Apple changes in-app purchase policies: an analysis

By now you have probably heard about it: Apple has rejected Sony’s Reader app on the following grounds.

We have not changed our developer terms or guidelines. We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase. [Official statement by Apple.]

This post analyses the pros and cons of this decision and provides related reading.
Points in Apple’s favor:

• Competitors are even worse. Sony and Amazon are the two companies who are most immediately affected. Both companies don’t even allow third-party apps on their devices and Amazon has a tight hold on content: It works really hard so that publishers go exclusively with Amazon. IIRC, before Apple’s iBooks, exclusivity was required for participating in the Kindle store.
• Commercial apps can’t expect to be hosted for free. Letting Apple host a commercial app for free and making money with it through other channels is not entirely fair to Apple. The free hosting was intended for apps that are completely free and selflessly offer something to the community.

Points against Apple:

• Pretending that nothing has changed. It is a change from previous policies, because whatever may have been in the developer terms wasn’t enforced before and now is.
• Badly communicated. This move fits the “Apple as a control freak” trope too well. Just look at the headline of the original story: “Apple Moves to Tighten Control of App Store”. Whenever Apple’s actions fit this pattern, it makes everyone nervous and Apple should have communicated the move better. On the other hand, Sony directly going to the media did not make this easy on Apple.
• Apple’s devices are made more attractive by 3rd party apps and thus every app helps Apple make money. App developers thus deserve better communication.
• 30% is too much. The effort of implementing in-app purchasing and Apple’s 30% cut make it too costly for smaller companies to comply with this rule.
• Why force developers? In-app purchasing should be attractive enough for app developers on its own merits, without forcing them to use it.
• It’s not good for users. Superficially, forcing developers to support in-app purchases is good for users. Except that it’s not if prices have to be raised to offset the costs.

Two possible solutions:

• An app has to pay for its hosting if it is not truly free.
• “change the terms of in-app content purchases to be more akin to a credit-card processing fee” [source]

Related reading:

• The positive side of Apple’s tight control of the iOS app store
• Oceania: We Have Always Required Books From the Eurasian E-Bookstore to Be Sold Through Our In-App Purchasing System (Daring Fireball, giving context for this topic)
• Update 2011-02-15: Apple has made it official: If you sell something externally, you also need to make it available as an in-app purchase, at a price that must match or exceed the external price.
• Update 2011-02-16: Apple's App Store Subscription Policies Raise Antitrust Issues as Content Providers Fume
• “Publishers of existing App Store applications have until June 30th to comply with Apple's new policies.”
• Update 2011-02-18: Antitrust Enforcers Eye Apple Anew
• Update 2011-02-21: Apple Smacks Readability In The Face With Subscription Rules; All SaaS In Trouble
  Quote: “[...] Apple has every right to implement a subscription service that they want you to use (and it should help with end-user usability), but there’s no way they can charge a 30 percent fee for many of these services that will be forced to use it. SaaS [software-as-a-service, where the app seller does not own content, but provides a service to content owners] is one example, music streaming services are another. At 30 percent, most of these simply could not afford to stay in business. [...] Apple needs to either waive the fee or cut it down to some low single digit percentage in circumstances beyond traditional media publishers.”
• Daring Fireball comments: “I can see how many people, including content providers like Readability, wish that Apple had not instituted these new rules. But, given these rules, how can anyone be surprised by this rejection? Readability’s business model is to charge a subscription fee, keep 30%, and pass 70% along to the writers/publishers of the articles being read by Readability users. Sound familiar?” [30% is indeed quite a lot (in both Apple’s and Readability’s case). Flattr keeps 10%.]
• Update 2011-02-22: Subscriptions and the new In-App Purchase requirement 
• Update 2011-02-22: Steve Jobs Email Suggests In-App Subscriptions Don't Apply to 'Software As a Service'?
• Update 2011-02-23: Just How Is Apple's App Store Subscription Policy Good for Users? [Lists advantages of Apple’s in-app subscription for users.] 

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