Apple's app tax expresses gatekeepers' urge for control

WIRED:Apple says the only financing model on its platforms will be through Apple – at 30%

WHAT DOES absolute control of a dominant software and hardware platform give you? In the case of Apple, an unparalleled power to bargain.

Witness the company’s announcement this week of a plan for an easy subscription system for the iPhone and iPad, premiered by the Murdoch digital newspaper the Daily (which I described last week), and soon to be rolled out to other paid services.

By other paid services, I mean all paid services on Apple’s mobile devices. Apple has made it clear that the only financing model on its platforms will be through Apple.

The company will charge a hefty 30 per cent fee for those subscriptions and there’s no evading the Apple tax. If your app offers purchases through, say, a web page, Apple will oblige you to offer the same offering and price point on the device itself.

Steve Jobs described the deal in these terms: “Our philosophy is simple. When Apple brings a new subscriber to the app, Apple earns a 30 per cent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 per cent and Apple earns nothing.”

I have to say, to my ears, that’s a fine example of the famous Jobsian ability to remaster reality. Few people will ever go past Apple’s own in-app subscribe feature to gain an equally priced subscription elsewhere.

To emphasise alternative scenarios where Apple earns nothing is akin to claiming that demanding a 30 per cent cut of everyone who walks down a street to your store is acceptable, because, heck, climbing into the window will never incur a charge.

(As long, of course, as you charge the same price for window entry.)

The reaction from those affected has been mixed. Internet publishers and developers mostly answered with shocked disbelief. From companies like Pandora, which resells thin margin products such as music, the redirected revenue was described as simply untenable for its business model. Amazon is known to be unhappy.

Companies such as Vodafone have also complained, which is ironic given the death grip many telephone companies have attempted to exert over their own customers’ ability to pay for goods on the phone.

Most impressive for me was the quickly crystallised positive arguments from those who generally support Apple. The soundbite that swiftly developed was that Apple was putting users before publishers.

Apple’s subscription system will be user-friendly, goes this argument: it will clarify and simplify a maze of possible charging systems under the convenient banner of Apple’s one straightforward model. Apple will limit the provision of user data to companies to “name, e-mail address and zip code”.

If publishers and developers really want to wave goodbye to the iTunes store’s 100 million credit card customers, well, they’re free to leave its more user-friendly services.

Google was quick to respond with a counter-offer to users of its Android mobile phone operating system and the web.

Its announcement of “Google One Pass” described a subscription system that had no exclusivity requirements and charged only 10 per cent. Of course, Google’s own supporters were quick to highlight the benefits of this alternative scheme: no shotgun negotiation, better rates – and competition with Apple’s “our way or the highway” attitude.

Competition is good, but what I find most disillusioning about this entire discussion is quite how much either alternative directs profits and power to the makers of a platform.

Already there is little sense that any other payment system will find a place in the mobile world between Apple and Google, and a genuine sentiment among many that a truly diverse market would simply be confusing and “user-unfriendly”.

Apple not only now takes a tithe of all content within its app store, but also controls exactly what content will be delivered within this space.

Choosing which apps are worthy of Apple’s platform is one thing – acting as as the arbiter of magazines and newspapers is quite another.

Those old enough to remember the times when stationers and distributors could make or break a magazine based on their (often inaccurate) view of their contents will understand why.

Google deliberately operates in a more free and open backdrop of the web, but it continues to dominate that space without an obviously strong competitor. The theoretical potential for a new entrant is a weak substitute for an actual Google-beater sharing the same space.

There is also something particularly disturbing about these giants leveraging their power in other areas to become the tollkeepers as well as the car-makers and map-makers.

I love Apple and Google products but I am intensely uncomfortable with the monopoly power either company wields within its own domain. In my darker moments, it feels like the early boom years of the web were the briefest moments between unbroachable oligarchies.

Both Apple’s and Google’s subscription systems are advertised by the companies as heralding a golden age of paid content. That’s certainly a vision which the decentralised web has struggled to offer.

I’m not sure though that that promise, or the simplicity and user-friendliness, of Apple’s exclusive control, even when diluted by Google’s alternative, really compensates for a steady acceleration to deeper control and larger profits by two gatekeepers.