Apple Reportedly Planning to Reduce Vig to 15% – Will It Impact eBooks?

4900266300_a1fe3e9394_oFor the past four and a half years Apple has been strangling its ebook competitors by requiring a 30% cut of any sales made in, or through, an app on the iPad or iPhone.

That's the same vig Apple has asked of all games, media services, and app developers for the past seven years, but The Financial Times has given us reason to hope that it will change. They reported on Friday that:

Apple is planning a departure from the pricing formula that has defined the economics of digital media for a decade, which would cut the 30 per cent fee music, video and news companies pay on subscriptions through its App Store.

The iPhone maker is discussing new commercial terms with media companies, people familiar with the matter said, to change the 70/30 “Apple tax” pioneered by Steve Jobs when its late founder launched the iTunes music store in 2003.

Changing the App Store’s terms of trade could improve the economics of online content businesses and reassure regulators that the company is not abusing its position as gatekeeper to one of the world’s most lucrative digital marketplaces.

As with any unnamed source, you should take the report with a grain of salt.

Update: And with good reason; The FT has already revised the story. They now say that the rumor concerns media companies with service on Apple devices, not services offered through iTunes.

That aside, do you think this will have much of an impact on the ebook market?

I doubt it will have much of an impact on the trade retail market; agency pricing precludes that possibility. But this could have a positive impact on the subscription ebook market (it might also help smaller ebook sellers - publishers, for example).

Both Scribd and Oyster offer a paid ebook subscription service, and one sells the subscription inside its app. Oyster pays Apple 30% of any subscription fee earned via the app, and I would bet they'd love the chance to cut that in half. It would represent a small but measurable boost in income.

Assuming, of course, that the rumor comes to pass. Oh, I don't doubt that the rumor is true (at least in part), but that doesn't mean that Apple will actually reduce the vig. There are any number of reasons this might fall through, so I wouldn't count your gagh until it slithers off the plate.

images by Public Domain PhotosJinx!

About Nate Hoffelder (11598 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader:"I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

2 Comments on Apple Reportedly Planning to Reduce Vig to 15% – Will It Impact eBooks?

  1. In order for this to make sense for Apple, it would have to at least double sales. And would be an admission that price is important.

    However, what will happen in reality is that the prices will remain the same, and the vendors will just pocket the extra 15%.

    • You know, I was going to argue the point but as I got to thinking about it …

      The only reason I took this rumor seriously was that it came from The FT, a publication which has a decent reputation for avoiding gossip. The rumor doesn’t actually make much sense. Why would Apple care? It’s not like content sales are a huge revenue generator. Apple makes money from hardware sales, and they sell so many devices that media companies have to be on Apple hardware.

      Just about the only way this could make sense is if Apple were anticipating companies like Netflix, companies that have an iOS app but no payment option in the app, adding an Apple payment option. That might happen, but even so it doesn’t seem likely.

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