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Apple's app subscription model comes under federal scrutiny

February 18, 2011 |  1:48 pm

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

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