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Apple's app subscription model comes under federal scrutiny

Colbert_ipadgrammys Both the Department of Justice and the Federal Trade Commission are looking at Apple's recently announced plan to take a 30% cut of revenue from content subscriptions sold through its App Store, according to reports.

On Tuesday, Apple announced that the 30% cut would apply to subscriptions of digital newspapers and magazines. The 30% cut also applies to items sold through an app -- which, for book-lovers, notably includes the Kindle App and in-app purchases of Kindle e-books.

Our Technology blog writes:

The Department of Justice is in the "early stages" of a probe into the subscription service and what it means for competition after publishers made complaints, Reuters reported. The DOJ is currently contacting both Apple and publishers, Reuters said, citing an unnamed person who is "familiar with the department's procedures."

The Wall Street Journal reported that the Federal Trade Commission is involved in the investigation as well.

The analyst firm Forrester has been among those arguing that Apple's 30% plan is too high, stating that such fees should be about 5%.

Whether any online retailer will settle for 5% is yet to be seen, but on Wednesday, Google made a move in that direction. In a clear effort to propose a more attractive alternative than Apple's to publishers, the Google tablet subscription model, dubbed Google One Pass, takes a cut of 10% or less.

-- Carolyn Kellogg

Photo: Stephen Colbert with an iPad at the 2011 Grammy awards. Credit: Robert Gauthier / LA Times

Comments () | Archives (6)

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Apple is rapidly becoming the evil empire it once sought to destroy.

Our family's days as Apple users are almost over. Can't wait until AT&T plan ends, then switch to Verizon, buy droids and next home computer will be inexpensive (non Mac).

Makes me sad, but Apple's lust for profits makes me sick.

I'm not sure why people are so upset by this. If you don't want to pay Apple, then order your Kindle book through the web and have it sent to your iPad. Right now that's what the Kindle app does anyway. You have options; buy one of the other tablets (inferior right now, but catching up) or buy a paper copy of a magazine. No one is forcing you to use Apple products. That's how a free market system works, buyers have choices and companies are free to charge what the market will bear. If you like the quality of Apple products, then go for it, if not, go elsewhere.

And just wait until the feds get to the price fixing part of the model. That's when they'll be adding the 'anti-trust lawyer' app. And, Jason, there's no free market when Apple dictates how much a publisher can sell their products even at non-Apple stores.

Regarding the suggestion one merely purchase from Amazon, then send the document to the Apple devices - Various tech journals have reported that Apple is indicating they may block the apps from content providers that do not agree to the 30% charge. This means, using the Amazon example, that though Amazon provides the reading app for free, Apple will block it from running on iPhones and iPads. Of course, as the writer notes, if you don't like it, don't use Apple's offerings.

It is odd however that Apple is becoming exactly the monster that Microsoft is, leveraging their dominance of one element of digital technology, to restrict access in order to capture usurious fees for content that they neither create nor provide.

@Rocky Lee; Apple is only requiring that Amazon and other competitors allow the same purchases to be made, for the same price, through iTunes or in-app purchases as may be made directly through the competitor's website. They will not block purchases outside the app. As it is now, Amazon will not let you buy a book through iBooks and load it on your Kindle. Apple is proposing to allow you to buy a book through Amazon directly and load it onto your iPad, iPod, or iPhone as long as you can also buy the book within the Kindle app with a payment to Apple. How is that not fair? How is Amazon's Kindle model more fair? How is Barnes and Noble's Nook model more fair?


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