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Apple ratchets down on apps -- again

IPhone4 The New York Times set off a flurry of stories over the past couple of days when it reported that Apple had stopped Sony from selling e-books in the Sony Reader iPhone app. Apple instructed Sony and other app developers to stop steering users to their websites to buy products. Instead, they were told to make sales directly through the apps -- where Apple would be entitled to a 30% cut. 

The article in Wednesday's Los Angeles Times went so far as to suggest that Apple might be running afoul of federal antitrust law. Here's what analyst James McQuivey of Forrester Research had to say:

By dictating where digital books can be sold, Apple may be squelching innovation, he said. Secondly, the restrictions could be interpreted as restraint of trade, which is frowned upon by federal regulators such as the Federal Trade Commission.

"I wouldn't be surprised if phones were ringing at the FTC today about this," McQuivey said.

I wouldn't be surprised either, but I don't think Apple is doing anything wrong, at least not in the legal sense. As popular as the iPhone is, it's not a market-dominating smartphone, and certainly not a gatekeeper to mobile phone service. There are abundant alternatives -- in fact, smartphones based on Google's Android platform are likely to outpace iPhone sales in the near future, based on the trends charted by the Nielsen Co.

Apple's move could make the iPhone platform less attractive to retailers eager to use apps to sell digital goods, however, because it forces them to pay a significant percentage of their sales revenue to an additional middleman. Whether that drives them away from the popular iPhone platform remains to be seen; as long as Apple's market share holds steady, retailers have a powerful incentive to pay the Apple toll. But the fact that retailers could abandon Apple and still have access to most smartphone users (and the vast majority of all mobile phone users) makes it hard to justify the FTC trying to change Apple's approach.

By the way, retailers who abandon their Apple apps can still sell e-books and other digital goods to iPhone users. They just have to do so through the iPhone's web browser. The problem, though, is that some of that content may require an app to be viewed, played or heard.

The iPhone has never been an open platform. It's always been a vehicle for Apple to distribute the software apps and goods it endorses. The only change inherent in Apple's new instructions,  which Apple says are consistent with its longstanding guidelines for developers, is an additional degree of control over how the apps function. It seems particularly unfriendly to retailers and their customers, but then, it's Apple's platform.

Related: 

Apple shift on e-books may draw regulatory scrutiny

Verizon will launch 3G iPhone on Feb. 10

Android smart-phone sales leapfrog iPhone

-- Jon Healey

Credit: EPA / Andrew Gombert

 

Comments () | Archives (23)

The comments to this entry are closed.

Grant

A move like this by Apple is a form of corporate suicide!

Jeff

As far as I am concerned, Apple will squelch sales of there hardware devices to customers who feel like I do that the 30% will be tacked on to the cost of ebooks and other publications. Android here I come. My younger son wants an iPod, I think I'll discount mine and buy something else. Consumers, please don't support this kind of market control.

S

Apple makes so much revenue already that you'd think they could let this slide. But I'm wondering if apple can't make a 30% cut of the subscription fees, then what's in it for them to continue hosting the app in their store? I also remember a spokesperson for apple saying that they would be allowed to sell products through their websites as well. Don't quote me lol. Its just that apple iOS platform has been closed from the beginning and yet people still are surprised. But there are so many alternatives - mainly android - that these companies can go elsewhere, it's just that they don't want to.

SorryBut

Not very smart on Apple's part. Never bite your customers OR their desire to buy your product. Charge more for a premium product, but don't nickel-and-dime. Apple depends on a few brilliant products and a lot of goodwill, lose either and they will be eaten.

Marc Ellis

Guard the innovation and the technical superiority you may have with your product, but limiting buyers purchases and usage reflects BAD BUSINESS. Closing the platform to outside innovation will lead to people like me... No support of the Apple IIe has made me shun Apple since 1982... Go Android!

Elian Gonzalez

"No support of the Apple IIe has made me shun Apple since 1982..."

Dude, let it go.

Karma

Apple may take 30 percent of all app sales, but they don't retain it as profit; it's mainly going to quality assurance and operating system development. Alternatives include the upcoming Vibrant 4G that will reportedly come with an ancient release of Android filled with security/stability problems.

Karma

Please whip me into a false sense of outrage against something popular...please!

Jill

The developers fully knew all this... long before they started building the app. (Unless they can't read the contract they signed with Apple.)

There are just a very few things you can't do with your app. Why try to do them... and then wonder why your app never gets approved.

We followed the simple rules on all 12 of our apps. Never had any of them rejected.

I wonder why.

Robert Hunt

Apple is going downhill. Steve Jobs thinks he can rule the world... Google, here I come.

M. Brando

This statement isn't correct:

"Apple instructed Sony and other app developers to stop steering users to their websites to buy products. Instead, they were told to make sales directly through the apps -- where Apple would be entitled to a 30% cut."

