Is Apple's subscription policy in violation of antitrust laws?

Apple’s new policy for digital subscriptions has certainly raised some eyebrows in the tech community. It was rumored that Apple may start charging a percentage of subscription fees to publishers who want their content on iDevices, but many people thought that the idea was simply crossing the line of developer expectations. Nevertheless, Apple has gone through with the policy, and publishers now have to fork over 30% of subscription fees to Apple to get access to the App Store. With the speculation out of the way, experts are now asking the next question: Is this legal?

The legality in question is in terms of anti-trust law, according to the Wall Street Journal. Shubha Ghosh, a law professor at University of Wisconsin who specializes in antitrust, is wary of the idea. “My inclination is to be suspect,” he said. The main issues to consider are Apple’s dominance in the market, and whether or not the measures it’s taking are considered anticompetitive.

Deciding dominance is important because it shows that Apple is using its market share position to coerce publishers to pay more for a service and restrict competition. Herbert Hovenkamp, another antitrust professor at the University of Iowa law school, doesn’t think that Apple has the requisite dominance in the digital media space to warrant an antitrust argument. Nevertheless, once apple begins to sell 60% of all digital media subscription, a case can be made.

There are many ways Apple could get out of potentially disastrous antitrust litigation, and the simplest way, according to Ghosh, is to formulate a “business justification” for the practice. If they can convincingly show that the “subscription tax” is necessary to bolster the platform, antitrust doesn’t apply. Another possible argument is that there are other avenues for digital publication. There is nothing stopping publishers from using ad revenue to support a free subscription model and while the financial feasibility of such a venture is unclear, don’t be surprised if you we start seeing ad-based subscriptions popping up in the App Store very soon.

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It will just make people go to the horses mouth directly instead of through the original 3rd party app.

Book Author -> Distributor -> Kindle app -> end user
Book Author -> Distributor -> Kindle app -> Apple CUT -> Apple Store (2nd distributor) -> end user

The new system basically adds 30% onto an already agreed sale price with the author that does not take into account another 30% loss the distributor is going to have to take the brunt off.

Questions that are raised would be, why would the author go via that distributor if they can go directly to apple.

What if Ferrari said you can only use our specialized fuel to make your Ferrari run? Either people would give in and afford such fuel for the sake of owning a Ferrari or they would move along to another car company that may or may not require their own fuel too, or use a generic fuel. The principle is the same as renting, you wanna stay here in My space, you pay me money, if not get lost find your own space. Apple isn't the only provider of any "type" of thing it sells so it is not a Monopoly or in violation of Anti-trust laws. It would be different if they were the only ebook readers or PMPs or computer or phone company, and forced consumers to pay at their price, but they aren't; there is clearly compition out there.

I believe there should have been dialog between Apple and providers. Perhaps a sweeter % could have been reached in exchange for services from Apple. The providers built the App Store and the providers are the ones with a current subscription base. They (Apple) are reaching into their pockets after they established Apple in this market.

This is (a possibility of) what will happen to providers:

Cost of Subscription - X
Apple's 30% - Y

Keep costs at X (and overtime lose content - music/video/etc.)
Keep costs at X + Y (lose a % of customers who helped build that specific provider - the percentage loss will be varying due to possible (not guaranteed) new subscriptions from Apple)

I honestly believe this is a move by Apple to forcefully drive up the cost for providers so Apple can in turn offer similar options at a fraction of the cost in the near future (1 - 5 years) and get a large percentage of their initial providers customer base. Then again, I could be wrong but I seriously doubt it.

It truly is crap like this that uses their market share to further take profits from developers and put them in Apple's pocket.

Apple has done this almost everytime they have had success with a product. Lock it down, and milk everyone that touches for extra cash.

A few moves like this are enough to shove away important developers and cause their customer base to consider a shiny Android or WP7 phone.

thenetavenger said,
It truly is crap like this that uses their market share to further take profits from developers and put them in Apple's pocket.

In one way correct, but you also fail to mention that Apple has also lined these developers pockets, some of them quite well.

Look, no one was forced to buy an ipod or an iphone or to use Itunes. Apple has the right to sell you a product under any conditions it sees fit. Just as you have the right to refuse to purchase or use that product. Publishers have the right to not develop for the Apple platform, and that is exactly what they should do... go develop for Android. It's taking over anyway.

Apple is in violation of my law.....the law of "Being allowed to do whatever you please with the device you OWN, for which you PAID money"

ManOfMystery said,
Apple is in violation of my law.....the law of "Being allowed to do whatever you please with the device you OWN, for which you PAID money"

And how is that stopping you in this instance, or you just spouting off in general

Meph said,
I think they should take 5% from sales, not 30. That would be a lot more agreeable.

If anything, it should be in line with what credit card companies charge retailers, which usually tops out at around 3%

Meph said,
I think they should take 5% from sales, not 30. That would be a lot more agreeable.

at least they should let the develloper choose

Sraf said,

If anything, it should be in line with what credit card companies charge retailers, which usually tops out at around 3%

Credit card companys might charge 3% sales maybe, but then they also have a flat monthly charge.

