In the wake of its rejection of the Sony e-book app, Apple is clarifying its guidelines for app development, emphasizing that to be approved, apps that allow consumers to bypass the iTunes/App store retail channel must also offer consumers the option of in-app purchases through the Apple purchasing system. It remains unclear how this will affect e-book retailers like Amazon, B&N, Kobo and others with iOS apps, vendors whose apps bypass Apple for sales and send the consumer to their own web sites for purchases, but currently do not offer in-app purchases through the Apple purchase system.
Why is this such a big deal? Because there’s a lot of content being read and consumed on Apple devices that is not bought through the Apple retailing system—and because Apple receives a 30% cut of any books or other content bought through Apple’s iTunes/App store or its in-app purchasing system. Apple requires that all in-app purchases go through the Apple system, so vendors often develop apps that open a browser window and take the consumer to a website for their purchases. At the very least, Apple will force developers to give consumers the option of buying, say, an Amazon title—and getting its 30% cut—through the Apple in-app purchasing system, a convenient and familiar process to Apple device owners because Apple already has all of your (our) credit card info. Of course, it’s doubtful that Amazon or any other e-book retailer wants to give Apple a percentage of its sales and it’s hard to conceive just how buying--let alone pricing--an Amazon title through Apple would even work. Nevertheless, it remains to be seen if Apple intends to crackdown on vendors like Amazon and perhaps reject updates of their apps if they do not offer an in-app purchase option.
Amazon has not responded to requests for comment.
While Apple claims that its app-development guidelines have not been changed, the guidelines are unclear—they appear to prohibit any purchasing system but Apple’s—and up until now, Apple’s enforcement of these rules seems to have been inconsistent. Nevertheless, in published reports Apple spokesperson Trudy Miller said, “We have not changed our developer terms or guidelines. We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase.” Apparently even though the guidelines have not changed, “now,” in Miller’s words, there is a new requirement for how apps are to be structured.
Going forward, it appears likely that Apple will demand that e-book vendors like Amazon make changes to their apps that will allow consumers both options: the ability to bypass Apple and buy direct from the vendor (no 30% cut for Apple) as well as the ability to use the convenient Apple in-app purchase system and give Apple its 30%. As we mentioned earlier, Apple’s iOS platform offers content providers a huge audience. Apple has sold more than 90 million iPhones since 2007, more than 15 million iPads since last April and more than 45 million iPod Touch devices since 2007. It’s no secret that many of the owners of these devices want to consume new or previously purchased media on them that didn’t come from through Apple.
To take advantage of that audience, Amazon, which has a bigger inventory (800,000 titles) of e-book titles than any retailer, was quick to offer apps that allowed consumers to read their Kindle e-books on Apple’s as well as other devices besides the Kindle. Indeed a recent study by the Codex Group found that 40% of iPad e-books are bought through the Amazon/Kindle store and another 12% through the B&N/Nook bookstore. Apple’s iBookstore, with only about 100,000 titles, had only a 29% share of the iPad e-book market.
Of course there are some observers who say that, ultimately, Apple wants all purchases on its devices to go through its in-app purchase system, so it can get its 30% cut of the revenue. That may be true but Apple hasn’t quite taken that step as yet. But stay tuned.