In economics, rent-seeking occurs when an individual, organization or firm seeks to earn income by capturing economic rent through manipulation or exploitation of the economic or political environment, rather than by earning profits through economic transactions and the production of added wealth.
Rent-seeking, from Wikipedia

Most of my tweets today have been about in-app purchase, first with the news of Sony’s Reader app being rejected on the basis of its purchase model, and then Apple’s clarification / de facto policy change stating that apps that offer user-purchasable content must offer Apple in-app purchase in addition to whatever other purchase methods might be available.

Matt Ingram at GigaOM nearly nails the issue in a section header:

The Landlord Will Get His Share

What Apple seeks to collect is rent, specifically monopoly rent, the ability to extract excess payments not as a consequence of a mutually-beneficial trade, but because it owns the damn store and it sets the damn rules.

I have long argued that in-app purchase can be a pretty raw deal for developers. Slide 50 from my Voices That Matter (Seattle 2010) talk, In-App Purchase: Best/Worst Thing Ever puts this in perspective:


App Store In-App Purchase
Product Hosting
Audit Trail
Purchase UI
Purchase Restoration (sometimes)
Local Purchase Storage
Apple’s Cut 30% 30%

To clarify what I mean by each of these:

  • Product Hosting: Apps are hosted on Apple’s servers. In-App Purchases go on your server (unless they’re bundled with the app and simply unlocked)
  • Audit Trail: The audit trail for an app purchase is entirely verifiable through Apple. With In-App Purchases, the developer gets a digital receipt that he or she needs to log on their own server, after validating it against an Apple webservice.
  • Purchase UI: For apps, the description, screenshots, user ratings, pricing, and purchase process are all handled by iTunes or the iOS App Store. For I-AP, the developer needs to create a UI for all of this, beyond a simple “are you sure” alert provided by Store Kit once a purchase is initiated.
  • Purchase Restoration: Users can easily re-download their old apps to a new device for free with iTunes or the App Store, once they’ve logged back into their iTunes account. For In-App Purchases, developers are expected to provide restoration of “durable” and “subscription” products, but Store Kit’s -[SKPaymentQueue restoreCompletedTransactions] method only restores the former. There is no programmatic way to discover old subscription purchases on a new device. There’s also no way to get an identifier for the iTunes account, so you don’t even have anything to associate with the subscription purchase on your own server.
  • Local Purchase Storage: iOS is responsible for storing the apps on the device’s file system. The developer is responsible for storing in-app purchases, ideally in a form that will survive crashes, wipes and restores, etc.

If you sell a $10 subscription, you do almost all the work, and yet Apple still feels it is entitled to a $3 cut for doing little more than running a credit-card swipe. Obviously, I don’t think they earn it.

If Apple’s now going to force the issue, it’s truly a sad and ugly moment for them and for all of us. How far does this concept go, after all? Consider websites that have premiere memberships, like ESPN.com or Crunchyroll. Both of them have dedicated iOS apps, since the full functionality of their Flash-heavy sites don’t work in Mobile Safari. Is Apple going to insist that these memberships be made available for purchase by I-AP as well? Or will users not be able to use iOS devices to access the online content they’ve paid for? How is that good for the platform?

It’s enough to make you hope that content providers switch to an ad-supported model and let Google make all the money. That would be just desserts, with a cherry on top.

5 Comments

  • 1. [Time code];&hellip replies at 20th February 2011 um 12:11 pm :

    [...] Talking with a colleague from Cocoaheads Ann Arbor last night, I stumbled across an even bigger objection to Apple’s new “must offer in-app purchase if app content is available elsewhere” rule, beyond those that I covered in In-App Purchase and Rent Seeking. [...]

  • 2. [Time code];&hellip replies at 22nd February 2011 um 5:46 pm :

    [...] more nugget about the I-AP subscription dustup (my previous blogs: 1, 2), particularly for all you conspiracy theorists who love you some nefarious [...]

  • 3. Michael Tsai - Blog - In-&hellip replies at 4th March 2011 um 4:54 pm :

    [...] Chris Adamson on the news that news that “if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase”: What Apple seeks to collect is rent, specifically monopoly rent, the ability to extract excess payments not as a consequence of a mutually-beneficial trade, but because it owns the damn store and it sets the damn rules. [...]

  • 4. [Time code];&hellip replies at 6th March 2011 um 1:10 pm :

    [...] in Josh Benton’s To the Victor Goes the Pricing Power (a title that parallels my own arguments that Apple is rent-seeking). Benton writes: But if someone searches for and downloads The New York Times app — after the [...]

  • 5. [Time code];&hellip replies at 23rd December 2012 um 12:49 am :

    [...] I think Apple taking a 30% of in-app purchases for doing little more than a credit card swipe is an outrage, it’s far more justified when HD bandwidth costs about 20c per viewer/hour. In fact, given [...]

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