Apple's new subscription service: the good, the bad, and the ugly

Apple's new subscription service: the good, the bad, and the ugly

Apple, the most audaciously disruptive company in the history of technology, has once again raised the ire of old industry incumbents, the hopes of independent players, the fears of passions of developers and consumers, and the post counts of bloggers by announcing their new in-app subscription service for iPhone and iPad. And make no mistake, their press release yesterday was as strategic as any Open Letter ever penned and posted by Steve Jobs.

But is it a greedy money grab, a noble defense of consumer privacy, an arrogant power play, a savvy business move, or a bold if risky gamble by Apple to once again, for the umpteenth time, redefine how an industry works? All of the above?

Let's take a look at the good, the bad, and the ugly of Apple's new App Store subscription service and the policies that surround it... after the break.

The good: Huge consumer win

The first, best thing about Apple's new subscription service is that it will be drop dead simple for consumers. Pretty much every iPhone, iPod touch, and iPad user on the planet knows how to use the App Store and most know how to use in-app purchases. Being able to buy a subscription to a newspaper or magazine as easily as you buy smurfberries is a huge plus. If you don't understand how truly revolutionary that is, go try to subscribe to a real world magazine today. I dare you. There's paperwork, billing info, delivery info, offer after up-sell offer -- and that's not even counting the pain of trying to fix things later when you get over-charged or your copy of People keeps arriving at the dry cleaners down the street. If you think I'm exaggerating or trying to be funny I'm not. It's a terrible user experience.

Second, media companies don't really sell newspapers or magazines, they sell you (more specifically your eyeballs). Think Google invented selling ads for you to look at, and then selling the data about you looking at those ads back to the advertisers? Think again. Those billions of dollars of business existed in the paper world for decades before Google took it high tech. This was one of the largest areas of contention between Apple (who sells products) and media companies (who sell us) -- they wanted our demographic data and Apple didn't want to give it to them. Yes, evil Apple. Say what you want about them but Apple's business is straightforward -- you give them tons of money and they give you pretty things to use. Media is different -- you give them tons of money, they give you something pretty (or ugly, depends), chock full of adds, and then sell all your information back to the advertisers and marketers. Most of us don't realize it so it hasn't been a big deal. Apple does realize it and wants media companies to ask us before they take our data. This displeases the media companies. As Kontra points out, that should make us very, very happy.

Third, Apple is once again disintermediating an industry and that ultimately offers consumers more choice. Just like iTunes has helped get around old world record labels and their indentured service contracts, iPhone helped get carriers to stop mutilating our smartphone experience, and the App Store helped smart indie developers make millions, in-app subscriptions will let small and medium size publishers produce periodicals in a way only giant megacorps can today. It gives them access to 150 million potential devices, the massive iTunes credit card pool, the App Store's simple payment processing system, and all the hosting, transaction, and marketing Apple provides. That's right, they get a shot at being promoted on the App Store and everything that goes with it -- just ask a developer like Glass House Apps what being featured by iTunes means to their business. All included in a simple 30% fee. So just like consumers now get tons of media (like podcasts) and apps that might not have been possible outside Apple's distribution system and platform, we may now get publications as well.

That's a lot of win.

The bad: Huge big media loss

Steve Jobs:

“Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing,” said Steve Jobs, Apple’s CEO. “All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app. We believe that this innovative subscription service will provide publishers with a brand new opportunity to expand digital access to their content onto the iPad, iPod touch and iPhone, delighting both new and existing subscribers.”

So if you already subscribe to a newspaper, and you download their app, they get to keep all your money. If you download the app first, then subscribe, they have to give 30% to Apple. And they can't make the in-app version 30% more expensive than an out-of-app version, nor can they provide a link for you to go outside the app to subscribe on the web and cut Apple out of their 30%. In other words: if your customer comes in via iOS, Apple is going to get PAID.

Our local movie chain sells soft drinks for $5 (yeah, ouch) and the Burger King inside the movie theater also sells soft drinks for $5. Down the street, outside the movie theater, Burger King sells them for much less. Imagine they weren't allowed to? Sure the movie theater delivers an expanded, captive client base but it's a bitter, begrudging, why-$5-for-a-coke client base. John Gruber equates it to Disneyland, where if you want to do business inside the Magic Kingdom, Mickey gets his cut.

