Competition and Intrusion

Frédéric Filloux has a bit of a rant about Apple’s vulnerability to charges of monopoly for its very successful control of the ‘tablet’ market and the rather strict rules that it imposes for publishers and developers in iTunes.

I am not sure that his charges amount to much. On Apple’s 30% commission he decides:

Ok, then, it’s legal. But is it fair and, more importantly, sustainable for Apple?

…..

But this system essentially favors the vast market of small to medium-size companies unencumbered by legacy products and unwilling to bother with the tasks of distributing, marketing, and invoicing their customers……

Again, while 30% is fair for a startup with no marketing and distribution system whatsoever, it remains quite high for big companies who already have large infrastructures.

Hang on, am I reading this correctly? Is Filloux really arguing that Apple’s 30% rule because it is consistently applied to competitors large and small is unfair because it does not favour the existing newspapers and distribution monopolies with their bloated cost structures? He thinks that 30% is fair for small companies and startups that aren’t saddled with legacy distribution systems. But for large publishers with heavy overheads its too much. What a bizarre complaint, Apple is being very scrupulous in my book about creating what used to be called a ‘level playing field’.

On the contested issue of Apple’s control of customer data, Filloux is similarly off-beam. He waxes indignant about the way apps may not contain direct customer communications, unlike boxes of cornflakes:

Wal-Mart allows a box of corn-flakes sitting in its shelf, to be loaded with everything needed by the brand to engage a relationship directly with its customer: coupons, games, toll-free numbers, emails and web addresses, samples, all sorts of incentives designed to further tie the customer to the products whether or not they are sold in Wal-Mart stores. On the contrary, in the app-world, you can’t even have a link sending the user to a customer-relation pages. On this specific matter, Apple is doing worse than the worst retailer in the physical world. MondayNote: Apple’s Anti-trust Problem (Part 2)

But this is simply nuts. Apps, and magazines par excellence, are just like cornflake boxes in this regard. They contain masses of marketing material that allows customers to engage directly with the brand  and other brands, and to buy the magazine in print or from some other outlet. And even to subscribe directly with the publisher. There is no rule that says magazines may not contain links or special offers to publishers sites and toll-free numbers. Its fine to put such messages in the magazine. What Apple takes umbrage at is messages which intrude on the iTunes process: the system of in-app purchasing and renewals. If we are to use the Walmart analogy, Apple’s rules say something like this “If you are going to use our racking system and checkout counters, that is fine but you are not allowed to put up inconsistent signage in the racks or but in on consumers at the till and encourage them to go off to Sears”. Apple has some rules which you have to follow if you are going to use their customer relations apparatus: and that is really what the restrictions on pricing and customer oriented messages in the apps are about.

It should be remembered that Apple explicitly allows publishers to provide free access to their existing subscribers (or to their new non-Apple customers) from within the app. This is a degree of open-ness and competitiveness which we are unlikely to see in the Amazon, or Barnes & Noble store any time soon.

Apple’s critics from within the magazine industry should reflect on the fact that there is still no effective competition coming from Android tablets. When there is such competition, the chances are that it will be because the market-maker is being as careful as Apple to ensure that the apps in the Android marketplace are as well-regulated and  considerate of consumer privacy issues as the Apple iTunes store. Giving magazine publishers as much control of consumer data as (some) publishers would like is a non-starter.