movies and TV shows via subscription. Essentially, Apple is demanding a 30 percent cut of their ongoing revenues from iPads. That’s the price for making their content available to customers who own Apple devices.

There’s no sense fretting about whether or not this is fair. Apple has a right (and, indeed, an obligation, as far as its shareholders are concerned) to extract as much value as possible from the online ecosystem it has created.

Google has gotten a lot of attention for the launch of One Pass, the all-in-one subscription plan for publishers that the search giant revealed earlier today — primarily because it made for a nice counterpoint to Apple’s new in-app subscription system, which launched on Tuesday. While Apple’s offering is closed and takes a big chunk of the revenue from publishers, Google’s takes a much smaller cut — and because it’s based on the web and not on controlling access to a walled garden, Google’s system is much more open. That said, however, it’s not at all clear that publishers will get anywhere by signing up for it, open or not.

The main benefits of Google’s plan are fairly obvious: It doesn’t force publishers to provide the company with preferential access to their customers, the way Apple does by requiring in-app purchasing for all subscription services, and Google is taking only 10 percent of the revenue any publishers bring in via its payment system, while Apple takes 30 percent of all subscription fees. On top of that, as MG Siegler notes, the One Pass system provides publishers with access to information about those who sign up — names, email addresses, zip codes and so on — which is crucial data that content companies use to market their services to advertisers. Apple turns this option off by default, and users have to opt in.

That’s the good news. The bad news? Google’s One Pass is pretty much just a warmed-over content paywall. All it does is collect the money for publishers who want to put up a toll-booth around their content. In fact, the thing it resembles the most — as Josh Benton of the Nieman Journalism Lab notes — is the Journalism Online Press+ system that entrepreneur Steven Brill and former Wall Street Journal executive Gordon Crovitz have been peddling to newspapers and magazines for the past year or more, without much success.

Like that system, Google’s service is essentially designed to handle the payment processing for multiple subscription sites, so users can theoretically sign up for dozens without worrying about being nickel-and-dimed by each one. There’s just one problem: There’s no sign that users have any interest in doing this — or at least, not in large enough numbers to make it work for anyone other than perhaps The Economist and the Wall Street Journal. Those who have put up new paywalls, including The Times of London, have seen the vast majority of their readers disappear into the wind.

One of the reasons users of Apple products like the iPhone and the iPad seem a lot more willing to pay for things like apps is because the experience is so much better and paying is so easy. Despite that, magazine and newspaper publishers have have had little success so far in getting people to pay for their apps. Why would it be any easier with Google’s One Pass? If anything, it’s likely to be even harder, because it’s based on the open web — and users are likely to notice that free content is all around them, while iPhone and iPad apps do a fairly good job of disguising that fact.

So congratulations to Google for making some hay with its launch, but any publisher who sees One Pass as some kind of golden ticket is dreaming in Technicolor.

Related GigaOM Pro content (sub req’d):

How Media Companies Can Compete Online

Demand Media — Search Spam or the Future of Content?

Google Needs to Fix Its Spam Problem Even If It Hurts

Post and thumbnail courtesy of Flickr user David Kozlowski

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About Me 0047

Saturday, March 5, 2011

Making Money Online With

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