Early today, Apple finally unveiled its long-anticipated App Store Subscriptions service, while simultaneously making official a pretty big effective rule change in the way in-app purchases / subscriptions work: app developers now need to make the exact same purchases (at the same price) available in-app as are available out-of-app, giving Apple at least the chance of getting a 30% cut.
Although Apple says this rule has always been on the books and they’re only now enforcing it, it’s a huge change that is likely to complicate a lot of existing business models.
For example, Amazon’s Kindle app currently channels all in-app purchases through the Amazon.com website, but soon, the Kindle app will have to make all the titles in its e-book library available as in-app purchases available through Apple. Since Amazon’s cut on every e-book is already less than 30%, every e-book they sell through Apple (for which they will have to pay a 30% cut) will result in a loss. Amazon can’t respond by offering in-app e-books at a higher price to cover the Apple tax, because Apple has prohibited it.
It’s a pickle: Amazon either has to raise prices of Kindle e-books all around, sell e-books to iOS owners at a loss, or stop selling e-books through the iOS Kindle app altogether. Amazon’s not alone in this: other services in similar predicaments are Hulu and Netflix.
Unfortunately, though, they don’t have long to try to figure out alternatives: Apple has allegedly given publishers until June 30th to fall in line with the new policies or get kicked out of the App Store.
For services like Hulu and Netflix, where most users subscribe through a web interface, this probably isn’t a big deal, but it’s Amazon and Kindle that are clearly in Apple’s crosshairs. I don’t know what Amazon will do, but if I had to hazard a guess, I think they’ll stop selling e-books in-app on the iOS platform all together. That’s a drastic solution, though, and not really very good for Amazon in the long-run. Perhaps the most obvious solution is a good, old fashioned lawsuit?
