Apple vs. Amazon

Posted by Always Write at 7:57 PM Tagged with: , , , , ,
Feb 162011

You didn't really think they could just get along, did you?

It was only a matter of time.

Once Apple entered the e-book business back in April with the launch of the iPad and the iBook Store — and partnered with publishers to cram the agency pricing model down Amazon’s throat — a collision like this was probably inevitable. After all, Apple has been selling e-books to be read on iDevices through the iBook store, while Amazon has been selling e-books for those same iDevices through the Kindle for iPhone/iPad apps. And, it’s pretty clear which of those two e-book retailers has been more successful: Amazon still commands the strong majority of e-book sales, while Apple’s iBook Store has floundered. So, is Apple OK with Amazon moving in and selling all those e-books to iDevice owners?

Apparently not. In the past week, Apple has started “clarifying” its position on e-book stores (and magazine and newspaper publishers) selling content through iOS apps to (what Apple sees as) Apple’s customers. The first salvo was when Apple denied the Sony E-Reader app, claiming that it violated guidelines related to in-app purchases. Over the ensuing week, Apple’s position became more clear, as it is apparently gearing up to require vendors who sell content to do so through in-app purchases. At issue is the current practice of many current apps (like Kindle for iPhone) that take users to Safari to purchase e-books over the Internet, bypassing Apple’s app store and its 30% cut of all app and in-app purchase proceeds. And Apple has given existing apps until June 30 to comply with the new requirement, which is that any app offering out-of-app purchases (like those over the Internet), must also offer an in-app option (at the same price). Of course, the in-app option (which will just be a click, attached to your existing Apple account and payment method) will be much more convenient for most users than launching a website and signing in. (Crazy side-note: Apple licenses Amazon’s patented 1-Click purchasing system.) Even worse, it appears from Apple’s latest statements that apps can’t even link to outside stores (like Amazon), but only offer the in-app purchase!

“Our philosophy is simple — when Apple brings a new subscriber to the app, Apple earns a 30% share,” said CEO Steve Jobs in a statement Tuesday. “When the publisher brings an existing or new subscriber to the app, the publisher keeps 100% and Apple earns nothing.”

“Apple does require that if a publisher chooses to sell a digital subscription separately outside of the app, that same subscription offer must be made available, at the same price or less, to customers who wish to subscribe from within the app.”

Think about that for a minute: Apple will now require e-book vendors (Amazon, B&N, Sony), magazine publishers, streaming video apps, and anyone else who sells anything that can be accessed through an App Store app to remove external Internet “buy links” and instead offer an in-app purchase option. And Apple will get 30% of all of those sales. In the case of e-books, the agency model agreements already specify that e-book retailers only get 30% of the sale price, which means that Apple would get all of the profit (and then some, since Amazon has some costs) from e-book sales: 70% would go to publishers, and 30% to Apple, with Amazon getting nothing. And while it currently appears that customers could choose to bypass the one-click in-app purchase and buy directly from Amazon’s website instead (from their computer, or by going to Safari themselves), how many will? And what is to stop Apple from preventing external purchases from being usable inside an app?

Obviously, Amazon can’t let this stand. There’s no way they’re going to agree to create the world’s largest e-book store, write an iOS app, deliver e-books to customers, and provide tech support for purchases, yet give all the revenue from Kindle app users to Apple. But, Amazon has promoted the “Buy Once, Read Anywhere” tagline, as it lets users read e-books purchased from the Kindle Store on Kindles, Macs, PCs, smartphones, Android, and Apple iOS devices. Yes, pulling the Kindle for iPad app would hurt Apple and the iPad’s already-damaged reputation as an “e-reader” and would tick off customers who bought an iPad thinking they could unify their Amazon, B&N, Sony, Kobo, and Apple e-book libraries on one device, but it would also tick off Amazon customers and Kindle owners who like to read from time to time on their iPhones. It’s pretty much a lose-lose situation, but Apple seems to be forcing the issue.

What’s the upshot of all this for iDevice owners? Will their iPhones and iPads become less useful overnight? I think being able to access Kindle e-books on the iPad was an important selling feature for Apple. How much other content will iDevice users lose access to? What other apps will this new policy affect? Would you want to develop an iOS app right now?