As mentioned above, for the App Store that 30% cut gets you hosting, bandwidth, credit card transaction processing, delivery, reporting, and several incredibly valuable assets -- the App Store's ease of use, it's consumer confidence, and its huge visibility.

But that doesn't mean as much to big media as it does to smaller companies. Big media is used to distributing its own content, handling its own transactions, doing its own marketing, and most importantly -- enjoying and monetizing its own direct relationship with customers. Their whole business is predicated on that old-world model (even newer media enterprises) and it's not a model that supports giving Apple 30%. (It's also a model that's often needlessly consumer hostile, but that's a choice not a requirement.)

Take Netflix for example. Existing subscribers in the US and Canada are exempt but Netflix plans to expand internationally and given the popularity of iPhone and iPad around the world it's not hard to imagine many of their new customers might come by way of the App Store. Netflix already has to pay huge licensing fees to Hollywood (and may have to pay much, much more soon). Their $8 price tag probably can't handle giving $2.40 to Apple. They can't charge $11 in-app and $8 on the web, so do they raise the price to $11 for everyone or just leave the App Store and iOS? Would Hulu? Would DropBox or any other company that up-sells expanded services and provides access to them via the App Store?

Sure record companies probably didn't like the idea of $0.99 iTunes singles, decried the breaking of the album and the power of Apple, but at least record companies sold something -- music. Not ad-supported music. Not music supported by selling info on who was listening to the ads in the music. They sold the actual music. Newspaper and magazines are a very different business from music and movies or apps. Since subscriber data is opt-in, and my subscribers -- finally given the choice -- will likely decide not to opt in, the price can't be subsidized by aggregating and selling viewing data augmented by subscriber demographics either.

That's a tough, bitter pill for large, existing media companies to swallow.

The Ugly: What happens next

When cross-compilers were banned from the App Store, Adobe -- every bit the proprietary, controlling, developer-locking scoundrel Apple was -- went running to the government in hopes the threat of anti-trust action would cause Apple to back down. And Apple backed down (though one look at Epic Unreal 3 may have done more than Adobe's whining). No doubt media companies may employ the same strategy when it comes to fighting the twin provisions of "having to offer the same content via in-app purchase" and "having to offer the same or better pricing in-app". Since Apple is a high-profile, headline grabbing target, the US and EU might choose to "investigate" and Apple might well back down again.

None of that will intentionally be for the benefit of the consumer. (We may benefit from the results but don't assume the media companies or government prosectors care one bit about us in that process.) Say what you want about Apple but they sell user experience, media companies and governments don't. At the risk of repeating myself far too often -- in the battle between King Kong and Godzilla we're not the popcorn munching audience enjoying the show, we're the citizens of Tokyo trying not to get crushed beneath giant ape and lizard feet.

Theories are also being batted around that media companies like Amazon could simply sell read-only versions of their apps but that likely violates App Store policy just the same. The only other viable option is web apps, accessible from iPhone, iPad, and Android, webOS, Windows Phone, and BlackBerry alike. So far web apps haven't provided the speed, convenience, and overall user experience that native apps can but with huge media companies, especially web-savvy ones, behind them, Seth Weintraub believes they could become a viable alternative.

Worst case we see Netflix, Amazon, Hulu, and other massive and massively popular properties leave iOS as a platform. Perhaps they offer a web app instead, perhaps not.

Best case Apple offers tiered service -- simple transactional processing for existing media giants at a much lower cut, full on agency for small and independent publishers who need the services the App Store provides. Big media will still have to change and evolve their business models, learn to sell products rather than selling their customers, but just like the App Store it could lead to phenomenal, platform defining success for those that best and most strategically embrace it.

Likely case we see a lot of grumbling in the media, so headlines about government oversight, a lot of finger pointing, an announcement from Google for publishers (that's not opt-in), and a bunch more editorials like this (though hopefully much shorter and better written). Then we'll really find out what works and what doesn't with Apple's new in-app subscriptions, and both Apple and publishers will adapt and improve the system the same way the App Store and developers have been improving it for the last 2.5 years.

They're unified in wanting our money, after all.

