Apple’s Dangerous Storefront Paradigm

What if you bought a Sony TV and then discovered you could only watch shows that Sony okayed ahead of time?  Furthermore, what if Sony decided that anyone wanting to create a show to broadcast to your TV had to pay Sony a fee?  What if some TVs worked with some networks but not others?  How would you feel if you wanted to watch a certain show but discovered that Sony censored that TV production?

Radios, televisions, record/tape/CD/DVD players have always been sold as machines that were universal devices.  They would work with the same content everyone was providing.  You bought a RCA television and it played the same shows as a Sears set.  A GE clock radio would pick up the same stations as any other AM/FM set.

When computers came out there were many types, with different chips and operating systems, and there was no universal system.  Then came the IBM PC in 1981, followed by PC clones, and things settled down, but not quite, because in 1984 the Apple Macintosh came out with all intentions of being different.   The Mac’s market share has always hovered around 1/20th of the PCs.  It wasn’t quite disruptive, but offered an alternative.  But if you bought a Macintosh computer you could buy any Mac compatible software you wanted.

Now, with the iPhone and iPad, and the Apple App Store, Apple is creating a paradigm shift that will shake up things and change the way we do things completely on computers.  And don’t be fooled, smartphones and tablet are computers.

Apple is changing the computer from being a general purpose device that the buyer has control over into one that’s essentially a tiny Apple storefront.  Apple wants to get a cut of the action on any program, service or content that runs on their machines.  Not only that, they want to control what services, programs and content that can be used on their machines.

This is like Samsung saying “If you want to watch The Social Network on our TVs, we get a percentage of its selling price.”  Because computers never completely became universal devices like radios, TVs and DVD players, computer makers can get away with trying something different.

What Apple is saying, we don’t want to be a computer maker anymore, we want to be a retailer that sells products for computers.  They couldn’t do this before because they didn’t have the App Store.  The App Store is a choke point that Apple can control.

Under the old paradigm if you wanted a tax program for your computer you picked out a program you liked and bought it direct from its maker, or from a mail order store like Amazon or New Egg, or a retailer like Office Depot.  Now Apple can say the only way you will get a program for your iPhone, iPad, and soon maybe your iMac is through an App Store they control, and which they charge a 30% cut.  Now some people like this paradigm shift, it does have merits, but I for one find it scary too.

For instance I was going to buy the iPad 2 as soon as it came out.  I changed my mind weeks ago when Apple announced their 30% fee.  I was wanting an iPad to read magazines on, and my first magazine subscription was going to be The New Yorker.  Right now The New Yorker is $4.99 an issue on the iPad.  It’s $2.99 a month (4 issues) on the Kindle, and $39.95 for the PC version, that includes access to the complete back run of the magazine.  I don’t know what the subscription fee will be on the iPad because Apple is just now working out the deals and technology to sell subscriptions.

Now Amazon has a choke point for Kindle users too, and I’m sure Amazon is making something for selling magazines, but I doubt it’s 30%.  But see the difference?  Under the old PC model of buying content we can deal directly with the seller.  $39.95 a year is a great deal.  It’s $3 more a year than the Kindle price, but I would get all the back issues to read while I’m a subscriber, plus I’d see the full magazine page with all it’s ads and illustrations, and not just the content and cartoons as I do on the Kindle.

I was hoping The New Yorker would provide the same deal on the iPad for $39.95, but will it when Apple wants $12 for its share?  Does Apple deserve a share?  Are they really a retail store?  Google has since claimed that sellers on the Android platform will only have to kick back 10% to them.  But is being cheaper any fairer?

See the paradigm shift coming?  Computers are becoming storefronts.  Apple tells its users that programs bought from their App Store are safer than those purchased elsewhere, but isn’t that some kind of protection racket?  And isn’t this also a kind of Monopoly too?  To be legal shouldn’t iPad users have the right to visit any application store they choose?  Imagine if Ford sold you a car but enforced where you bought your gas and oil because they claimed it was safer?

Before Apple announced their shakedown plans I had imagined having an iPad with Rhapsody Music on it.  I pictured in my head what a beautiful app Rhapsody could design for listening to music while looking at appealing visuals, like large size photos of album covers.  But will Rhapsody still develop such an app?  Many content producers are saying they might have to pull their wares from the App Store, but I don’t picture that happening.  I just see them jacking up their prices.

The New York Times plans to sell the online version of their paper for PC users for $15 a month, and charge $20 a month for iPad users.  But to be fair it’s $19.99 for Kindle users now.  If they didn’t have to go through Apple or Amazon, and Kindles and iPads were just generic devices, would The New York Times just charge $15 a month to their users?

Is having the device maker controlling a choke point on sales of content for their devices really needed?  If you buy stuff from Target at their stores or online you really need Target to manage all the stuff they sale, so they deserve making money.  But do Google and Apple really do that much to run their stores?  It’s nice to have one payment system, and it’s nice to have one installation system, but is it really worth 30%.  Their fees should be more in line with what credit card companies charge retailers.  I’d say 3% tops.  And how many retail stores can get away with a 30% mark-up – most live and profit by razor thin margins.

Whether we like it or not, tablet computers are our future, and this is a good thing.  But giving Apple, Google, and Microsoft the right to control all sales on their devices is not.  Microsoft is a dark horse in the tablet race.  What if they came out with a hands off approach, and just sold their OS to tablet makers, would that change the game?  There’s a reason why PCs dominate the market share.  They may be open to attack from hackers, but they are open.

JWH – 3/20/11

4 thoughts on “Apple’s Dangerous Storefront Paradigm”

  1. That’s why I’ll never buy an Apple device! You should see about getting a Kno. If I had the money that’s the tablet I’d get. It’s got two screens, I dream of having a comic page on each screen!

    John

    1. I looked into it more and am afraid the Kno is largely proprietary too. The search for a non-propietary tablet continues.

  2. IBM created the PC, but they didn’t make any money on it. Intel and Microsoft made the big money, with countless software developers also making a profit. It ended up a good thing for everyone but IBM.

    That lesson has not been lost on other hardware developers.

  3. In the beginning, the ’70’, many personal computer makers tried to squeeze software developers and users by keeping their systems proprietary. Only Apple succeeded. Now they can charge 30% more for a computer which does 30% less (for example, you can’t run 3DS Max natively on a Mac).

    Will Apple succeed this time? Their chokepoint is like the one which the game platform owners (Sony, MS…) have on developers. But the market always seeks ways around such strangleholds. Ironically, the iPhone and apps are opening up game development to more indies (see unity3D for example).

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