As is generally known the Apple App store handles payments for developers and some distribution functions in exchange for a 30% cut on the revenues obtained from the sale of those apps. 70% is passed along to the publishers and developers who make the apps. The Android App store is run along similar lines (30% to Google for handling the transaction, collecting the monies and maintaining the store front: 70% to the developer). Amazon last week announced its own App store, along with an invitation to developers to produce Apps for the Kindle platform. Co-incidentally it announced a new and improved deal for authors and publishers, whereby under certain not too onerous conditions the author/publisher will get 70% from the Amazon sale. It is fishy the way that these deals seem to cluster around a 30% cut. Is there something about the investment and infrastructure needed to set up and run an App store that dictates a 30:70 deal? Who is going to be first to blink, and move to 20:80?
Along with its brilliant iPad, Apple just announced an iBook application within the iTunes store. Edward Nawotka, an industry pundit wonders whether this presages Apple offering a direct route to publication for authors. Amazon has been cutting direct deals with authors (sidelining the publishers). Google is in the class-action settlement of the century in its effort to become the digital publisher or republisher of millions of out of print but in copyright books. It would seem that in there effort to establish dominant positions in the distribution of digital books these three great companies are moving back up the publishing chain in an effort to secure greater security of supply.
As well as trying to buy into a dominant supply position (it would be fascinating to see the details of the exclusive deal that Amazon struck with Rosetta for McEwan’s backlist. What guarantees or minimums are in that package?), these great companies are also trying to muscle into the other guy’s distribution channel. Both Google and Amazon have built apps for the iPhone which allow users of the Apple device to access resources hosted/published for Kindle or by Google Books. Somehow it is barely conceivable that Apple will produce apps for the Kindle or the Android app stores.
What does this tell us? It tells us that building an app for the other guy’s store is a sign that you have either lost the market, know that you are going to lose the battle in the long run, or are not really concerned to establish a dominant software or hardware platform for books in the first place. Apple can afford to ignore (in fact can afford to welcome) the Kindle and Google Apps, because these book reading systems will only take off on the iPhone/iPad platform if the users are able to purchase media content directly to the device through iTunes and the app store. Any such transactions are a direct win for Apple at the expense of rival platforms. If Google or Amazon were to support Apple’s in-app purchasing they have lost the market and ‘lost’ the customer relation. My hunch is that Amazon really doesn’t care too much about the market for ‘soft reading systems’ and does not care at all in the long run about the hardware market. They care about selling digital books and built Kindle as the first stage of the rocket that would take them to being everyone’s digital library. They would be very happy if the Kindle became a mere brand, a virtual personal library system; if need be on Apple’s hardware and O/S. They really do not want to lose the digital books market, especially not to Google. There is therefore scope for an alliance of sorts between Amazon and Apple, if Apple wanted it. Apple has the whip hand in these matters with its clearly superior hardware and software package, but it could offer Amazon a pretty exciting prospect as the digital books back-end to the iTunes content management system.