Apple Picks Consumers: All Others Get the Middle Finger

Apple took a side in a war between business and consumer — they chose the consumer. Now businesses and third-party developers are outraged, and the drama won’t end! Where’s Jerry Springer when you need him?

There is one thing I love about Apple: for all the times I get upset because Apple pushes the limits of what I consider acceptable behavior, they still force me to appreciate them when they stand up for the little guy, the consumer. Apple did this again recently, and while I hear both sides of the argument, things are getting crisscrossed.

What Apple has done is great for consumers. What Apple has done is detrimental to businesses everywhere. But Apple has every right in the world to do what they have done so far. There is just one little detail that I don’t agree with.

Nothing Personal

Apple is now an integral part of the technology world. Apple serves third-party developers, entertainment companies, Web 2.0 companies, social networks, print media, corporations, and any other type of business you could imagine. They do this by offering their products to businesses who either use Apple’s products to better their own company from a productivity standpoint or create applications for iOS to profit from.

Apple is also high in the minds of consumers. If there is one technology company you’d expect to hear any modern teenager to mention as one of the most memorable, Apple would surely be it — whether it be from the iPod, iPhone, iPad, or Mac. Consumers now rely on Apple’s products more than ever.

Consumers know what they are getting into when the join the Apple ecosystem. They know that, with Apple, there are certain ways that things are handled. There is a premium you have to pay. And the liberties you enjoy with an open system — like Android — might not be fully realized (or even exist) with Apple. But that’s okay, because we signed up for this.

For businesses and developers, there hasn’t been too many surprises. Sure, there are a few memorable moments where an application or two was rejected that upset many people, but the world moves on. Developers read the terms of service (supposedly) and they know what they are getting into. There should be no shock, even though the occasional hiccup happens. It’s okay, though.

It’s Just Business

But Apple might have bitten off a little bit more than it can chew with these new rules about in-app subscriptions:

For starters, subscriptions must be sold through Apple’s App Store. For instance, a magazine that wants to publish its content on an iPad cannot include a link in an iPad app that would direct readers to buy subscriptions through the magazine’s website. Apple earns a 30% share of any subscription sold through its App Store.

One more potential string attached: If publishers sell digital subscriptions outside the Apple orbit they must allow Apple to offer the subscriptions at the same price or less.

(Emphasis added.)

The “subscriptions must be sold through Apple’s App Store” and ” they must allow Apple to offer the subscriptions at the same price or less” are the parts that I don’t necessarily agree with. And if I was a third-party developer who relied on subscriptions to generate money for my own well being, I’d be pretty upset too.

Last.FM’s co-founder Richard Jones furiously stated that “Apple just f***** over online music subs for the iPhone.” I think that summarizes the sullen feelings for many third-party developers.

I can sympathize here.

The Consumer Is Always Right

But why should Apple care? The consumers are the ones who provide Apple a majority of their profits!

Now you might be thinking that this isn’t true — in the case of iTunes, Apple generates much of its profits from the 30% it takes from the third-party developers. And you would be right. However, without the consumers that Apple has hooked on their platform, there is no money to be made. Without these consumers, the developers wouldn’t bother developing for the platform no matter how amazing it is (think webOS and Windows Phone 7). So there would be no money to be made without the consumers.

So, you could look at this from two perspectives. The first perspective is that of the consumer. If Apple keeps consumers happy, they keep consumers engaged. This in turn leads to consumers spending time, money, and attention on the iOS platform, which is made up by the third-party developers. And the third-party developers generate potential sales from these consumers who might not have been there in the first place if it wasn’t for Apple’s platform.

The second perspective is from that of the business. Without third parties, Apple has little to maintain consumer interest. It is the third parties who provide the impressive applications that make up the App Store, and without the App Store, the iPhone is nothing more than an expensive music player that can make phone calls.

One without the other does not a profitable ecosystem make. So Apple needs to work hard to keep both parties happy. It’s more of a balancing act — the scales of happiness are being tipped, with Apple standing in the middle, free to tip it as the company so pleases.

I suppose you could add in a third perspective: Apple’s. They created iOS and have every right to manage it as they desire. They have a right to profit from its creation, and they should be able to earn some of the profits made from developers. It is only fair, right? (No matter what, Apple still gets rich.)

Apple First, Consumers Second

When all is said and done, Apple is, of course, going to side with itself before anyone else. They are in this game to make money. It’s their responsibility to their shareholders. However, they also need to sometimes make harsh decisions that will offend businesses or consumers. This just took it a bit too far.

Businesses that take advantage of subscriptions thrive because they have access to a great amount of information about their subscribers. Online, this could mean that these businesses have basic info from a name, e-mail, and phone number to an address, social network connections, browsing tendencies, and more. Furthermore these companies have been widely known to sell this information to other companies, which is a major contributor to all that junk mail you receive.

But Apple has made it clear over the past few days that it is siding with consumers. Apple not only is urging third-parties to use the iOS subscription functionality, but they are also protecting their customers’ data in the process. This means no more access to subscriber information and an easy way for consumers to subscribe to content.

While all these developers are upset — especially when you factor in the 30 percent that Apple is taking for themself — and I can sympathize (especially with the part where Apple is forcing developers to charge similar pricing for subscriptions within iOS), I can’t necessarily denounce Apple for such a thing.

Apple did the right thing.

Apple Chose Right

At the end of the day, the consumer is Apple’s primary customer. This should be engrained into the company’s mission statement, tagline, or whatever they call it. Without the support of the consumers, it doesn’t matter what Apple does. But as long as they serve consumers, people will be willing to open up their wallet to purchase Apple products.

The only thing Apple needs to do for third-party developers is give them the opportunity to make money. If they do this, third-parties will stick around — where else are they going to go?; Android isn’t exactly the first place you go to find consumers willing to spend money. If there is money to be made, there is an opportunity that wasn’t there previously. If Apple wants to charge 90 percent, then they should be allowed to. Most of the third-party developers will leave, but I promise you there will still be some that stick around.

I know that lawsuits will be coming. It was obvious to me the second Apple rejected Sony’s e-reader app from entering the App Store. And, hey, I think these developers have an argument to be made about the specific demand that third-parties must use subscriptions through the App Store and how much they can and cannot charge — I actually hope they take it to court and win.

But for everything else, just let it be. It all comes back to the basic economics of supply and demand — Apple is supplying the consumers for third-parties and consumers are demanding the products. Third-parties shouldn’t complain about how much they get from Apple’s hard work.