Lock-In, Content, and Pricing on the iPad
March 23rd, 2010, 2:01pm by Mike
(Meant to post this here, too…)
Quick review: Traditionally, Apple likes their hardware, and they use content (music, apps, etc) to sell hardware. It’s not clear to me whether this has changed recently with the tremendous success of the iTunes Music/App Store, but in the past, content has been a carrot to lure users to hardware.
Recently, content providers (music/TV/movie execs) have been angry at Apple, predominantly because Apple (a) has been successful at delivering their content at a price that both agreed to beforehand, and (b) content providers now feel that, having proven that the market exists, they should be free to raise the price and/or control distribution of their content. The same fight is brewing over book publishing — we’re at a much earlier stage, but Amazon has proven that a (relatively small, but growing) market exists, and Apple is poised to potentially become a big player.
There are two big issues around books on the iPad: lock-in, and pricing.
Lock-in is related to the fact that Apple’s ebook format(ePub) is different from Amazon’s, so the iPad won’t natively read Kindle ebooks (though Amazon and Barnes and Noble are both supposedly working on iPad apps, which Apple may or may not approve for distribution to iPad). While this stinks if you’re a current Kindle user who wants an iPad, I don’t see that it really affects users too much. In an ideal world, every format player would play every format, but outside the realm of desktop computers, we’re used to the idea of lock-in. My Garmin GPS won’t display TomTom maps. I don’t own any music devices that can play Sony’s MiniDisc or ATRAC formats. Games on XBox, PS3, and Wii are not interchangeable. In all these situations, you accept the limitations of the hardware when you buy it. I’m not that bothered here, it’s Apple’s call what they allow on their hardware. Vote with your wallet if you don’t like it.
(In my opinion, Apple did right by choosing ePub, and on their site, they say that you can sync free ePub format files to the iPad via iTunes.)
The pricing issue is much more complex. In summary, Amazon already has deals with publishers, who now want to get in bed with Apple. Apple is giving the publishers the chance to charge more than the $9.99 that Amazon currently charges for ebooks — pleasing the publishers, and giving them leverage in future negotiations with Amazon to raise their prices, potentially even withholding content from Amazon if they don’t raise their prices to match Apple. End result, we all pay more for ebooks (assuming that this sort of price fixing by publishers doesn’t get hammered in the legal system). The NYT summarized this when the iPad was announced.
Consumers feel that the price of a book is calculated by the sum of the costs of producing it, and that printing and distribution are the major costs — so reductions here (in producing and distributing ebooks) should be reflected in the final price. I don’t want to try to analyze it here, but there are other considerations in book pricing, and Apple demanding 30% of gross revenue off the top doesn’t help drop the price.
Taken together, along with Apple’s other recent issues surrounding app approval in the App Store, Apple is looking more and more like a juggernaut, approaching Microsoft’s status in its heyday. It’s no secret that I’m a big Apple fan, but their strong-arming the market definitely makes me uncomfortable. I’d certainly consider alternatives to the iPad, were they available, but currently, there doesn’t seem to be anything comparable. And I have a feeling that, for me, I’ll be OK with the iPad.
March 24th, 2010 at 5:03 pm
I said it somewhere else, but Apple rejecting a Kindle app would pretty much guarantee that I wouldn’t buy an iPad. Not because I have any Kindle books. Rather because it would be the clearest signal yet that Apple, the company that invented the personal computer, would be signaling that it’s not really your computer to do with what you want. It may not be the Kindle, but there will be other killer apps out there that Apple doesn’t allow.
I’d rather wait a year & pay an extra $100 for an Android or Windows tablet that I could use like a regular computer rather than buy into the closed, Apple-approved system.
March 24th, 2010 at 5:04 pm
The article is essentially unsourced, but it sounds like, for NYT bestsellers anyway, Apple is hitting the $9.99 price point that Amazon touts.
