Apple 2.0

Covering the business that Steve Jobs built

Why Apple blinked

June 10, 2011: 11:22 AM ET

An analyst offers three reasons Apple relaxed its rules for App Store subscriptions

Scott Forestall demoing iOS 5's Newsstand. Source: Apple Inc.

RBC's Mike Abramsky was the first analyst out of the gate Friday to comment on Apple's (AAPL) decision to make it easier for publishers and other content partners to offer in-app subscriptions.

In a note to clients, Abramsky lists three reasons he thinks Steve Jobs blinked:

  1. Apple realized it had gone too far. "Apple has been criticized for its heavy-handed approach to developers and content partners; in this case they overreached in constraining publishers (already thinly profitable) from charging what they want for non-iOS subscriptions."
  2. Competition from Web applications. "The budding revolt could have boosted HTML5, in competition with Apple's native apps (and still can). Financial Times openly encouraged customers to switch from its iOS Native Application to its Web Applications. Five major content publishers (Time, Hearst, Conde Nast, Meredith, News Corp) have created Next Issue Media to create a digital newsstand for Android and other tablets, where content providers have full control over pricing and customer information."
  3. To avoid giving Google the edge. "Google has been promoting its One Pass payment platform as a publisher-friendly alternative to Apple's in-app purchases, taking only a 10% fee for managing back-end processes (authentication, payment processing, administration) and allowing content providers to control customer data."

"This episode highlights one growing challenge for Apple," Abramsky concludes. "Its size becomes a double-edge sword for content providers, developers and carriers, who are attracted to Apple's growing addressable market (200M iOS devices) but increasingly fearful over its expanding power. Apple plays a fine line between maintaining control/exclusivity of its closed ecosystem, but also not alienating the very content partners that give its platform its distinct advantage."

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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

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