Opinion: Why the Comixology Debacle Shows That Apple Needs to Change its Consumer-Unfriendly App Store Policies

Are you angry about the new Comixology app, which removes the ability to buy comics from inside the app itself? If so, you should be just as angry at Apple for their policies making such an absurd situation, where an app can offer the ability to consume the content it sells without actually selling it, as much as you are at Comixology/Amazon for inconveniencing you.

The economics for the change are clear: they were giving 30% of every sale to Apple, as per App Store policies. That's the way it's been since the App Store opened - every time money changes hands, Apple takes its 30% cut. When in-app purchases were introduced, Apple kept the rate per transaction the same: 30% on everything. Thus, when Comixology sold a comic for $3.99, they only got ~$2.80 from it, for a book they had to sell for the same price on their site, by Apple policies.

It's likely that this 30% cut hurt Comixology's bottom line - they are beholden to a number of outside forces and right holders for the comics they sell - and the move to Amazon apparently provided them the opportunity to change their selling model.

So, that 30% fee on transactions that Apple takes is problematically high. Certainly, it can be justified for paid apps: Apple provides approval, storage, bandwidth, tax collection, and a variety of services beyond just taking the money, in order to justify taking such a cut of a developer's revenue.

But for in-app purchases, Apple is serving as little more than a payment processor, though they do track whether non-consumable IAP is owned by the user. And 30% is exorbitantly high for payment processing. PayPal merchant fees are 2.9% plus $0.30 per transaction. Amazon charges the same for transactions $10 or above, with a 5% + $0.05 per order for smaller transactions. These aren't counting the bulk volume discounts that these processors provide.

You could go to your local comics shop or to a vendor at a convention, and using a Square credit card reader, they can sell you that comic at a 2.75% per swipe fee. So what right does Apple have to be taking 30% on a similar transaction? I think they should be allowed to take a reasonable premium on top of payment processing for the App Store services they provide, but it's clear that 30% is unreasonable, especially for low-margin fields like the sale of music, movies, and comic books.

And because Apple specifically restricts outside payment systems, there's no recourse for anyone who wants to offer media or subscription services through an app but to not sell said services in the app itself. It's why you can't buy a Netflix, Spotify, or Dropbox subscription from inside their apps at all - because Apple can't take their steep tax.

Why would Apple, a seemingly pro-consumer company in the way that they design their products to be easy to use, do this? Well, they're not actually a pro-consumer company. They're a pro-Apple-consumer company. Everything they do is designed explicitly to get you to stay with Apple products. Ever thought about getting an Android or Windows Phone but decided not to because you didn't want to lose iMessage? Exactly.

Remember that Apple sells music, video, and books of their own (though not comics to the scale that Comixology does); they have a weighted incentive to make it hard for outside sources to provide them on the App Store unless they pay the exorbitant 30% fee. And when people are inconvenienced by app makers because of Apple's policies they get mad at the app maker, not Apple, which has to cause a chill to run up the spine of anyone struggling with a similar decision as Comixology.

The thing is, it doesn't have to be this way. Google has a similar setup with in-app purchases where they take 30% of every transaction, but they provide alternatives. Specifically, they have a policy that enables Comixology to still sell comics through their app through their own payment system: "Developers offering additional content, services or functionality within another category of app downloaded from Google Play must use Google Play's in-app billing service as the method of payment, except: where payment is for digital content or goods that may be consumed outside of the app itself (e.g., buying songs that can be played on other music players)."

Thus, Android Comixology users can still buy comics through the app. Those who relied on Google Play credit to buy books will find themselves out of luck. Of course, Google doesn't have a monopoly over content distribution or an interest on keeping people as tied to Google Play and their own services, but it's still a better way to operate than the monopolistic way that Apple does. The 30% payment processor fee for in-app purchases is still on the exorbitant side, but the nature of it is a lot more fair.

So, what Apple ultimately has is a situation that's meant to give off the illusion of consumer-friendliness by making it only possible to spend money through iTunes accounts, when it really restricts the freedom that people have to get the content they want, where they want it from.

If a solution that's actually friendly to users (and not just to those who buy in to the Apple system) is to happen, it's going to require public pressure. They could enact the exact same policy that Google Play has, for one. This same policy is the one that allows Starbucks to allow for store credit refills through direct credit card or PayPal payments. It just needs to be expanded to cross-platform media so that users don't get left out in the cold, or compelled to buy from Apple's stores. Give them actual choice.

Or Apple needs to make their tax on in-app purchases - these purely digital transactions - a smaller fee, in order for it to be viable for sellers in high-margin transactions involving media. Somewhere from 5 to 10% may be more reasonable than the current 30%. Whatever the solution I believe change needs to happen, because right now, the ultimate loser from Apple policies are ordinary people who have had convenience taken away from them because of corporate politics.