Apple said you have to _also_ offer the ability to buy within the app. Not _only_.

I think the uproar is pretty silly. Can you buy from anyone but Amazon on a Kindle? No. Can you buy from anyone other than Sony on a Reader? No. From anyone but B&N with a Nook? Negative. And the FTC is going to come down on Apple? I don't think so...

affableman

Jobs has always been a monopolist at heart. Why is anyone surprised?

Jesse

I thin Jill and M. Brando have it nailed. They are not doing anything the others aren't doing and they do it better than most. Go ahead to Android. From what I hear the return rate on these )iphone killers" is pretty high. Mostly because Android sucks as an OS.

Jason

Then you've heard wrong, Jesse, especially about the newer phones. The OS is gorgeous and works beautifully. Android sales continue to climb (sales figures are adjusted for returns, FYI) so no, the return rate isn't that high.

This is why apple retains itself as a niche product, and that's their perogative.

Jon Healey

@M Brando -- Apple is expected to clarify its rules soon, and I think we'll hear that yes, there has to be an in-app buying option in addition to a Web buying option.

But your Kindle, Nook and Reader analogies are inapt. Those are single-purpose devices, even more limited than game consoles. No one expects their Wii to let them buy games for the PS3. But an iPhone is, for all intents and purposes, a computer. It's reasonable for people to expect it provide them broader access to materials than a Kindle does.

I say that even though I agree with your conclusion regarding the FTC, given the alternatives that consumers and retailers have to the iPhone.

cesarp

I never like the way Apple does business. The way they want to monopolise their business. I did not like the way America Online did business either. That is why I prefer a Microsoft dominated world instead of an Apple dominated world.

I can't believe that Apple would want a 30% commission for selling products thru their applications.

BC

@Jon Healey

It doesn't make a difference if it's a "single use" device, since eBooks constitute that same "single use". Kindle, Nook, and the Sony eReader all confine the user to buying eBooks through their own stores, despite having the exact same "single use".

endive

Is the issue control over revenue? It's the authors theory, logical as it may be, it's a theory. What if it's to circumvent unscrupulous companies from getting around paying their fair share to support the R&D of the iTunes eco-system. Honestly many of these companies were selling squat before the App Store came along.

I've been disappointed with the overflow of poor quality apps on the android market, or an over inundation of the same type of app. Tight control of application quality is my main concern, and where I think the Apple/AppStore provides a far more satisfactory experience.

Jon Healey

@BC -- Good point! I should have said single use device that functions as a brand extension, a la a Wii.

Marco Papa

So sad that the article writer did not get his facts.

The comment "Apple instructed Sony and other app developers to stop steering users to their websites to buy products." is actually false. Apple simply requires to enforce its current term of service which give the user the OPTION of either buy from and external website OR do an IN-APP Purchase for the same content. It will be up to the end user to select either option.

Big JIm Slade

It does seem odd that Apple appears to be well behind the game regarding innovation now.

When Apple's done well they've emulated Porsche and their segment of the car market. A high end niche player with stellar performance. Clueless in the minivan or truck markets, but they make a great sports car.

In order to expand market share, Apple's corporate masters are leading them into embarrassing territory, much like Porsche with thier their SUV and four door iteration of the AMC Pacer. This policy exudes the same aroma.

Looking back a few years from now, I doubt few will argue that the iPhone 4 allowed the competitors back in the game.

With all the money Apple's stockpiles of late, we should expect far better desktops for the money as well as advanced generations of most everything.

Not happening.

Jack C NYC

I prefer a "closed system" -- look at the viruses, spyware, etc for Windows, now Android is facing the same problem.

Android Trojan found grafted to gaming apps
The most sophisticated Trojan for Android smartphones yet. That's how security firm Lookout describes "Geinimi," a nasty piece of malicious software it has just discovered grafted on to downloads of some popular Android gaming apps. -- http://tinyurl.com/23bbxjy

How to tell if an Android app is malware
http://www.msnbc.msn.com/id/40204815/

Software released for attacking Android phones
Two security experts said on Friday they released a tool for attacking smart phones that use Google's Android operating system to persuade manufacturers to fix a bug that lets hackers read a victim's e-mail and text messages. "It wasn't difficult to build," said Nicholas Percoco, head of Spider Labs http://tinyurl.com/22r9saw

4 years an no malware on iPhone... a closed system has it's advantages. (jailbroken iphones may be vulnerable to viruses, but why jailbreak your warranty and upgrade ability?)

greg

Apple users won't care. They believe "it improves the user experience." Apple can do no wrong. Defensive and self-absorbed they are blind to the big picture and the behavior of their favorite company. Apple is just as "evil" as any other big corporation.


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