Even more disturbing are the future ramifications of such a move by Apple. If Apple considers iOS users as its customers for third-party goods (in a way that Dell, for example, never does when you use one of their computers to buy something online), what else will they try to “tax”? Now that Apple has earned a dominant position in the mobile app field (the Apple App Store is far ahead of the Android Marketplace or any competitors), how long until it starts changing the terms on developers? Although those developers provided a large portion of the value of Apple’s “platform” (the iDevice + wide variety of cool apps in the App Store) and helped make it #1, now that Apple is the dominant smartphone and tablet computer platform, it doesn’t need any one developer nearly as much as that developer needs Apple. What’s Apple’s next move here? Perhaps requiring exclusivity from its apps to prevent Android from becoming a threat?

This new Apple policy is a pretty disturbing move (that is almost certain to hurt consumers, however it shakes out), but even more disturbing is how Apple has morphed from the plucky underdog to the ruthless, monopolistic giant corporation that uses its power to squash competition. To complete the irony, perhaps the best hope to tame the Apple juggernaut is a partnership between Nokia and a plucky upstart in the mobile operating system field: Microsoft.

Feb 162011

Who's more serious about reading, Amazon or Apple?

So, Apple burst onto the e-book scene almost a year ago with the release of their iPad and the iBook Store in April. But, as of 6 months ago, Apple was still only a minor player on the e-book sales scene, with Amazon dominating 75% of e-book sales and B&N with another 20% or so. Apple was hindered by (a) being late on the e-book scene, (b) the fact that reading on a backlit LCD screen just isn’t as “magical” as Apple wants you to believe, and (c) the iBook Store doesn’t have the selection of other e-book stores, with no Random House titles and only about 30,000 total in-copyright titles (compared to Amazon’s 800,000 or so).

Even iPad owners prefer Amazon's Kindle store

Adding insult to injury, a Codex Group survey from November 2010 found that even iPad owners were buying more e-books from Amazon (which can be read on Amazon’s Kindle for iPad app) than from the iBook Store: Amazon e-books accounted for 40% of iPad users’ purchases, while Apple e-books were 29%.

Most observers have noted that Apple’s e-book business is struggling, including The Unofficial Apple Weblog, who looked at the iBook Store 6 months after launch and found that:

I figured that this would be a good time to see just how the iBookstore has progressed. The answer, in a word: poorly … very poorly.

Or how about this review?

However, after six months of offering up downloadable text content to capable iOS devices, it appears that the once seemingly mighty contender hasn’t been able to do much more than land a few rabbit punches. Despite the iPad’s rabid popularity, neither major publishers, nor the book buying public have embraced iBooks.

After more than half a year online, Apple’s iBook Store is still only offering up approximately 60,000 titles. When held up against the 700,000 titles offered by Amazon for their Kindle reader software and hardware solutions, Cupertino’s library looks pretty weak. Did we mention that about half of the titles available as iBooks are also available from Project Gutenberg? C’mon Steve, this is embarrassing.

And that came from the staunchly pro-Apple folks over at Mac Life. Ouch.

So, did Apple take these criticisms to heart and improve the iBooks experience? Did they prove they’re serious about the e-book market? Has Apple gotten Random House to sign on? Increased their selection to at least keep up with Amazon’s rate of growth, let alone closed the gap? Improved their store navigation or implemented a recommendation engine? What have we heard from Apple about the iBook Store in the months since those less-than-glowing articles were written?

Nothing. Well, I can’t say I’m shocked, since the whole iBook Store and marketing of the iPad as a reading device never seemed sincere to me. It’s just so far inferior to a Kindle 3 as a reading device (harder on the eyes, triple the weight, far less battery life, etc.), it’s not really in the discussion for me. Add in the fact that the K3 is around 1/4th the price ($139 for Wi-Fi, $189 for free-for-life 3G), and there’s no comparison when it comes to reading.

More telling is the fact that Apple pretty much abandoned the marketing talk about the iPad as an e-reader soon after launch. I always thought that was just a marketing ploy, a way to position itself as the #1 seller in the e-reader category (a “Kindle killer”), instead of as a minor player in the much larger laptop or netbook market. And Apple hasn’t mentioned the iPad’s e-reading capabilities in a long time, they haven’t added titles, they haven’t upgraded the shopping experience at all, and they’ve made only minor updates to the iBooks app. Contrast that to Amazon, which incessantly markets their e-readers as devices focused on reading, has commercials touting their outdoor reading ability as superior to the iPad, upgrades their Kindle software and Kindle apps often, adds about 30,000 new titles every month, and even came out with the much-improved Kindle 3 in August. As a reader, you know Amazon is devoted to reading, e-books, and the Kindle. And Apple never really cared about reading to begin with, and it shows. After all, Steve Jobs dismissed the Kindle and reading in general as recently as 2008, saying that:

“It doesn’t matter how good or bad the product is, the fact is that people don’t read anymore. Forty percent of the people in the U.S. read one book or less last year. The whole conception is flawed at the top because people don’t read anymore.”

