[Andrew H.]

Originally Posted by stonetools

There’s not too much Apple love on this issue, is there? I think there are two issues here:

1. does Apple deserve a cut of the revenue from the sales of products on its platform
2. what should be the size of the cut.

If you think that these are the issues, you don't understand the issues. No one disagrees that Apple deserves a cut of the revenue from the sales of products on its platform.

Apple gets this already, and I don't think that anyone disagrees with it.

What Apple wants is a cut of the revenue of sales *not* on its platform. Basically, Apple is saying: (1) if you have sell something outside our platform that is used on our platform, you have to *also* sell it through our platform and give us 30%; and (2) you have to sell it on our platform for the same or less than you sell it outside our platform.

From a business standpoint, the answer to 1 is Yes. Apple has , at considerable time, expense and risk, built a unique, successful – dare I say insanely great:-) – merchandising platform. Successful merchandising platforms tytpically charge merchants for the privilege of selling on their platforms.
Walmart charges manufacturers for the placement of goods on its shelves.
Best Buy gets a cut of cell phone plans sold at its stores
Shopping mall proprietors charge storeowners-including booksellers- rent for operating in their malls. No one attacks shopping mall owners for charging rent to B&N, yet when Apple hints that it may do the same thing, suddenly Apple is EEEVUUUL! What gives?

Irrelevant. Apple does charge for apps sold through its app store. This is like Walmart taking a cut from the sale of a TV in its store (which it does), and then demanding a cut from the cable company and DVD producers that produce content for WM's TV.

Part of the reason is that Ipad owners interact with their booksellers through those oh-so-convenient reading apps, which Amazon etc. thoughtfully provided to their customers for free. The consumers therefore get mad at Apple for wanting to “gouge” their “ benefactors”.
From a business point of view, of course, those reader apps are really storefronts- channels to the pockets of 160 million IOS device owners. Moreover, these storefronts operate 24/7/365, with the possibility of a sale every time someone looks at the home screen of their Idevice.
Until now, those storefronts have been operating “rent free” , despite negligible setup and rental costs. I myself am an example of this state of affairs. Before I bought my Ipad in December, I had never purchased anything from Amazon or B&N. Since that time, I have bought nine or ten ebooks from them. Not a red cent has gone to Apple, despite the fact that the purchases were made through the Ipad, for use on the Ipad, by means of apps hosted by Apple.

"Rent free" suggests that this is an unnatural state of affairs...but of course it isn't. There are also many free programs that operate on a computer; this is a very normal state of affairs.

That state of affairs was probably never going to continue.

Why? No one else thought it wasn't going to continue...which is why everyone had (and to some extent still has) difficulty parsing Apple's statements on this issue.

Steve Jobs is just too smart a businessman for that. So Apple is looking for their cut. How big should its cut be?

Apple has said 30%

Apple thinks its cut should be 30 per cent for subscription services that get a subscription through an IOS device, plus non-default access to subscriber information Google thinks 10 percent, plus default access to coveted subscriber info. Rhapsody apparently thinks 30 per cent is too high. What do I think it should be? Hell if I know. The market will settle the issue.
Now we haven’t heard anything about one time purchases like ebooks. Apple hasn’t said anything, or Amazon or the others. Some folks have been demanding clear statements from Apple. Again that’s naïve. Nobody is saying anything, because they are all NEGOTIATING, as hard as possible. Once the negotiations are done, there will be clear statements-probably on the last possible day, June 30, 2011.
I expect that there will be lots of changes, even to the dreaded agency model, as the booksellers and publishers make room for Apple’s cut. One thing is certain-Amazon , etc. will want to remain on the IOS platform, if they can possibly help it. Whatever the Android fans may think, the IOS platform is it as far as making money is concerned . The revenues from the App Store are SIXTEEN times those of the Android market. I have no doubt at all that Amazon, etc. will be on IOS come July 1.

Which is why Amazon, B&N, etc. have said that they will pull their apps come June 30.

I have no doubt that they will unless Apple "explains" that they didn't really mean what they said. Amazon is a high volume, low margin seller with a profit margin of just under 5%. Paying 30% to Apple means that they lose 25% on each book. Probably even 1% is too high. B&N's margins, I assume, are similar to Amazon's.

Android is a red herring, as are the revenues from the ios App store. B&N and Amazon aren't selling apps; they are selling books. In the US, they have approximately 95% of the e-book market. The real reason Apple is doing this, IMO, is to increase the market for its spectacularly underperforming iBook platform.

But it's not a risk-free proposition for Apple at all. People buy iPads for the apps. (Just like you buy computers to run programs). If Apple's policy means that fewer good apps are available on their platform, the platform itself becomes less desirable. And particularly wrt books - trying to lock people into iBooks will work about as well as trying to lock people into Atrac did.