Peter Kafka

Recent Posts by Peter Kafka

How Media Companies Play With Steve Jobs’s New Rules: Give In, Go Around or Compromise

Apple’s new subscription rules for its iTunes app store have been in effect for less than two months. But that’s long enough for us to get a good idea of how media companies are responding.

Short version: A few prominent players have accepted Apple’s terms and will be giving Steve Jobs a big chunk of their subscription revenue.

Many more are sticking around the App Store, but removing any kind of e-commerce link from their apps. This makes their apps less useful, but at least it doesn’t cost them any money.

And a third group is trying an end run by building their own Web apps that will work on Apple devices without requiring the company’s approval.

Some examples from each category:

Play along, eat the tax: Some big print publishers, including the New York Times, Condé Nast and Hearst, are working with the new rules.

That means that they’ll hand over 30 percent of the subscription revenue they generate via iOS apps every month, and that they won’t have access to as much consumer data as they’d get if they sold the subscriptions on their own. But they’ll put up with it in order to reach the 225 million iTunes accounts Apple controls.

(Variation on the theme — play along, pass the tax along to consumers: Music subscription service Rdio is accepting Apple’s tax as well. But to protect its margins it is raising the price for subscriptions sold through iOS devices, from $10 to $15. After Apple gets its 30 percent cut, Rdio will end up with the same $10 it would have had before the new rules.)

Stay in iTunes, but grudgingly: This is the “better than nothing” approach. Services like Netflix, Hulu, Rhapsody, Spotify, and publishers like Time Inc. and The Wall Street Journal (which, like this Web site, is owned by News Corp) are keeping their apps in iTunes. But rather than hand over cash and lose access to customer data, they won’t sell any subscriptions through their iTunes apps.

And at Apple’s insistence, they are stripping out any links that send customers to the companies’ home Web sites. This even applies to services that aren’t selling subscriptions at all, but are offering access to content as part of other subscription services. See, for example, ESPN’s WatchESPN app, which tells users that they have to visit an ESPN Web site to sign up for the service, which is free for certain cable company customers. But the app doesn’t offer a live link to the site, just an address.

End run: The Financial Times was the first big media company to build a Web site that mimics an app but works on Apple’s Safari browser, as a way of working around Apple’s restrictions while reaching Apple’s customers. Now Amazon has followed suit, as has Wal-Mart’s Vudu video service.

Note that both the FT and Amazon continue to keep their old apps in iTunes; they’ve just neutered them. You can still read Kindle titles you bought on Amazon’s iOS app, for instance — you just can’t press a button that will take you directly to Amazon’s Web site to buy a new one.

So what does all of that tell us about the App Store ecosystem and how developers will fare in and out of it?

Not much. It’s pretty early. We might have a better idea in a few months when some publicly traded companies like the Times may end up talking about their Apple relationship during earnings calls. (Admittedly, that’s a stretch of a hope: Apple has a way of getting most of its partners to STFU.)

That said, here’s a not-very-out-on-a-limb prediction: Companies who already have lots of customers and are already in frequent communication with them, like Amazon, should do fine outside of the store.

And companies that have lots of potential customers but little traction, like Vudu, will likely struggle. Particularly since that company sells the same thing — video-on-demand rentals and sales — that Apple already sells through iTunes.


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There was a worry before I started this that I was going to burn every bridge I had. But I realize now that there are some bridges that are worth burning.

— Valleywag editor Sam Biddle