You would think Apple would want to produce a system that developers and publishers are happy to use, rather than them being forced to use it but unhappy about the service.. apple should care about that.

ILikeTobacco said,
"The main issues to consider are Apple's dominance in the market"

I thought Android had dominance now.


I can't think of one Android MP3 player off hand.

ILikeTobacco said,
"The main issues to consider are Apple's dominance in the market"

I thought Android had dominance now.

Not in terms of tablets which would be the platform for the bulk of the subscription based services (i.e., electronic magazines). Apple's iPad reins supreme in that market and will likely continue for the next couple of years. They already have an established and wide range of magazines.

Hackersoft MS MVP said,

I can't think of one Android MP3 player off hand.

not that its actually relevant but http://www.archos.com/
They never said it was limited to pmp only devices and I have never seen an Android device that doesnt have the ability to play media files like any other pmp.
Shadrack said,

Not in terms of tablets which would be the platform for the bulk of the subscription based services (i.e., electronic magazines). Apple's iPad reins supreme in that market and will likely continue for the next couple of years. They already have an established and wide range of magazines.

What is that, six posts? lol That makes sense though even though there is nothing stopping those publishers from switching to Android apps. Hard to mount an anti trust lawsuit when you have the ability to move to another platform and the only thing stopping you is yourself.

Hackersoft MS MVP said,

I can't think of one Android MP3 player off hand.

I can name you at least 5 with only one company
Archos
then there's Creative with Ziio
Phillips Gogear Connect
then samsung with the soon to be announced Galaxy Player then ...

I don't think Apple should throw away their cut all together. Retail space costs money, whether it be at Target, Walmart, or the App Store. They all take a percentage.

However, I do think 30% is excessive for in-app purchases since the actual delivery of the content isn't from Apple's servers.

thealexweb said,
Asking contnet providers to charge iOS users less or the same price is out or order considering Apple's 30% cut.

In one way I agree with you, in the other I think the content providers would take the **** with it, so some middle ground should be found, maybe a average?

Agreed. They need to back off in this instance. It'd be a shame to see apps like Kindle and Rhapsody leave because of this.

I hardly think this'll go anywhere, developer will just raise the price and app store users will gladly pay the difference (that's why they're there for anyway).

I had urge to by iMac some time ago but now it's gone, after snapping out of the "all my friends have it so I want one too" phase.

Neo003 said,
I hardly think this'll go anywhere, developer will just raise the price and app store users will gladly pay the difference (that's why they're there for anyway).

I had urge to by iMac some time ago but now it's gone, after snapping out of the "all my friends have it so I want one too" phase.

Problem with that is that subscriptions through the App Store MUST by this policy be the same price, or lower in price than the same subscription if bought out of the App Store

Sraf said,

Problem with that is that subscriptions through the App Store MUST by this policy be the same price, or lower in price than the same subscription if bought out of the App Store

Yep, and for companies like Rhapsody that are working with tight margins and licensing issues based on their subscription price it is a serious issue.

(Smaller companies that depend on iTunes sales and have no room for price variance would fail if this is not addressed.)

leeoniya said,
due to apple's walled garden business practices, i would only ever buy one apple product: stock.

Interesting analogy. Gardens w/o walls are more vulnerable to weeds and pests.

One of the biggest issues I've always had is that if you buy an apple iPod you have to use iTunes and if you want an easy life you then have to buy music from apple. How they have not got in trouble for that in the first place I don't know, except that they can say people can rip their own music from CD or use DRM free music. This just seems to be an extension of that really, closing down in another area to make them more money.
It is understandble as to the why, but I don't think its really fair. It is also questionable when it comes to a product like Kindle as I could have already bought them using another method (web, kindle, kindle on PC) so should that stop me from using it on my iDevice? or should I then pay to use it on my iDevice? or is it a non-issue as I have found a way round their payments system?
If the latter than anyone could do that and just give apple the finger

Teebor said,
One of the biggest issues I've always had is that if you buy an apple iPod you have to use iTunes and if you want an easy life you then have to buy music from apple. How they have not got in trouble for that in the first place I don't know, except that they can say people can rip their own music from CD or use DRM free music. This just seems to be an extension of that really, closing down in another area to make them more money.

You don't have to buy anything from Apple except the device, you can rip all your CD's to iTunes and copy them over, how is using your current MP3 collection or copying a CD making life hard for yourself, how can it be any easier except having to import them into iTunes rather than Drag-And-Drop?... Don't understand your argument...

harveyhanson said,

You don't have to buy anything from Apple except the device, you can rip all your CD's to iTunes and copy them over, how is using your current MP3 collection or copying a CD making life hard for yourself, how can it be any easier except having to import them into iTunes rather than Drag-And-Drop?... Don't understand your argument...

Having to install iTunes (which forces Bonjour and other Apple rubbish) on your computer to use an iPod is a monopoly abuse in itself.