March 24th, 2010 at 5:37 pm
Apple has made it very clear that they will not tolerate apps that duplicate core functionality in the iPhone. Seems to me that RSS Player is the exception rather than the rule. I see nothing out of the ordinary about Apple rejecting a Kindle app for the iPad. Seems to be business as usual to me, no more telling than rejecting a GMail app or Google Voice or an Amazon mp3 store app.
I don’t think either Apple or Mike would argue that the iPad is a computer.
March 24th, 2010 at 6:23 pm
Let me also say that I think the question, while of philisophical interest, is not actually relevant as long as Apple gets the web browsing right. Premium content (books, magazines, newspapers, video) is going to make up a tiny portion of content consumed, I predict.
March 24th, 2010 at 8:47 pm
I agree about the web browsing, definitely the draw for most people.
Along those lines, I would say that more important than the books DRM question is the lack of Flash on the iPad. On a primarily browsing device, there are quite a few things that would be nice that require Flash. I think that’s a much more relevant example of Apple’s walled garden issues.
March 24th, 2010 at 9:09 pm
Anyone remember Palladium, aka Trusted Computing? It was pitched in the late 90s as a security/control “feature” in Windows, to ensure on a microprocesor or OS level that only “trusted” applications could run. The selling point was this would prevent trojan horses/ viruses from running. But it was also an anti-piracy measure, which could be easily used by vendors to brick specific applications.
The iPad seems one step past this. Ultimately, I think 90% of my use would be in the browser, at which point, who cares about 100,000 apps, gimme a decent Chrome/ Android/ Firefox browser/ OS set up, and I’m good to go. The other stuff is a bonus, and I don’t want to buy into a platform with over nannying.
Now, there are degrees of control. I don’t know where my “line” is, but it’s clear to me that some things are on either side. Enable a webOS-like sideloading feature, and I’m in. Block any competitive application, and there’s just no way.
March 24th, 2010 at 9:38 pm
The sad thing is that even with the overnannying, you’ll get more apps with the iPad than with any other platform other than Windows. There’s no Kindle app on Android, for instance, despite it’s early success. Maybe that will change soon– I’m certainly rooting for it.
For my money, give me a light Windows 7 slate anyday, even if it has 3 hours battery life and needs a stylus. I’d rather have an underpowered PC than an overspec’ed smartphone. But you can’t fault Apple for trying to follow their successful iPhone formula. They have no reason yet to think that the public will be less tolerant of a walled garden with tablets vs. with handheld devices. You are one data point, of course.
And of course, we don’t know that the Kindle app will get rejected (nor Opera Mini). Not that it would change the argument either way, really. The arbitrariness of it is what makes it fun 🙂
March 25th, 2010 at 2:24 pm
To channel 3Com, I’m fairly certain that the iPad will be bigger than the iPhone.
March 25th, 2010 at 6:47 pm
You do realize that my whole rant is just a set up so that when Apple does approve the Kindle app you can’t mock me for buying it, right?
March 25th, 2010 at 8:08 pm
So if Apple approves the Kindle app, you would take it to mean they’ve turned over a new leaf? In my mind, Apple can’t win here. They can do what I expect and reject the Kindle App (maybe even pull the iPhone app), and I wouldn’t think any less of them. Conversely, they can approve the app and I’ll conclude that they had to grandfather it in because they already approved the iPhone version.
I said elsewhere that if they do approve the Kindle app, I don’t see the iBook store as being competitive, since Kindle books would be available on PCs, Macs, Kindles, iPhones, and iPads vs. only iPads for iBooks, as far as we know.
March 25th, 2010 at 8:24 pm
I think it’s the other way around, so you can claim shock, then righteous indignation, that the iPad isn’t open.
