ComiXology, Apple, And Control Of The Customer Experience

Unless you've been under a rock for the past few weeks, you know what has happened with ComiXology, iOS, and Amazon. If you haven't, you can read this article to get caught up. TidBits also has a nice write up. I've been sitting and pondering this situation for weeks now and have gone back and forth on my feelings. Let's set the stage for the process/problems.

  1. Apps can use Apple's IAP mechanism and sell digital goods inside of an app. Users can use their iTunes login to process this payment. Apple keeps 30% of the purchase price.
  2. Amazon does not use IAP for its Audible app (ironcically, iTunes gets it's audiobook content from Audible), Kindle app or Amazon Video app.
  3. To purchase Amazon digital goods, users must vist the website and purchase them. Once you go back to said app, you can download the content you previously purchased.

Why doesn't Amazon want to use IAP? I think it's multiple reasons.

  1. Their digital products likely don't have a 30% margin to give away. Amazon runs its entire operations on razor thin margins. Amazon, for the most part, is a middle man in the content distrubution. Apple is in the same boat.
  2. They want credit cards on file. According to Horace Dediu, Apple has a lot more credit cards on file than Amazon. Amazon wants your default behavior to be to visit Amazon.com. If you have to visit Amazon to buy Amazon digital goods, you are more likely to buy other things. The more invested you are in Amazon's ecosystem, the more likely you are to buy their hardware. The more hardware you buy, the more likely you are to keep buying other things. The cycle continues. On a side note, ComiXology comics are still purchased through the ComiXology website. I imagine this will remain the same, but at some point you probably will merge your ComiXology account with your Amazon one. This is how it happened with Audible. Audible still has its own website and catalog, but you login and purchase items through your Amazon account.

An idea has been tossed around that should Apple make deals with certain companies for reduced IAP percentages. I think I agree with it. I think it should be based on volume, though. You might be thinking, "that isn't fair to the little guy!" In all forms of business, there are volume discounts. At my school, I pay less per iPad than you do when I buy them in bulk. When I buy iOS apps in bulk, I get a 50% discount (if the developer opts into the education discount). Apple pays less for iPhone screens than you could buy them. Volume discounts are just a reality of doing business.

Others have said that Apple should allow Amazon to sell its books directly through their app and bypass the IAP system. I do not agree with that. I think that is a slipperly slope. It would certainly be fine for Amazon and other major companies, but it would be a disaster for developers who are a bit more "scammy". Imagine if the Candy Crush folks weren't required to follow Apple's policies for prompting for passcodes when purchasing digital goods?

Let's imagine Apple did decide to work with Amazon and offer IAP at the cost of processing a credit card transaction. Would Amazon use IAP? Probably not. Amazon no longer sees itself as a retailer. It sees itself as a platform. Platform owners wants to control the entire experience. This doesn't come down to IAP percentages, but rather control of the customer experience.