Rene Ritchie

Editor-in-Chief of iMore, co-host of Iterate, Debug, Review, Vector, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Apple's new subscription service: the good, the bad, and the ugly

49 Comments

I think it's pretty clear that the definition of a subscription service will change. This policy as it's currently written doesn't take into account some existing subscription models that won't fit into the policy (like Netflix and Rhapsody). These are services that are wholly independent of the iPhone experience, it just so happens that they have apps that interface with THEIR service. Apple has nothing to do with it. I think they will relent and allow companies that offer totally different services to keep doing what they are.
Where it will change is in print and other media that is actually consumed from within the app. For example- The Daily. It is produced for the iPad and presumably issues will eventually be pushed to the app FROM Apple's servers. In this case I think Apple has a reason to force devs to comply with their subscription policy. I don't think Apple has this totally figured out yet though and I imagine they will delay the enforcement of this policy until then.

@DHHhttps://twitter.com/dhh/status/37933958566129664
That says it straight out. I can only hope the industry sticks it to Apple on this one. To answer your question, they are being greedy. They, IMO, looked at it and said "Hey...we could require a piece of this!"
Oh and @gruber's comment, while understandable, isn't legit. If Amazon was in Disney World, they'd get a piece of Amazon's store sells but NOT their online sales. In-app purchases...ok but Apple is taking a percent of the business not even a part of their "Disney World".
They ushered in the app bubble and will effectively usher us out and into the HTML 5 app bubble. ;) #mehopes

Can these companies put a message in their apps that say subscription required to use this app and not have the message be an active link but just say please see our website to sign up?
Does this mean Comcast is going to be required to add buying your cable servcie in their app and Apple is going to take a 30% cut of the monthly cable bills? That just sounds absurd.

The difference there is Google likely won't require them to charge the same amount "in-app" as out, won't actually REQUIRE them to use their "One Pass" service for subscriptions, and will likely share marketing information and analysis with the companies rather than hiding it only for themselves.

No they can't just put a message "subscribe outside the app" since part of Apple's requirements are that if the app operates with a subscription service it needs to be able to be purchases within the app.

Interesting, I've been looking for more details on Google's service. The next few months might be fun after all.

My biggest fear is losing the Kindle app. Frankly, the choices from iBooks, to the extent that it has the same publishing scope (doubtful), are always more expensive. Also, while I understand the distinction between in-app and out-of-app purchases, how can "subscription" billing reasonably subsume transactional out-of-app purchases? Seriously, I have to wonder if this is just the tip of the iceberg. What next, Kindle, Sony & Kobo aren't allowed to undercut Apple's prices???
Also, how does this apply to book purchases? I have had the Kindle app for a while and have bought close to 20 books. Based on the way this is presented, my "history of subscriptions" (i.e., coming from Amazon as opposed to discovering it via iOS) is irrelevant. My next book purchase will, at least come July, be treated as a new "subscription".
I love Apple products, but I really think this has the potential to go sideways.

How can it be a "huge consumer win" if companies providing content will be forced either to:
1) Eat the App Store charge themselves, by charging the same in the App Store as they currently charge outside the App Store, causing them to hemorrhage money on every sale in the App Store (unless you honestly believe all retailers from Amazon to Zygna have > 30% margins)
2) Pass the cost increase onto consumers by raising their prices both inside and outside the App Store to keep them in relative partly, which would raise prices above what they would ordinarily have charged, not to mention introduce an "Apple Tax" on consumers who do not even use Apple products.
3) Stop producing native iOS content apps.
Remember, charging higher in the App Store is expressly forbidden, so those are the only three options a producer has. Forget the long term, even in the medium term any outfit that does business outside the App Store has to raise prices or stop doing business on iOS. Period. How is that even the flimsiest of wins for the consumer?

I don't think this s ugly for publishers. Their existing model is dying on the vine and at a rapid clip. I know very few young people willing to buy a print subscription to anything these days. Blogs offer a lot of the same content for free. Some won't buy a paper because of the ink residue.
This opens up a huge potential user base for publishers and content authors to read their product. It's great that more people will be able to read quality journalism rather than pure blog posts which contain bias toward the actual news. And if it's on iTunes, people don't mind clicking vs. having to input a credit card to buy a new subscription to something you do not want delviered anyway.
I think this is a win-win. As for Apple taking 30%, I think that is generous considering the tens of millions of dollars Apple has invested in building out this platform that happens to be perfect for this type of application. Publishers should take the 70% and run. Because right now it's 0%.