On an unrelated note, there was a preview of Comic Zeal for the iPad — it’s apparently a comic viewing app that’s currently available for iPhone, but since I don’t really read comics anymore (i.e., for the past 20+ years), I wasn’t aware of it. At the time I read comics, I definitely was into the stories, but there was also the idea that you were buying a keepsake, to be stored in plastic bags with acid-free cardboard backings, since hey, these were gonna be valuable someday (of course, to paraphrase CCR, someday never came).
Somehow, reading magazines on a tablet computer seems OK, maybe since they’re disposable (how many magazines do you keep?). But for some reason, reading comics on a tablet just seems wrong to me. It even seems more wrong than reading great literature on a tablet computer.
But they sure look nice!
March 25th, 2010 at 8:40 pm
Also reading that magazines plan to charge $3-5/issue for iPad versions. Ooph. I’m sure the iPad version will be nice & all, but really, why not just visit the web page? $10-20/year would be a more realistic price.
I think Apple will sell a lot of iPads. But folks counting on iPad sales to save their newspapers & magazines… no effing way.
March 25th, 2010 at 8:57 pm
I also haven’t read comics in a long time, but the idea of having a big collection, maybe your whole collection, always at your fingertips has a lot of appeal, much like having your whole music collection on an iPod. The ritualistic bagging and storing was part of the fun of collecting, though!
Correct me if I’m wrong, but there is still no way to read comics for free, right? Not like magazines, where you can find the same content faster and cheaper online.
March 29th, 2010 at 1:52 pm
Techdirt has a rather insightful look at the iPad model, which echoes my own feelings. It boils down to the iPad being a web browser first, and apps are secondary. So why pay $3-5/issue to read Sports Illustrated or Wired when you can read the web version for free? A snippet:
http://www.techdirt.com/articles/20100325/1200358718.shtml
March 29th, 2010 at 8:52 pm
That’s certainly valid, but there are plenty of people who buy magazines at the newstand or airport, or subscribe for home delivery, or get the newspaper delivered, even though it’s available online. And as someone who actually did pay for a newspaper app (The Guardian), it’s much better than even the mobile-optimized site (it’s one of the best apps I have, period, and it’s on my first screen).
I agree that the ipad will primarily be for surfing the web, but the browser is not necessarily the best delivery platform for all content. Most people won’t have apps for every publication they read, but I’m sure that people would consider having a couple for their favorites.
March 29th, 2010 at 11:24 pm
Sure, I’d pay $5 for a Wired App, or NY Times app. But I’m not paying $5/month.
March 30th, 2010 at 1:35 am
All things being equal, I’d prefer a well designed app over the same content on a poorly designed mobile web page. I really think the only way to get me to pay a subscription fee for an app with content that’s also available on a website is to also charge for the website (making “things equal”). Sure some people pay for newspapers and magazines even though that content is typically available for free online (WSJ excepted), but it’s not a lot of people, certainly not enough to sustain that business model. I don’t expect putting premium magazine apps on the iPad to increase the pool of willing payers, but maybe if they capture the experience enough that the majority of the print subs transition to the iPad versions, they might be able to keep the same revenue stream flowing with the reduced cost of digital delivery. Maybe that will be good enough?
March 30th, 2010 at 6:48 am
I think part of what bothers me about the rumored price of an iPad subscription is that it’s *more* expensive than print subscriptions. I understand if they price one-off issue purchases the same as the newsstand version, but with Wired (for example), a single issue costs about $4, while an annual subscription costs about $12. Not 12 x $4, which it sounds like the iPad version may cost.
And I agree with Jake — the Guardian app I have was a one-time purchase, I wouldn’t have paid a recurring subscription fee, at least not for that particular content.
And I do think that “a lot of people” subscribe to print versions of magazines and newspapers — certainly less than before due to the web, and not enough to sustain many publications. My predictions:
— Print newspapers have their place, and there are people who’ll always read them on paper, as long as they’re available. They’ll have to start charging for online content, there’s just no other way to make ends meet for them.
