The Orange View (on hiatus) Because Apple is great but it isn't perfect

2Mar/11Off

John Gruber’s off-target Apple rant

I've been a fan and (tee-shirt) subscriber of John Gruber's DaringFireball blog pretty much since he started it. Gruber is a great writer with a good sense of humor, knowledgable about many things and with an increasingly dependable network of inside sources. But he's sometimes been challenged to see beyond his Apple world view.

On Apple's recent iOS app subscription rules and the ensuing controversy, however, Gruber has been at his absolute worst, almost blindly defending Apple with a mix of bravado (they can do it, so they should do it), naiveté (maybe it won't be so bad, maybe) and mistakes (see below).

Lost in almost all of his analysis are the needs and desires of users. It's all well and good if Apple has the right or the desire to impose these rules but who really cares except some lawyers and business school professors. What really matters, and what's really at stake, are the needs and desires of users to get the most out of their Apple iPhones, iPods and iPads. I'd also argue that Apple is breaking an implicit promise it made with buyers of the first 150 million plus number of iPhones, iPod Touchs and iPads. We wanted the next great personal computing platform, not Disney World in our pocket.

Let's take a look at his latest defense of the worst aspects of Apple's new policy, particularly:

  • demand for a 30% cut of subscription services of music, video and other non-publishing content
  • banning of Sony's ebook app and likely ban, after June 30, of all other ebook apps
  • lowest price requirement for in-app subscriptions
  • mandatory in-app subscription offering if subscriptions are offered elsewhere

Here's some choice Gruber quotes about the basic 30% cut demand, which cannot be paid by music subscription services like Rhapsody or video service like Hulu Plus because they must already pay a 70%-ish share of revenues to license content:

"Apple doesn’t give a damn"

"It’s difficult to expect them to be sympathetic"

John -- no one cares if Apple cares. What we care about is that millions and millions of people who use their iPads to watch Netflix movies, read Kindle ebooks or listen to Rhapsody albums will not be able to do so anymore. And most people bought their devices when Apple was allowing all those services to offer such apps. And while Apple is happy to sell stuff in one-time, download transactions, it doesn't even offer streaming subscriptions for music or video. So that's going to be a huge loss for users and a broken promise by Apple, even if not an explicit one (Apple has even touted such "middlemen" on stage like the Scrollmotion ereader).

Eventually, Gruber reaches the core issue, that apps users love like Netflix will be forced out. And he has no defense of this. He just asserts "For all we know, though, Netflix may well be fine with this policy." Yeah, for all we know, they may not be. But plenty of others with very similar business models have already spoken out. It's not a defense, it's a concession.

There is, however, an unspoken middle ground that may apply to these kinds of apps. Netflix and others could effectively be kicked out of the app store because of the new rules but allowed to offer HTML-based pseudo-apps via the Mobile Safari browser. There's already been some speculation about Amazon's web Kindle. I'm not enough of a tech guru to tell you whether such pseudo-apps would work as well as normal apps but I'm skeptical. Furthermore, the pseudo-apps wouldn't be listed in the iTunes store, wouldn't be on the best-seller lists (where Netflix, Pandora, Kindle, Xfinity TV, Nook and Hulu Plus are all on the top 100 free apps list right now) and would probably be harder to find and install.

Obviously, all of those apps compete with content that Apple is selling in the iTunes store. Imposing tricky rules to disadvantage competitors on your platform, who does that sound like? It's right out of the 1980s and 1990s Microsoft Windows game book. So in addition to being bad for users of the platform, it's also a really bad portent of where Apple's strategic head is at. Not because it might be illegal (I have no idea) but because as Microsoft increasingly competed by manipulating the rules of its own game, it lost focus on innovation and giving users what users wanted. We all hope Apple doesn't start down that path, I think.

On ebook readers, Gruber is equally hopeful. He doesn't actually defend what Apple's doing but simply says "I don't believe Apple wants to chase to competing ebook platforms off the Appl store." In a podcast with Dan Benjamin the other day, Gruber said some of his sources were saying Apple might be trying to work something out with Amazon.

Again, I'm pretty skeptical. First of all, Apple has already harmed Sony ebook reader customers by banning Sony's app. And several outlets have reported that the other ebook apps have until the end of June to comply with the new policies (an impossibility) or get the hook. A final piece of evidence was Random House's announcement yesterday that they were caving in to Apple's demands to raise ebook prices and adopt the "agency pricing" model which eliminates retail price competition. Random House's ebook division was going gangbusters without being in Apple's iBookstore. The most recent data from the company said U.S. ebook sales were up 300 percent year over year leading to "major increases in revenues and profits." Why suddenly now would Random House capitulate? I think the simple answer is they expect Apple to kick all the other ebook vendors out of the iOS app store.

But most important of all, now is the time to raise a ruckus, to send a message to Apple that we the customers do not want other ebook vendors out. If, as Gruber says, the sides are talking, customers have a huge interest in how those negotiations come out. We should be shouting from the rooftops that we want to keep all the ereader apps in the app store. Keeping quiet or hoping for the best reduces the likelihood of getting what we want.

