this space intentionally left blank

April 30, 2014

Filed under: tech»mobile

Company Towns

Pretend, for a second, that you opened up your web browser one day to buy yourself socks and deoderant from your favorite online retailer (SocksAndSmells.com, maybe). You fill your cart, click buy, and 70% of your money actually goes toward foot coverings and fragrance. The other portion goes to Microsoft, because you're using a computer running Windows.

You'd probably be upset about this, especially since the shop raised prices to compensate for that fee. After all, Microsoft didn't build the store. They don't handle the shipping. They didn't knit the socks. It's unlikely that they've moved into personal care products. Why should they get a cut of your hard-earned footwear budget just because they wrote an operating system?

That's an excellent question. Bear it in mind when reading about how Comixology removed in-app purchases from their comic apps on Apple devices. I've seen a lot of people writing about how awful this is, but everyone seems to be blaming Comixology (or, more accurately, their new owners: Amazon). As far as I can tell, however, they don't have much of a choice.

Consider the strict requirements for in-app purchases on Apple's mobile hardware:

  • All payments made inside the app must go through Apple, who will take 30% off the top. This is true even the developer handles their own distribution, archival, and account management: Apple takes 30% just for acting as a payment processor.
  • No other payment methods are allowed in the App Store — no Paypal, no Google Wallet, no Amazon payments. (No Bitcoin, of course, but no Monopoly money either, so that's probably fair.) Developers can't process their own payments or accept credit cards. It's Apple or nothing.
  • Vendors can run a web storefront and then download content purchased online in the app... but they can't link to the site or acknowledge its existence in any way. They can't even write a description of how to buy content. Better hope users can figure it out!

Apple didn't write the Comixology app. They didn't build the infrastructure that powers it, or sign the deals that fill it with content. They don't store the comics, and they don't handle the digital conversion. But they want 30 cents out of every dollar that Comixology makes, just for the privilege of manufacturing the screen you're reading on. If Microsoft had tried to pull this trick in the 90s, can you imagine the hue and cry?

This is classic, harmful rent-seeking behavior: Apple controls everything about their platform, including its only software distribution mechanism, and they can (and do) enforce rules to effectively tax everything that platform touches. There was enough developer protest to allow the online store exception, but even then Apple ensures that it's a cumbersome, ungainly experience. The deck is always stacked against the competition.

Unfortunately, that water has been boiling for a few years now, so most people don't seem to notice they're being cooked. Indeed, you get pieces like this one instead, which manages to describe the situation with reasonable accuracy and then (with a straight face) proposes that Apple should have more market power as a solution. It's like listening to miners in a company town complain that they have to travel a long way for shopping. If only we could just buy everything from the boss at a high markup — that scrip sure is a handy currency!

It's a shame that Comixology was bought by Amazon, because it distorts the narrative: Apple was found guilty of collusion and price fixing after they worked with book publishers to force Amazon onto an agency model for e-books, so now this can all be framed as a rivalry. If a small company had made this stand, we might be able to have a real conversation about how terrible this artificial marketplace actually is, and how much value is lost. Of course, if a small company did this, nobody would pay attention: for better or worse, it takes an Amazon to opt out of Apple's rules successfully (and I suspect it will be successful — it's worked for them on Kindle).

I get tired of saying it over and over again, but this is why the open web is important. If anyone charged 30% for purchases through your browser, there would be riots in the street (and rightly so). For all its flaws and annoyances, the only real competition to the closed, exploitative mobile marketplaces is the web. The only place where a small company can have equal standing with the tech giants is in your browser. In the short term, pushing companies out of walled gardens for payments is annoying for consumers. But in the long term, these policies might even be doing us a favor by sending people out of the app and onto the web: that's where we need to be anyway.

Future - Present - Past