Apple 2.0

Covering the business that Steve Jobs built

The cost of Apple's 'greed tax'

February 22, 2011: 7:27 AM ET

Growing developer unrest draws a clarification -- of sorts -- from Steve Jobs

REJECTED: Readability's iOS apps

When it looked like Apple's (AAPL) new subscription model was aimed at magazine publishers in New York City, nobody west of the Hudson River seemed to mind.

That changed almost overnight when someone in Cupertino rejected an app for the iPhone and iPad submitted by Readability, a Web service developed in conjunction with Instapaper that offers reformatted articles -- stripped of ads and other distractions -- and shares its revenue with the authors and publishers.

"We believe that your new policy smacks of greed," wrote Rich Ziade, Readability's creator, in an open letter to Apple that was quickly seconded in a blog post by Instapaper's Marco Arment, a writer and developer whose opinion carries a lot of weight in the Apple community.

The shifting tide was succinctly captured Monday by Cult of Mac's Pete Mortensen in a piece entitled "App Store Subscription Plan Demolishes the Appeal of iOS":

"The broad application of Apple's new App Store subscription guidelines to everything from magazines (sensible) to Kindle books (questionable) to Readability (delusional) to Tiny Grab and possibly DropBox (downright silly) could end up being the single-worst business decision the Cupertino Colossus has made in the last decade."

Perhaps it was talk like that that elicited a response to a MacRumors reader from what appeared to be Steve Jobs' iPhone:

"We created subscriptions for publishing apps, not SaaS apps."

SaaS is an acronym for Software as a Service, typically a program that resides behind a firewall and offers some kind of useful service, either "pay as you go" or by subscription.

The problem with Jobs' clarification -- assuming it came from him -- is that the rule in the App Store Review Guidelines that caused Readability to be rejected doesn't offer the flexibility he claims:

11.2     Apps utilizing a system other than the In App Purchase API (IAP) to purchase content, functionality, or services in an app will be rejected. (emphasis ours)

It's likely that nobody at Apple really knows how many of the 350,000-plus iPhone and iPad programs in their App Store run afoul of Rule 11.2. It could be hundreds. It could be tens of thousands.

"Since there are so many gray areas," wrote Arment, "and it's very far-reaching, this is going to be a difficult policy to enforce consistently."

Arment rejects the arguments that most critics have raised against Apple's new policy -- that the 30% fee is too much, that third parties can't afford it or that Apple has nor right to impose it (he leaves antitrust concerns aside -- for now).

But one argument that Apple should care about, he concludes, is that "this policy will prevent many potentially great apps, from many large and small publishers, from being created on iOS at all."

"A broad, vague, inconsistently applied, greedy, and unjustifiable rule doesn't make developers want to embrace the platform...

"What if major publishers, such as the New York Times or The Wall Street Journal (whose current app violates this new policy, along with Hulu, Netflix, Kindle, The Economist, and countless others), decide that they don't want to offer their services through IAP (at 30% less revenue per customer) and just cancel their current or future iOS apps?

"Don't we all lose?

"The discussion shouldn't be whether Apple can enforce this policy, but whether they should. And if you look at what this does to developer relations, big and small, it's easier to argue that this is likely to result in more harm than good to the iOS platform."

Also on Fortune.com:

[Follow Philip Elmer-DeWitt on Twitter @philiped]

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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