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Apple puts restrictions on in-app purchases

February 2, 2011

Apple is reportedly prohibiting application developers such as Sony from selling content via iPhone and iPad applications unless the transactions go through Apple’s system.

According to the New York Times, Apple rejected Sony’s iPhone application, which sells ebooks from the Sony Reader Store. App developers are obviously unhappy with Apple’s tightening of control, which makes it tough for them to bring content to as many devices as possible.

“I am not surprised by this move by Apple, since it has a competing product,” said Mark Beccue, senior analyst for consumer mobility at ABI Research, Oyster Bay, NY  “Apple has the right to draw a line and they have done this occasionally.

“Everyone gets upset when Apple says no to something,” he said. “But you have to remember that this is not necessarily sitting poorly with consumers. People who are trying to sell are more upset about it than anyone.

“Sony was pushing the envelope a little and is now upset because it has a distribution challenge.”

This is a competition
Every time Apple rejects an application or makes changes to the way it operates, developers get upset. But some experts believe that Apple has every right to do this from a business standpoint.

After all, this is a competition.

“The App Store is proprietary and Apple has the right to set its own rules for competitive purposes,” Mr. Beccue said.

“This is not the Internet we are talking about,” he said. “If developers want to sell stuff they have full right to create mobile Web sites and sell through them.

“But if they want to be part of the App Store, they have to follow the rules.”

At the end of the day it all boils down to consumers. As long as consumers are going to continue in their love affair with Apple and its products, developers and content creators are going to be rushing to develop for the platform.

Apple has done so much in terms of marketing and has cemented its place in consumers’ hearts and minds, so most likely people will not care whether their payments go through Apple or the developer, per Mr. Beccue.

Risky business
But not everyone in the industry agrees with Mr. Beccue. Chris Cunningham, founder/CEO of appssavvy, New York, does not agree.

“Specifically, from my perspective this is a classic big company with large revenue that has an incredible foothold on consumers’ hearts and minds,” Mr. Cunningham said. “Apple now understands it has some of the most popular handsets so they are putting constrictions on the companies providing content.

“Looking at the walled-garden approach, MySpace did not make it when Facebook did, because it had such an open approach right from the start,” he said. “The key is to get as much distribution as possible and the companies that provide on that avenue will do well.

“The iPhone is the most popular device from a creative standpoint and the large number of apps is one of the biggest factors of its success. It is risky for Apple to constrict developers because it is potentially alienating developers and pushing them to develop on Android where they may get more flexibility.”

Like Mr. Beccue, Mr. Cunningham was not surprised to learn of this news.

“Apple has always been very controlled and very precise on how they control consumer adoption,” Mr. Cunningham said. “This news is very Apple: putting restrictions on content creators.”

Shift in value?
The New York Times article touched on an interesting point. Basically, this sudden shift may mean something about Apple’s understanding of the value of its platform.

Apple focused on making money with devices. This shift in platform strategy could mean it now values its platform more than the device.

But ABI research’s Mr. Beccue disagrees. He said that this restriction on the part of Apple is to protect devices.

The devices are what sell and the App Store is one of the many factors that help sell iPhones.

“I think Apple is very new business,” Mr. Cunningham said. “They have a strong hardware strategy but they have a strong software strategy as well. Their revenues are in the billions and the adoption of their product is really high.

“Apple understands that this is a race right now to get exclusive content channeled through their devices but also at the same time get as much adoption as possible and in this particular case they are walking a fine line as it relates some of the most important individuals,” he said.

The individuals Mr. Cunningham is referring to are developers and content creators.

The mobile landscape is a very competitive one, with Google and Apple in a race to the top.

Google and Apple are going about it in very different manners. Google has a very open approach and Apple is very closed.

“Apple is again still very consistent with how they have always been: very controlled and very methodical,” Mr. Cunningham said. “It all boils down to this.

“Will the power of Apple and its devices trump or win over the developers even though they may not be happy with the restrictions in place?” he said. “That will depend on consumers, obviously.”

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Giselle Tsirulnik is senior editor at Mobile Commerce Daily and Mobile Marketer. Reach her at

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