“So Sony, but that’s not allowed” said Apple

Machiavelli ponders his next move...
Apple - sorry, Machiavelli - ponders the next move... (Image credit to Crashworks)

Today, Apple confirmed that it had blocked a Sony eReader app from being released onto the App store. Nothing much that’s newsworthy there; if it wasn’t for one thing. The reason it was blocked was not that it was a poorly written or low quality app – although one more eBook reader isn’t exactly anything to get excited about – but that it allowed for direct purchases from the Sony store in app. Again, nothing new here, you can purchase ebooks from Amazon’s Kindle app too. But, there is a distinction.

In Amazon’s Kindle app you are thrown out of the app into the browser to make your purchase, whereas in the Sony app, as far as anyone knows, the experience is completely enclosed within the app itself.

Why’s that important?

The reason behind this is, unsurprisingly, money.

The in-app purchase model is extremely important for future revenue growth. Initially, revenues were fueled by the intense activity around the store generated from hardware purchases, as new iPhone and iPod owners bought and installed apps. Figures show that, on average, each iOS device contains 60 apps. At first these apps would have been paid apps, but as with all software, it wasn’t long before someone else came along offering a similar app at a lower price, pushing down prices until they eventually reached zero. Now, for every paid app there are many free variants of varying quality. So, even though there is natural growth within the marketplace, caused by the growing user-base of devices, the revenue generated per device is falling.

Step forward in-app purchases.

In-app purchases are the logical next step. If the means for app distribution has become stale, but the app itself remains vigorous, then you start to charge users for content – or in this case, additional content. This model has already been well-explored in the games industry, through the medium of DLC (DownLoadable Content) and in-game purchases. Platforms like Steam, created by Valve, have proved the worth of this model.  Zynga’s Cityville, one of the most popular games on Facebook, also uses this idea, allowing users to buy additional credits to use in game to build their city.

The company that controls the process of in-app purchases stands to make a lot of money, hence today’s decision. Apple wants to make sure that all purchases go through the app store so that it can make a percentage from every sale. It’s as simple and as Machiavellian as that. Direct purchases from other sites, ones out of its sphere of influence, are directly competitive. The only reason it hasn’t stopped the Kindle app is simply that it would be accused, not wrongly, of making decision on our behalf about which sites we visit. And at this point I think this would be a draconian step too far.

Apple isn’t only company looking at this. Facebook announced last week that Facebook Credits were going to become mandatory for apps on its platform, with an exchange rate being set for virtual currency transactions. This is exactly the same move being played out.

I may be wrong, as always I am open to your thoughts and criticisms, but after all, this is money we’re talking about.