Apple 2.0

Covering the business that Steve Jobs built

Apple blinks. Rewrites rules for Netflix, Amazon, publishers

June 9, 2011: 11:05 AM ET

Some of the most draconian restrictions in its App Store subscription rules have been lifted

Source: Le Monde

Last February, when Apple (AAPL) announced the rules by which publishers and other content providers could offer subscriptions through its App Store, Steve Jobs made them sound like the most reasonable thing in the world.

"Our philosophy is simple," he wrote. "When Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing. All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app."

What sounded reasonable to Jobs, however, sounded crazy to publishers. Moreover, it threatened the very existence of some of the most popular third party applications in the App Store, including Amazon's (AMZN) Kindle, Zinio's magazine store and Hulu Plus, a joint venture of NBC (NBC), Fox (NWS) and ABC (DIS), among others. See: Steve Jobs to pubs: Our way or highway.

Some publishers caved and went along with Apple's terms. Some, including Time Inc. (TWX), which publishes this blog, met them half-way. Some, like the Financial Times, pulled out of the App Store and went with a Web app instead. Others threatening to take their business to Google's (GOOG) Android, which had no such restrictions.

Apple seems to have gotten the message. On Monday, two and a half weeks before the rules were scheduled to take effect, Apple changed them. It scrapped the "same price or better" requirement and allowed content providers that direct customers to subscription offers outside the App Store to do so without giving Apple a 30% cut. As All Things D's Peter Kafka put it:

"Now, apps can offer access to content purchased outside of Apple's walls, as long as the app doesn't have a "buy" button that connects consumers directly to an external store. That is: Apple won't make it easy for users to buy in-app content without going through Apple's store, but it won't outlaw it, either."

Amazon, which currently uses a button in its Kindle app that takes customers to the Amazon website to purchase books, will have to rewrite its app. But if it wants to keep the revenue flowing from Apple users, it should be able to design a workaround. According to YUDU Media's Richard Stephenson, a simple "visit our website" with a live URL would do the trick.

Below: The old terms and the new (via MacRumors).

Before:

11.13 Apps can read or play approved content (magazines, newspapers, books, audio, music, video) that is sold outside of the app, for which Apple will not receive any portion of the revenues, provided that the same content is also offered in the app using IAP [in-app purchase] at the same price or less than it is offered outside the app. This applies to both purchased content and subscriptions.

After:

11.13 Apps that link to external mechanisms for purchases or subscriptions to be used in the app, such as a "buy" button that goes to a web site to purchase a digital book, will be rejected

11.14 Apps can read or play approved content (specifically magazines, newspapers, books, audio, music, and video) that is subscribed to or purchased outside of the app, as long as there is no button or external link in the app to purchase the approved content. Apple will not receive any portion of the revenues for approved content that is subscribed to or purchased outside of the app

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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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