Exactly andy this would be ok for new publishers that want to join the iOS platform but for existing publishers is not so good. But again this would only be a good thing for publishers not for other media like hulu, Netflix, rhapsody and so on which already have their own way of selling their products to consumers and have to pay apple to use just because they created an app that works with iOS not only that but you do have to pay developer fees to submit apps to apple. So now after paying those fees they have to pay them more for people to use the app to buy subscriptions. If anything I think apple should charge developers a cut for the amount of apps they sell in the app store because ultimately I want to be in control of my products. If I already paid apple to have my app in their store why keep paying them when customers buy it. That's like making a deal with Walmart and Walmart says you have to pay us to a registration fee to for us to carry your product and when the product sells we will keep a portion of those sales and if the consumer buys another product using the product they just bought from us here we want 30% of that sale too. Outrageous

"As mentioned above, for the App Store that 30% cut gets you hosting, bandwidth, credit card transaction processing, delivery, reporting, and several incredibly valuable assets — the App Store’s ease of use, it’s consumer confidence, and its huge visibility."
Great. It's a service. Charge that for those who need it. For those who don't (Amazon, Netflix, Hulu, AT&T, Comcast, most publishers etc) it not only is not needed, it is actively more work and more expense for them, as they would have to duplicate key portions of their distribution chain. They pay more and get less for a service they do not want, yet Apple forces them to use the service if they do not want their apps banned or removed..
That sounds suspiciously like racketeering to me.

Yes, because one cannot just by a customer of Apple, or like their products.
One must love them unconditionally, and embrace all they do.
Pathetic.

The "good" is a stretch at best.
In this day and age subscribing to a print magazine is no more difficult than ordering anything else online.
You believe Apple is some how different than Google or the print media outlets? Maybe you could have made that argument if they hadn't started their "iAd" service. The only difference is that now Apple is trying to strangle the competition rather than compete on "merit".

Apple's policy needs to be reworked and refined to dispel consumer/developer/provider angst. This model is brilliant for magazines and newspaper content.
Like Joe A said, "I love Apple products, but I really think this has the potential to go sideways".

Let's not forget, how apples saving them the cost of print and physical distribution

LMBO! You clearly don't understand what's happening here.
If Company X has any subscription service [phsyical media or not], Apple wants 30% for doing nothing but providing another way for customers to pay to companies who already have a way for customers to pay.
:-/ Lose lose situation for all but Apple.

I'd also like to know what this means for my Kindle and Google Ebooks on my iPod Touch and my Skype subscription.
Congratulations, Apple. It seems that in one afternoonyou've just made Google's and HP's work easier in making Android and even WebOS more attractive to publishers and content developers. The cost for this type of "promotion" probably would have normally been in the tens of millions, at least. I'm now taking a wait-and-see stance before I get an iPad.

I feel it's worth point out here that this is the type of action that seems to scream out - "Watch out for me. I am not a trustworthy person/company/corporate entity. I am watching out for my own best interest, and that may not include your best interest." I have been a loyal Apple customer for some years now... I may or may not be, depending on Apple's moves in the coming days.

i think apple is hitting their downfall with their new guidelines. im strongly considering moving onto another tablet. one which doesn't 'restrict' it's users.

Whether its good or bad will be determined by the market. If the big names pull their apps, we'll buy something else. I doubt apple wants that.

I hope that Apple backs off on this like they did for third party tools. There is nothing good about this policy if they enforce it as written.
I hope it isn't just a land grab to prop up their iBooks store. The margin for amazon on books is 30%. This was a change forced on Amazon when the publishers went to the agency model about a year ago (for 5 out of the 6 biggest).
There is no way that Amazon could afford to pay 30% to Apple, and there is no way they should. A kindle or nook ebook is inherently superior to a book bought with iBooks, they can be read on more than one platform.
A big reason that people buy the I products is because of the content. It looks like Apple is trying to create a vertical system where everyone is locked in. If they succeed then it will be time to jailbreak or leave.