— Magazines (i.e., less frequent than dailies) are in the biggest trouble. A weekly sports magazine in the internet era? That news is a week old, and it’s been covered online, on TV, and in newspapers by the time it arrives in my mailbox (or inbox). I didn’t know anybody read Sports Illustrated at all anymore unless they were waiting in a dentist’s office. They’re dead regardless of the distribution medium. Magazines need special content — analysis, context, reflection, not just news reporting. Or they need to appeal to a population that doesn’t go online to read — like the magazines at grocery store checkouts.
I’d gladly receive The Economist on an iPad instead of in print. Then again, I only get it because I used airline miles for the subscription…
March 30th, 2010 at 2:53 pm
On a superficial analysis, I would have thought the opposite, that magazines have a better chance for survival than newspapers in the internet age. At least magazines have the possibility to switch their focus to indepth interviews, analysis, presentation, large format photography/multimedia, etc. I’m thinking car reviews, architecture magazines, leisurely reading. On the other hand, timeliness is critical to news, and even a daily periodical can’t keep up with the internet on that score. Not to mention how expensive it is to print a daily paper.
April 1st, 2010 at 9:28 pm
Sounds like Amazon has caved, meaning that because of Apple, eBooks will be more expensive, even if you’re reading them on a Kindle.
April 2nd, 2010 at 12:23 am
Boy, the book publishers really are trying their best to destroy the book publishing business. Did they learn nothing from the record labels? Gross margins on a $10 ebook are probably double what they are on a $30 (cover price) hardcover.
April 2nd, 2010 at 9:26 pm
The Kindle for iPad app has apparently been approved, and is in the app store. Whaddya think about that?!?
April 3rd, 2010 at 1:00 am
Good for Apple! Doesn’t really sway me one way or another, as far as the device is concerned, but it makes Kindle books seem much more accessible.
April 16th, 2010 at 2:55 am
Time’s latest issue rolls in at #75 among top paid downloads. Didn’t see that one coming…
http://appshopper.com/bestsellers/paid/?device=ipad
April 16th, 2010 at 12:43 pm
Is that bad? Where does the latest issue of Time, the print magazine, rank on the list of top physical goods :).
April 16th, 2010 at 5:45 pm
They probably rank pretty damn high! 3.5 million sold each week, http://nyjobsource.com/magazines.html .
April 20th, 2010 at 2:56 pm
The New Yorker this week has a nice (but long) rundown of the economics of eBooks, the story of how they were priced by Amazon, and how the iPad works into the story.
April 20th, 2010 at 4:33 pm
Had to find something to quote. A plain reading of the excerpt would suggest that Google will sell DRM-free books. I’m almost certain that’s not the case, in which this is just another case of a tech company lying about their magical DRM & a writer accepting the claim at face value. Even well after launch, I expect Kindle books to be available on far more devices than Google. Another interesting note is the Apple iBooks app is far more popular than the Kindle app. If I were to buy an iPad, pretty sure I’d be buying Kindle books instead of Apple books. But I’m probably in the minority there.
———————
Whether or not the settlement is ultimately approved by the U.S. courts, Google will open an online e-books store, called Google Editions, by the middle of the year, Dan Clancy, the engineer who directs Google Books, and who will also be in charge of Google Editions, said.
Clancy said that the store’s e-books, unlike those from Amazon or Apple, will be accessible to users on any device. Google Editions will let publishers set the price of their books, he said, and will accept the agency model.
Read more: http://www.newyorker.com/reporting/2010/04/26/100426fa_fact_auletta?currentPage=all#ixzz0lfqgn1do
May 4th, 2010 at 7:15 pm
Apparently the WSJ ropes in 64,000 iPad subscribers in their first month, at $18/month! I guess that not that high with respect to their normal subscription rate, but more than I would have thought (6% of all iPad owners!).
May 4th, 2010 at 9:15 pm
It’s possible, but the article notes that they don’t break down how many are still in the free trial period.