Did anyone really think he so dramatically changed his mind and did a complete 180 between that statement and when he made the iPad (which came out in 2010 but was probably in development even when Jobs uttered those words)? Or was “e-reader” just a convenient marketing label Apple decided to attach to a multi-purpose device designed primarily to do other things?

Apple claims 5M e-books sold, 22% market share

A couple of days ago, Apple held its yearly conference and announced the new iPhone 4, to be released June 24. At the same time, modern iPhones will also be able to update to the new iPhone OS 4.0 (now called “iOS”). The new iOS offers multitasking and other new features, and also brings the iBooks e-book reading app and the iBooks Store to the iPhone and iPod Touch.

Apple also announced that they have sold 2 million iPads in the first 65 days, and had 5 million e-book downloads in that time. Now, Apple is famous for hype and the “Steve Jobs Reality Distortion Field,” and they like throwing out impressive numbers that may or may not mean what they seem. For example, Apple neglected to mention how many of those 5 million e-books were paid vs. free downloads. If they’ve sold 3 or 4 or 5 million e-books in their first 2 months, that’s a big deal. But if they sold 500,000 and gave away 4.5 million free downloads … not so much. Also, the numbers work out to 2.5 books per iPad — or only about one book a month, which suggests that iPad owners are not generally voracious readers.

Apple also announced that the publishers they work with claim Apple already accounted for a staggering 22% of their e-book sales, but this number also wasn’t explained and must be taken with a grain of salt. First, many publishers don’t release sales numbers, nor do big e-book sellers like Amazon. Second, Apple only has 5 of the 6 largest publishers’ titles in the iBook Store, but lack the largest (Random House) and most smaller publishers; the “Apple 5” account for less than 50% of all e-book sales. The iBook Store currently has about 30,000 paid titles, whereas the Kindle Store has over 600,000 (20x more). Also, one of the “Big 6,” Penguin, had a disagreement with Amazon for much of the last 2 months and its new titles weren’t available in the Kindle Store. So maybe Penguin told Apple that they accounted for 22% of Penguin’s e-book sales (when its newest, most popular titles weren’t available on Amazon)? But I have a hard time believing that the iPad could do so well against Amazon (who had a 70%-90% e-book share), B&N, Sony, Kobo, and all the other established e-book retailers and jump out to a 22% share right out of the gate. Keep in mind that not only does Amazon have an estimated 3 million Kindles sold, but people can read Kindle titles on Kindle for PC, Mac, Blackberry, iPhone … and iPad. In any event, the numbers sound impressive, even if they are exaggerated a bit. I’m interested to see if people will really read much on the iPad. I’ve talked about reading on the iPad before, and concluded that I prefer the Kindle for pure reading, and that the iPad’s many distractions seem to appeal to a different demographic than serious readers.

Whether people will read or not on iDevices will soon become a huge question in the industry, because iOS 4.0 will bring the iBook reader app and iBook Store (where you can sample, purchase, and download e-books) to the iPhone and iPod Touch. I don’t know how many people read novels on their phones, although surveys always surprise me with how many people do it (personally, I prefer a larger, e-Ink screen to read on). But, even a relatively small percentage of iDevice owners could be huge, since there are nearly 100 million iPhones and iPod Touches out there, and Apple has 150 million credit cards in its 1-Click database.

In other news for the iBook app, a forthcoming update will add features that Kindle (and Kindle for iPhone/iPad app) users already have: bookmarking, highlighting, and syncing your position in your books across all your devices — so you can read to Chapter 4 on your iPad, then grab your iPhone and automatically pick up where you left off. Another cool feature is that the iBook app will also read PDFs and store them on a separate virtual bookshelf from your e-books.

In any event, it’s exciting news, since the reach of e-books has just expanded from a few million people (who owned Kindles, Nooks, and iPads) to 100 million iPhone users. With the ability to browse the iBook Store, make a 1-Click purchase (from a trusted source and without having to make a new account), and get instant wireless e-book downloads, will this be the tipping point for the wide-scale adoption of e-books? Time will tell….

© 2010 David Derrico