What about the price matching requirement? That's when Apple says publishers cannot sell subscriptions in an app for a higher price than they sell them anywhere else. Gruber says "Apple wants its customers to get the best price — and, to know that they’re getting the best price." Funny, does Apple want customers in its web store who buy a copy of Aperture for $199 to get the best price? Because they're also selling it in the new Mac App store for $79 and they don't seem to disclose that in the web store. The real reason is purely business -- Apple doesn't get its 30% cut if users buy a subscription outside of an app, which they would be more likely to do if prices were lower elsewhere.

The reason this policy is bad for users is that the "best" price could be a lot higher than it would otherwise would be and some things might cease to be available at any price. Publishers may have lower cost platforms for distribution or may want to make a bundled offer (like print + app subscriptions) that may not be viable or aren't permitted under Apple's rules. Any bundled offers that are allowed will have to be priced higher to account for Apple's 30% cut.

And for what it's worth, Gruber is just flat wrong about how credit card rules work. While retailers are barred from imposing a credit card "mark-up" they are fully permitted to offer a cash "discount," as is done by most local gas stations around here. Aside from the semantics, the effect is identical. Not to mention, citing the credit card industry as a model for anything being pro-consumer is pretty iffy. I would say that if Apple is copying something from credit card industry practices, that's a sign of anti-consumerism by itself.

So what about Apple's requirement that publishers and other content sellers must offer an in-app purchase option if they offer purchasing anywhere else? I call this the killer clause, as it means that even those folks who want opt out of Apple's plan cannot without forgoing the entire iOS app base. Gruber doesn't so much offer a defense of why this is good for users or publishers, as much as say Apple "doesn't see it this way" and then draw the highly inapt analogy of a shopping mall.

Sure, a mall owner gets a cut of everything sold in the stores in the mall. But the mall owner does not get a cut of all revenue later derived from that initial purchase. If I buy Club Penguin cards at the CVS at the mall, sure, the mall owner gets a cut. But the mall owner doesn't get a cut of the monthly subscription fee I have to later pay Disney so my daughter can use the cards online. No physical store or mall owner gets a cut of any subsequent revenues collected to add features or functions or services to the stuff they sell. And what about stores that until just recently sold boxed copies of MobileMe? Did Apple share revenue from subsequent renewal subscriptions with that original store? No way.

At the end, Gruber asserts that the new rules are not anti-competitive. But it's all filled with internal contradictions.

And what if, based on Apple's logic, the cable and telephone companies which are the dominant providers of broadband Internet connections decide that they should get a cut of all web site revenue (which they've constantly sought). They know exactly which web sites all their customers visit and how often. They could easily start sending bills, either to customers or to the web sites, imposing "access fees" or "revenue surcharges" or whatever. The FCC's incredibly weak network neutrality rules are expected to fall in court and don't even apply to wireless Internet. In fact, this vig-charging scheme of Apple's is quite similar to the wireless carrier's standard operating procedure for the past decade. Hey, they built the platform, they took all the risk, they brought in the customers, right?

The most depressing bit Gruber saves for last:

iOS isn’t and never was an open computer system. It’s a closed, controlled console system — more akin to Playstation or Wii or Xbox than to Mac OS X or Windows. It is, in Apple’s view, a privilege to have a native iOS app.

Elsewhere Gruber has compared iOS to Disney World. But does he realize what a loss that is for the users? A Playstation is fine, the mall is great, but they are incredibly limiting. They are not tools to accomplish great tasks, make art or poetry or build the next great tech innovation. Equally, like the cable and telecom hegemony, they restrict, they diminish, they lock down.

When Apple first announced that outside developers would be able to write apps for iOS and released its SDK, venture capitalist John Doerr showed up to tout his firm's new app fund. Here's one of the things he said about iOS:

Today we're witnessing history. That's the launching of the SDK, the creation of the third great platform -- the iPhone and the iPod touch. Think about it -- what the iPhone's all about -- you have in your pocket something that's broadband and connected all the time. It's personal. It knows who you are and where you are. That's a big deal. A really big deal. It's bigger than the personal computer.

Bigger than the personal computer. And, as I've said before, I think even as constituted the mere existence of the new subscription rules and capabilities will be great for some brand new kinds of upstart and creative publishers (cough, not The Daily, cough, cough). It's like the way adding podcasting to iTunes ignited a micro-broadcasting industry.

But if all we can do on this platform is what's best for Apple in every way, if only Apple's innovations and not anyone else's can be included, the platform is greatly diminished and devalued. I'm not predicting Apple's subscription rules will fail or saying Apple doesn't have the "right" to impose them. I'm saying the iOS platform would be more valuable to users if Apple had thought different. And the more it goes down this anti-competitive, overreaching road, the worse the damage.

Posted by Aaron Pressman

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