Thursday 1 May 2014

Taking a Cut of Digital & Megacorps Saying NO

This is Re: Comixology (now an Amazon company and now only letting people read their comics on iOS, the in-app purchase (IAP) is missing so you have to buy stuff on the web to add it to your library).

To start, let me be clear: digital purchases should be DRM-free to preserve the rights of the user/consumer. Comixology is not a good platform because it does not respect this right of purchase. When I think about both buying and selling content, this platform does not sound like it gets it; it seems like a rental service and I can't see the Netflix style subscription button (which can exist, see Marvel Unlimited - now with an app that isn't totally useless on Android). But companies like Image are really making a hash out of their pledge to do DRM-free (why can I buy Phonogram on Kindle or Comixology but it gets not a mention in the DRM-free Image store?) so comic fans often don't have a choice if they want to support content creators' work digitally and commercially.

You should probably not buy anything from Comixology because DRM is defective by design. Make use of their free selection to enhance the medium's discoverability/sample content (ie read the issue #1s, which should really always be a free digital sample for growing the user base/customers for all comics that have more than six issues already out) and then get bummed out when you find out there is no legal way to purchase the rest of that story digitally and DRM-free. There are signs of change, not only is discoverability coming from handing out the $2 first issues to let people know what it is they might want to buy hundreds of weekly $2 issues of for a story, but we're starting to see DRM-free sales that almost give away the first volume of a story to hook you onto buying volumes #2 onwards (to a conclusion in vol#5 or maybe it keeps going past vol#20?) at $10 each; that's good discoverability and good business. At some point they'll need to realise you have to offer occasional sales and decreasing prices over time on the older volumes and discounts on collections of volumes to generate a long tail and more of the area under the demand curve from a broad audience but it's a start. Outside of the US, 2000AD have been selling this stuff DRM-free for years.

Back to Amazon and Apple: what if we suppress our uneasiness over the Comixology platform or they announced their entire catalogue was to be sold DRM-free and their apps would just be an easy place to browse, buy, and download content you owned on any device?

The why of the change is very simple: if you have a store in your app and sell something then Apple enforces that you give them 30% of the sale. This is Apple ransoming the users based on the fact that they have yet to sell a single iOS device. You lease an iOS device and they restrict who can and cannot sell code that runs on 'your' device, including code that accesses content you already own (like digital comics). This is even for sales that have nothing to do with Apple, aren't done through their payment processing, aren't browsed on their store; if it was done in an app running on iOS then it is IAP so gets the Apple tax. Because the user does not own the device then it is not the user who has control of who they can commission to give them more stuff for it, everything goes through Apple.

Image sourced from this rather relevant article about a different kind of ransom.

Amazon have a payments processing company (called Amazon Payments, you can use them too if you want) and are building their own store inside the apps so it is crazy for them to pay Apple a 30% cut of sales when they can do the processing in-house and the store is something they built into their app, not something that uses the Apple App Store. The Apple App Store is just the conduit for their slim reader and store app, adding value to the people with iOS devices by letting them access and buy more content for them. They also do various self-publishing deals (on things like Kindle) where they take a 30% cut and the creator gets the rest. You obviously can't do such a deal if you run a store which gives Apple a 30% cut, you'd end up getting nothing for providing the store, payment processing, bandwidth for downloads (and user tracking to enable them to redownload in the future), and so on. So you either need to price everything on the iOS version of the platform at 30% above the price elsewhere (or let the content creators eat the loss by giving them per-platform pricing controls) or strip the store from your app and make it a reader app which tells people to use a browser or a different device to buy stuff to expand their collection.

Yes, it sucks for users and UX goes down by removing an easy to use button to buy stuff in the app but this was forced by Apple ransoming their user base, which is enabled by making iOS a closed platform that is defective by design. Painting Amazon as the bad guy is insane. They're an evil company but they also work quite hard to reduce the margins (often at the cost of their employees - definitely evil), to make the experience closer to a direct customer-creator relationship where they take their cut as the enabler and make it the best experience for the consumer with the smallest cut (that's how they get their market dominance).

If MS started to charge Valve 30% for every Steam game sale that came through Steam running on Windows then what do you think would happen? The mere threat of this (with the Windows 8 Store) is why Valve are making SteamOS/pushing Linux. It's insane to praise or excuse Apple and tell store creators to just live with the 70% cut when they have no need for Apple as a middleman, except that Apple are screwing over consumers who they pretend to sell devices to. Just as it will be insane to complain when the creators go totally direct and give you a better deal by cutting out the store entirely and managing their own distribution system if they want and can do it for cheaper than the ~30% cut most digital stores implement.

The final step in Amazon's plan may be to build the best self-service store creator and web platform (on AWS) to run it on. To put themselves out of business as the (fat) middleman and act as the (thin) middleman to enable creators to meet their consumers as directly as possible. That is already the plan at Valve for revolutionising Steam. That is the natural conclusion to middlemen getting more and more lean. That future does not include Apple pretending to sell devices and then slyly taking a 30% cut of everything because the people who pay them aren't really buying anything and can be ransomed to the people building their own stores to sell to the consumers direct.