⇥ Is Apple cramming the future down publishers’ throats?

Has Apple thrown a curveball straight into the face of publishers and content distributors? On the surface, it certainly seems so—and there are plenty of people who are convinced that’s the case. My friend Lex, for example, says that the new policies, which force App Store developers to offer the same in-app purchase options as they offer ex-app¹, are hostile both to developers and to consumers.

In principle, I tend to agree with a good part of Lex’s assessment—certainly pertaining to today’s marketplace. Companies like Amazon, Netflix or Rhapsody will find that their ability to leverage iOS as a distribution platform gratis has completely dried up. From this point on, they will either have to pony up 30 percent to Apple or get their apps out of the Store. It’s a none-too-subtle way for Apple to assert complete dominance over the iPhone, iPod touch and iPad as content delivery platforms.

Some have suggested that the developers affected by the changes might create “iOS-only” products designed to go around the limitations imposed by Apple. For example, Amazon could create a special iOS-only version of the books the sell through Kindle without having to change the pricing for all its other products. I have no idea if that’s even possible under today’s rules, but it would nonetheless be a losing battle: you can’t easily “go around” an organization that can arbitrarily change the rules of the game without any restraint.

The resulting loss of choice is, undoubtedly, a setback for the consumer. The fact that people won’t be able to move their content outside of the Apple ecosystem means that they will be held captive in the clutches of the Cupertino mafia.

The publisher perspective

Or does it?

Let ’s look at it from the point of view of the publishers. I think it’s safe to say that almost no consumer today makes their purchases directly from a publisher; the vast majority buys either through a bookstore or through an online seller like Amazon. The same probably goes for music, but let’s focus on books for a moment.

The terms under which Amazon resells electronic books through the Kindle are not dissimilar from Apple. In fact, Amazon’s terms can be far more draconian if you don’t have the power to negotiate more favourable conditions with them, and they used far worse before Apple entered the marketplace with iBooks.

From a publisher’s perspective, then, there is little change where the new App Store policies are concerned. Today, they pay Amazon a commission on sales and, starting from tomorrow, they’ll have to pay it to Apple.

Magazine publishers are in a similar, or better position: today’s magazine distribution is a world of pain that ranges from ridiculous discounts to onerous shipping costs. This has distorted the periodicals market to the point where you can get a subscription to any newsstand magazine for half the cover price, or less. The discount is not just the publisher’s way to reward your loyalty—it’s also their way to thank you for helping them bypass the most expensive step in their publication process.

With iTunes acting as an intermediary between users and publishers, getting a hold of that personal information will become much more difficult, although not impossible. Still, the fundamental dynamics of the game have not changed.

The consumer perspective

The only companies that really suffer here are, therefore, those that act as distributors. When you think about it, they do not necessarily add a whole lot to the process: in an online world, companies like Amazon act as little more than content aggregators—a convenient place where you go look for books, magazines and music instead of having to scour each individual publisher’s website.

Curiously, the Apple ecosystem already has such a place: it’s called iTunes. And the loss of choice from the fact that iOS is a closed ecosystem is only real so long as it’s measured against its competition. The Kindle is just as closed—it happens to run on multiple platforms, but Amazon keeps as tight a lid on its content as Cupertino does on the iBookstore.

Publishers, on the other hand, remain completely free to distribute their content through as many platforms as possible and acquire customers in any way they see fit. Thus, consumers are not necessarily losing anything—they’re just being locked into a particular marketplace if they choose to remain within Apple’s ecosystem.

In the process, they gain two important advantages. The first is a simple, centralized and proven payment mechanism. Rather than pulling out your credit card at every turn, all you need to do is remember a single login and password, et voila, your subscription is served. If it were any simpler… I suspect Apple would have thought of it.

The second is the ability to keep their personal information away from the publishers unless they choose to share it. This is no small thing when you think about the way subscriptions work today: why should customers pay and give away their information at the same time? The two activities have no business being related to each other, and yet they cannot be easily uncoupled today—in part because the publishers value the information they collect, and in part because it’s really the only way they can charge customers.

Apple’s perspective

All the uncertainty about Apple’s motivations, however, evaporates once you start considering the implications of its decision for the future of publishing on the iPad.

A 30 percent “tax” on purchases made through iOS devices sounds onerous and unjust when you project it onto today’s market, where publishers have not quite yet grasped the fact that tablets are not just another outlet for the material they create for the print media. Indeed, tablets will require a complete rethinking of the very concept of content, just like radio did at the turn of the century, and television in the Sixties.

The content of the future will, most likely, be an app of some kind—requiring not just a different approach to its development, but also a new business model to sustain its existence and grow. Factoring the cost of distribution into a new business model is certainly going to be easier than trying to cram it into the existing economies of scale. In the aftermath of the launch of News Corp’s The Daily, it’s obvious that the commission the company pays Apple is simply another line item in their budget—a cost of doing business that they knew about and have factored in their calculations.

And that’s exactly what Apple wants: publishers that are committed to creating a new generation of content that has been conceived from the get-go to appeal to tablet users who will otherwise not pay for it. It may sound harsh, but revolutions always are.

Whether the plan succeeds or not remains, of course, to be seen. The decision to restrict third parties from using iOS as a content-delivery channel to their heart’s content has ruffled a lot of feathers—many of which sit atop corporate bodies with deep pockets and determined management that won’t sit by while Apple has its wicked way with their livelihood. Still, the potential is there for a true evolutionary step to occur in the world of publishing, which has been anything but fast in embracing the digital age and its unique needs.