It's not always this way. Think about, say, a Pandora subscription - thin margins, but provides a real value added service that is well above and beyond that of a mere distributor.

Can they afford to give Apple a 30% cut of all revenue?

It's completely misguided to characterize all payment through a mobile app as cutting out the middleman. In a great number of cases (i.e. subscriptions) Apple role is nothing more than a payments gateway + lead generation. Does that make them deserving of 30% of your entire revenue stream?

My point is that Apple doesn't see in-app payments as merely payment processing. They see them as App Store purchases which are delayed in time.

Everyone keeps anticipating Apple becoming a payment processor, but it hasn't happened yet. They're still a platform provider.

This kind of reminds me of some of the TripAdvisor reviews you see on resorts with a championship golf course and all kinds of amenities. There are always people annoyed that because just wanted a simple room and don't want to have to pay for the amenities. They argue they should be able to pay a lower rate. But they just stayed at the wrong place.

A 30% rent is a great rate for what the App Store provides, but if all you want to pay for is a better payment processor, yeah, it does seem outrageous.

No, a payment processor is exactly what they are in this case. Consider what Apple is attempting to do to Amazon's Kindle service: users can purchase Kindle ebooks directly in-app but Apple takes a 30% cut of the payment. Amazon still hosts and provides the content, all Apple does is act like a payment processor like Visa or Paypal. Clearly Apple wants to shove out competition to it's own iBooks, iTunes and movie services.

And yet there seem to be a lot of books as apps on the App Store considering there's this 30% cut.

What kind of inside track should Amazon have on the poor shlubs who sell their books as apps?

The poor schlubs who sell their books as apps haven't cut out the middleman.

With Kindle (or iBooks), the author simply uploads his/her work in a commonly exchanged format. Everything else is handled - distribution, payment, formatting, device compatibility. The works.

As an author who wants to publish their book as a discrete app, suddenly you're engaging with a different middleman - the inevitable app vendor. The vast majority of book authors aren't coders and wouldn't know how to publish an app to save their lives, much less on multiple platforms (Android, iOS, webOS, WP7, along with their phone and tablet variants). Inevitably they will buy this solution (which, in essence, is largely of the same nature as Amazon/Apple) from someone else.

And what will we, as consumers, have seen from this situation? More confusion and a worse experience overall, as every single little piece of content now floods the app store, obliterating any sense of discoverability while making the UX much, much worse (downloading a discrete app, along with all of its code and media, every time you want to read a book?!)

Bookbaby makes it pretty easy, but I don't see how that even matters.

You're just arguing that there should be more middlemen, sub-platform-providers who get a special deal with Apple compared to original app authors.

We can all foresee what happens when providing a hammer factory is favored over providing a hammer. It's not good UX or good for consumers.

Apple's argument is that they deserve 30% of all revenue streams for getting a customer on board. For 30% of revenues, you could hire a true sales force that goes out and actively sells stuff, rather than just sitting back and hoping someone signs up. In the App store model, you still need to sell on your own, Apple just centralizes payment and distribution. Thus, I'm not sure I follow your logic.

Payments: Visa, Paypal, Amex, MasterCard, and many others would gladly handle the payments for ~2%. Not sure where you're getting anything about inventory and shipping given it's digital content. Sales: when did actually do any selling for anyone's product other than when it was mutually beneficial? You still need to sell it to people to actually use your product. Publishing: again, what is apple doing here? Distribution and a little bit of marketing, sure - but that's certainly not worth the other 28% of revenues.

Also don't see why Rhapsody repackaging stuff makes it any different. Shouldn't a true app store model work for any type of business?

I think you overstate the willingness of existing payment processors to deal with, say, .99$ purchases (they likely won't bother). I'm not arguing that Apple's providing a service that's worth 30% to everybody, but building a payment processing system to handle sub-$1 charges cost-effictively isn't trivial -- and if you're not in the business of building payment processing systems, you might just pay the rent. Amazon could handle rolling their own; Packt probably can't.

They would bother if they could get 30 cents on the dollar instead of their measly 2

I'm comparing it to a retail model. So I included sales but not advertising.

Every retail outlet is different, and App Store purchasing has a very particular set of advantages. If you don't need those advantages, the App Store still provides a great value by letting consumers access your service through a free app.

If neither of those work with a particular economic model, then I guess it's just not App Store compatible. So yeah, there's definitely room for a better model of app store that suits more developers. But I think Apple is more concerned with getting a broad selection of content than making the economics work.

And for those who don't need the help with payment, distribution, etc Apple is forcing them to take it. Do you think Amazon really needs Apple's help in processing or distributing any of their content? I'm pretty sure the WSJ has plenty of experience handling payments as well.

I paid several hundred dollars for my iPad, and for that price I'd like to do whatever I want with it and be able to take advantage of the greatest things people have built for it, not what Apple approves of being done. The issue I have is that Apple's feeling of entitlement inherently blocks out many incredible things from that iPad. E.g., I bought a bunch of books on the Kindle app so I could read them on any device. Apple could have done the same by getting off their asses and building iBooks for other devices, but they chose not to. And now that advantage of Kindle is gone because Apple wants to take every last dime from anyone doing anything on an iOS device? Many business models cannot survive having to give up 30% of revenues. It is a poor model.

Edit: I guess I wouldn't have an issue if there was an alternative way to get native stuff onto your device other than Apple's app store. But there isn't.

Pretty much. Apple is pretty well known for being a one-size-fits-most company.

They don't seem interested in stretching to make things work out for certain sets of customers and potential partners, and it can seem maddening. And they always keep themselves in control wherever they reasonably can. It is their strength and their weakness.

So far it's served them pretty well, but I agree it's not the ultimate model for an app store or a platform. It sure does seem to cover the most profitable surface area, though.

"Of course Rhapsody can't sell their stuff for a 30% margin. It's not their own stuff!"

Yeah. The original article talks about "calling Apple's bluff" as if this is some sort of choice on Rhapsody's part, but anybody who literally can't make a profit with a 30% cut off the top from Apple isn't "calling a bluff". There's no volition involved.