Teebor said,
One of the biggest issues I've always had is that if you buy an apple iPod you have to use iTunes and if you want an easy life you then have to buy music from apple. How they have not got in trouble for that in the first place I don't know, except that they can say people can rip their own music from CD or use DRM free music. This just seems to be an extension of that really, closing down in another area to make them more money.

It's not really an issue though, there is nothing wrong with the itunes store or the price of the download. It's convenient and i dont understand why anyone who wants an ipod/iphone would use anything else anyway? you can still add your own music from CDs or from other sources.

You don't have to buy from Apple, but if you wanted to use someone elses DRM music from another company you can't at least not easily (there are ways) so they are trying to pin you to their service. If I switched to iTunes for example my MP3 collection would be no good as the DRM would not allow it to work, to me thats anti-competitive so I always have to use other mp3 players, which doesn't bother me that much as they are better anyway, however I still have a choice of different products. So another example is getting your itunes DRM protected music on to a device that isn't an iPod, again not impossible there are ways to do it but needlessly difficult.

Aethec said,

Having to install iTunes (which forces Bonjour and other Apple rubbish) on your computer to use an iPod is a monopoly abuse in itself.

This. iTunes is the biggest piece of **** ever.

Teebor said,
One of the biggest issues I've always had is that if you buy an apple iPod you have to use iTunes and if you want an easy life you then have to buy music from apple. How they have not got in trouble for that in the first place

I think they can get away with it because Itunes is free.. if they charged for it then there would be a issue but right now its just super annoying but not against the law.

Aethec said,
Having to install iTunes (which forces Bonjour and other Apple rubbish) on your computer to use an iPod is a monopoly abuse in itself.
Oh god, I have to install the Windows Phone 7 Connector on my Mac if I want to use a Windows Phone! What is this world coming to?!

Lachlan said,

I think they can get away with it because Itunes is free.. if they charged for it then there would be a issue but right now its just super annoying but not against the law.

Clearly you don't recall what happened with MS and IE and what is still on-going with media player and other installed MS software. Free doesn't mean anything in terms of antitrust and tying laws. If Apple is tying their software, iTunes and Safari to their device then they are using their position in the force out competition or make it harder for other applications to compete. That alone should be grounds for an AT investigation.

Teebor said,
One of the biggest issues I've always had is that if you buy an apple iPod you have to use iTunes and if you want an easy life you then have to buy music from apple. How they have not got in trouble for that in the first place I don't know, except that they can say people can rip their own music from CD or use DRM free music. This just seems to be an extension of that really, closing down in another area to make them more money.
It is understandble as to the why, but I don't think its really fair. It is also questionable when it comes to a product like Kindle as I could have already bought them using another method (web, kindle, kindle on PC) so should that stop me from using it on my iDevice? or should I then pay to use it on my iDevice? or is it a non-issue as I have found a way round their payments system?
If the latter than anyone could do that and just give apple the finger
One of the biggest issues is stupid people bitching about things like this. You have options. You do not have to buy Apple. No one is forcing you. Again... YOU HAVE OTHER OPTIONS.

necrosis said,
One of the biggest issues is stupid people bitching about things like this. You have options. You do not have to buy Apple. No one is forcing you. Again... YOU HAVE OTHER OPTIONS.

People had options to use other browsers... Yet Microsoft still got in trouble for including IE with Windows.

...Just sayin.

Sure you have other options, but is the every day user going to know what these other options are? Or will he/she read the manual that came with the iPod and do just as it says? "Go to itunes.com and install".

Teebor said,
You don't have to buy from Apple, but if you wanted to use someone elses DRM music from another company you can't at least not easily (there are ways) so they are trying to pin you to their service. If I switched to iTunes for example my MP3 collection would be no good as the DRM would not allow it to work, to me thats anti-competitive so I always have to use other mp3 players, which doesn't bother me that much as they are better anyway, however I still have a choice of different products. So another example is getting your itunes DRM protected music on to a device that isn't an iPod, again not impossible there are ways to do it but needlessly difficult.


Does Ford service Chevy vehicles or vice versa

keuka said,


Does Ford service Chevy vehicles or vice versa

I don't think that applies at all...

Apple doesn't service Microsoft hardware. Microsoft doesn't service Apple hardware.

Apple only sells Apple hardware and Microsoft only sells Microsoft hardware.

Ford doesn't tell you not to use other companies to service your vehicle. They also don't tell you what you can or cannot install on your vehicle (obviously not taking the warranty into mind). Or where you should fill up your gas tank.

MidTxWRX said,

People had options to use other browsers... Yet Microsoft still got in trouble for including IE with Windows.

And it is god damned stupid that MS got into a pile of **** over that.

De.Bug said,
Just Apple trying to make more money

ya but think if microsoft tried that on Windows 8.. they would be torn apart. If for example they tried to take 30% of all subscriptions to all video games like WoW or something like that.. Everyone would freak out and be soo angry.

Lachlan said,

ya but think if microsoft tried that on Windows 8.. they would be torn apart. If for example they tried to take 30% of all subscriptions to all video games like WoW or something like that.. Everyone would freak out and be soo angry.


Because everyone is used to Apple being a !@#$%.