Apple Inc. is making a move that appears designed to push e-book customers with Apple mobile devices away from non-Apple apps and to its iBooks e-reader mobile app, thus boosting sales at its iBooks store. The merchant says in a statement it will begin enforcing a rule for developers of apps to be offered in the Apple App Store that says e-reader apps must enable purchasing of e-books through the app itself, not just on retailer e-commerce sites. This will place the transaction within Apple’s iTunes ecosystem and Apple will take a cut of sales, which could be as high as 30%. Apple did not reply to a request for comment on revenue sharing.
Amazon.com Inc., for example, offers a free Kindle mobile app for the iPhone, iPod Touch and iPad that enables customers to read Kindle e-books on those devices. But the app does not enable purchasing, only reading. Customers purchase books at Amazon.com, which hosts a virtual library for each customer that can be accessed by a Kindle or by any device with the free Kindle mobile app. Apple’s new set-up presumably would force Amazon.com, if it wants to keep its Apple apps, to enable purchasing through its Kindle app and give competitor Apple a cut of its e-book sales. Amazon.com has not replied to a request for comment.
The big question now is: What does this mean for retailers selling physical merchandise through mobile apps? Apple has to date only discussed e-books. But if it were to expand the rule to physical goods, it could have a chilling effect on a big chunk of mobile commerce. EBay Inc., for example, has sold billions through its apps designed for the iPhone and its sister devices running Apple’s iOS mobile operating system.
“The slippery slope question becomes a really big deal,” says Nikki Baird, a managing partner at Retail Systems Research who specializes in m-commerce. “They are basically saying you can’t sell anything through an app unless it comes through the App Store. If you apply it consistently, then you have to apply that to products, too, and that would just kill at least half of what retailers are working on in mobile right at this very second. That’s not good at all.”
It still isn’t clear if Apple is going to apply the rule regarding selling e-books through apps to other products, but if it does, retailers have a big decision to make.
“This raises an ugly question for retailers that want to sell via mobile apps,” Baird says. “What’s the difference between buying a book through an app and buying a product? If a consumer buys a gift card using a retailer’s app, does that mean Apple gets a 30% cut of that? What about if a consumer is ordering physical products? If Apple’s going to stick to its guns on this policy, it seems to lead in some scary directions. No retailer is going to give Apple a 30% cut of their retail business.”
Apple did not reply to a request for comment on whether it will expand the rule to physical merchandise.