Companies Try to Get Around Apple’s Fees
Apple gets a 30 percent cut on all sales from outside companies going through its iTunes system. It’s a sweet money-maker for Apple, but not everyone is happy with the arrangement and, as recent events show, some are taking steps to cut Steve Jobs and company out of the equation.
Walmart, which just this week waved the white flag of surrender in its competition with Apple’s iTunes in the digital music download business, has decided to make its Vudu video service available through the iPad browser, but it is not developing an app for the purpose.
The upside, obviously, for Walmart is that it gets to either pocket the money not paid to Apple and/or lower its price in a market share push.
On the downside, not all videos streamed by Vudu, most notably Disney films, will be available for the iPad. Some other content from other studios will not be available in HD.
Walmart is not the only company looking to get around Apple’s 30 percent cut.
Amazon.com announced the launch of a Kindle Cloud Reader that allows consumers to read e-books using only their web browser either online or off. The Cloud Reader is available for Safari on iPad or desktop.
"We have written the application from the ground up in HTML5, so that customers can also access their content offline directly from their browser. The flexibility of HTML5 allows us to build one application that automatically adapts to the platform you’re using – from Chrome to iOS. To make it easy and seamless to discover new books, we’ve added an integrated, touch optimized store directly into Cloud Reader, allowing customers one click access to a vast selection of books." said Dorothy Nicholls, director, Amazon Kindle, in a press release.
Discussion Questions
Discussion Questions: What do the actions taken by Vudu and Amazon.com say about the prospect these and other companies have in terms of future relations with Apple?
Apple has created a very successful walled garden around its products. If you want to be in the garden, you need to play by Apple’s rules, which frequently include sharing revenues with Apple. While Apple devices remain popular with consumers, other companies will look for ways to circumvent the fee sharing. Apple will fight back. That’s the way this game is played.
iTunes apps allow independent programmers a way to gain broad exposure to a giant market with little/no capital investment. In return, Apple gets a cut of the proceeds. The successful programmer gets a potentially huge payback for a great idea with essentially no risk, Amazon makes some money without investing in programming, and the consumer gets access to the latest innovations, a great deal for everyone.
For huge, well-capitalized companies, the 30% is no doubt annoying and it’s unsurprising that they would work to get around it. Will the end user go through two levels to get to content as opposed to going directly through an app? Some will, some won’t. Will enough do it to capture the ‘saved’ 30%? We’ll see.
Apple drives a hard bargain and — unless or until there is a clear alternative — they’ll continue to impose a significant “Apple brand tax”.
We’ll see what the net economic impact is on consumers and then see who wins in the long run.
At least for now Apple has the bat and ball in this game. So if we want to play the game we play by their rules. When another player enters the field we then have the option of choosing the field we pay to play on.
Although the general press doesn’t report much on this, apps will always be “in competition” with mobile optimized websites. Apple needs to be careful that their swagger doesn’t lead to losing their “good guy” and “cool” image. I bet the percentage tax Apple charges in their store will come way down.
…Just another thing not to like about Apple. They make aesthetic and highly functional products, but their emphasis on total control, exclusivity, etc., does, and will continue to rankle a number of companies and consumers (including this one).
Mobile apps are walking dead, folks. HTML5 allows you to do virtually the same thing and has two huge benefits: low footprint (nothing to install) and always up to date (no patching). As an example, my company has recently implemented our charts and graphs using HTML5 and Javascript for iPad users (which doesn’t support Flash) and you couldn’t tell the difference. Apple is making money on its app store business while it can (and that revenue stream should last a few more years, no doubt) but fast forward 5+ years and apps will be what “applets” are today, a footnote in the rise of ubiquitous computing.
Companies will keep trying alternatives; Apple will keep innovating; the space will evolve. The consumers will determine the alternatives they prefer.