I have been watching closely, the news coming out of Apple concerning their new subscription and content models. For those of you who haven’t, the basic premise is that Apple will be requiring everyone who sells content within their apps (including subscriptions) to sell their content through iTunes (think of buying a book within Audible or Amazon’s apps). App developers can still sell content outside the app store, but they must offer the same content at the same price in the iTunes model. This is a good thing and a bad thing for content based apps. The good news is, since apps will easily integrate with iTunes, customers will feel safe and secure buying content, even if they are buying from a seller they don’t know well (think about it like a sort of Paypal for in-app purchases). The bad news, is that Apple is taking 30% off the top of every transaction. 30%!!!
What I’m not sure I understand is Apple’s overall market strategy. Let’s (for simplicity’s sake) reduce Apple’s revenue model in to two parts. First, the hardware/OS part (iphone and iPad). Second, the content and apps that people buy after they’ve purchased their phone or tablet or computer. Right now the hardware/OS part of the company is in a stiff battle with Android. If Apple is focused on winning that battle, then why make this move around content and subscriptions? Surely, some content developers will abandon Apple’s platform because of this decision (everyone is watching to see what Amazon will do). If large content producers like Amazon abandon Apple it makes the hardware/OS that Apple produces less appealing to customers. Cannibalizing one part of the business to feed the other.
On the other hand, if the goal is to optimize profits from content and apps then why not release the operating system to be used by other phone and tablet manufacteurs? Why not partner with Sprint and T-Mobile in addition to Verizon and AT&T? Basically, why not do everything possible to increase the number of devices out there with access to iTunes? By staking themselves to a disadvantage (requiring iOS users to buy Apple hardware) in the hardware/OS part of the business they are limiting the number of customers that have access to the iTunes store. Cannibalizing one part of the business to feed the other.
I can think of only a few reasons for this apparently conflicting strategy:
Anybody else have thoughts?