One Percent More

A few items to follow-up on my ‘Thirty Percent’ post from yesterday — I am getting tired of answering the same emails over and over. Here goes…

Justin Pennington gets it:

@BenjaminBrooks I totally agree with you, I’m not sure why people are so against it. 70% of something is better than 100% of nothing.

Wil Shipley (developer of Delicious Library) makes a valid point:

Traditional book publishers, for instance, will give an author about $1 on a hardback sale. Solution: authors should dump publishers.

I could cherry pick tweets all day long, but the bottom line is that this is nothing new in the business world — it is just something new in the App Store.

Magazines

A few people have written in to say this will kill any profit that a magazine would get. Except that remember you can have a paper magazine, printed and mailed to your home twelve times a year for the bank busting price of $10. Magazines and newspaper have never made money off of the price of subscriptions — they make money from the sales of ads inside the publications. Apple isn’t stopping that — serve them up for all readers care, nothing new.

Amazon

Even more people wrote in wondering how crazy I was for thinking that getting rid of all apps that act as ebook readers — except iBooks — is a good thing. I don’t and I doubt those apps are going away. Apple thinks this stuff through and I am confident that the complete picture has yet to be painted, be patient.

At the very least offering just the reader for Kindle should be sufficient — I doubt many Kindle users struggle to remember Amazon’s URL to go buy a new book. Yes, it would be less convenient, but it isn’t a death blow by any means. Beyond that book distributers have a really screwy deal to begin with — it’s an industry ripe for change.

Netflix

Perhaps the most heated emails were from people that are upset about the consequences this may have on Netflix. Again we don’t know the entire story here, but my guess is that if Netflix is going to die because they now must give Apple a 30% cut of their monthly subscriptions — then, well, Netflix’s business was on the verge to begin with.

Netflix costs $7.99 a month for streaming only and from that we can’t really derive what is profit, but we do know that they will send you a DVD and a return envelope for $9.99 a month plus streaming. Now that isn’t just one DVD a month, but only one DVD at a time. So for $2 more Netflix can afford to ship and house DVDs back and forth — to and from — people’s houses. I can assure you that sending someone one DVD a month and the return envelope (with associated warehouse costs) eats up more than just $2. If anything Netflix wants the Apple subscription model to work because it will mean more profit to them, not less.

Music Subscription Services

The same probably isn’t true for music subscription services, but honestly you are streaming so you need a net connection for it to work. Which is to say that a slick HTML5 app may be better suited for these services — it would be cross platform and incur them no fees from Apple.

Again though, I really think that these services will reach an economy of scale where the 30% take isn’t worth arguing about when you are talking about a subscriber base in the millions. Bottom line: a 30% cut is far less destructive than Apple starting a streaming iTunes store — now isn’t it.

Originally posted for members on: February 17, 2011
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