Yeah, this one smells. I'm not buying Apple's martyrdom here of simply providing a no-hassle unifying subscription model at a "reasonable" cost.
Apple knows that they are going to push a lot of the well-established content providers (e.g. Netflix, HULU, Rhapsody, etc) to the brink of leaving iOS or setting up shop off the grid in HTML5 web appville.
Could it be because they want to own the subscription media platform via their propsed cloud-based streaming service?
Fine Mr. Hulu/Netflix/Rhapsody/Kindle, go ahead and remove your product from 150 mm potential users. We will simply offer them our streaming Apple service instead and oh by the way, we will give them online access and Apple TV access so they won't really need you at all. Don't let the door hit you in your iOS.

Riiiighht..
Android + Windows + Meego + RIM + WebOS + any other platform vs. IOS. Which is going have the bigger marketshare overall? It isn't going be Apple. Android as it is is rapidly catching up to Apple, the lack of a unified DRM solution hurts it currently. But Google would be dumb not to take this opportunity to take an advantage away from Apple. Same for any other company. Imagine being able to say, buy content from Amazon or get a subscription from Netflix and use it on any device from tablet, to smartphone, to PC, hell even car. Compared to Apple where you would now be limited to iTunes and Apple hardware.
Frankly I hope every major content provider and middleman affected by this change leaves IOS to force Apple to reconsider their policy on having the same price in-app and outside of the app. If people want to pay more money for the convience of buying something in the app, sure give Apple a cut. But if they buy it outside of the app, then Apple shouldn't be getting a 30% cut.

Yea, if this was just Apple "providing a no-hassle unifying subscription model at a “reasonable” cost" then I think that costumers that USE the "no-hassle" approach should have to pay extra for it rather than making ALL customers pay extra for those costumers that want this "no-hassle" option. Instead of raising prices on all subscribers to offset Apple's charges, raise prices for in-app purchased subscriptions so the cost for those of us that know how to enter basic information on a content provider's web site can continue paying less.
Oh but Apple doesn't want content providers to have that option...

Rene, great article. I read a bunch of the coverage yesterday and feel that the part people are missing is key.
This can and will be a potential game changer for publication/subscription sales. It cuts out so much of what is wrong with the business. If you get rid of the crazy sales and marketing of subscriber's personal info, you are left with a model where publishers will have to actually rely on consumers purchasing content. If that is the way it works, the content better be good.
Frankly, if a company has a huge bloated business model that isn't based on the purchase of great content, I have no problem seeing them squirm.
The iPad and future products like it, will become the dominant way of consuming this type of media. They can either get onboard and adjust their business model, or they can continue to become more and more irrelevant.
There is certainly a lot of logistics to work out with companies like Netflix and Amazon but I think that great successful companies like this will adjust things and come up with a new model that works well.
Ultimately, the apps that they provide are just portals to view content. Apple is basically saying that they have provided the platform, the way to get the native app onto the device, the development kit to write the app and would like to receive a portion of sales that come thru the App store ecosystem. How they differentiate between actual purchases (like Kindle books) and subscriptions, (like Netflix, Rhapsody or Magazines)will be very important.

I think (hope) the effect on Kindle will be limited. A lot of Kindle stuff is e-books, which are one-off purchases. I don't see how Apple could force Amazon to turn a book shopping service into a subscription service or how this would work - require subscribers to buy a book per month? Or require to buy a subscription for the mere option to buy Kindle books at all? Amazon could simply stop in-app purchases, at least for magazines and newspapers which do require subscriptions, but keep the app as reader for e-books downloaded from their website. If Apple won't allow people to read e-books they bought on Amazon on the iPhone then the next step could be to no longer allow people to sync mp3s downloaded from Amazon (or ripped from CDs) to their iPods. After all, they could have bought them from iTunes instead. I doubt they would go that far.

The way the news releases and developer agreements are currently worded all developers who provide outside content would be obligated to make it available as an in-app purchase where Apple gets 30%.
For subscriptions to magazines etc this isn't too bad. For stuff like Netflix, Dropbox, rhapsody, it would probably be cost prohibitive. We actually know what the margins on most ebooks are, 30%. So for Amazon etc, it wouldn't be possible.
The question is how Apple will enforce it on the big players.

Where did they come up with the 30%? That is a lot. That is only going to make the big companies mad. Rhasopy is already talking about pullin out. Google One Pass is saying " come to us". This is going to bite Apple in the end. Charge a fair price.

I disagree with their decision, but I don't blame them for it. What I do get angry about is this idea that they are helping customers against all the evil ad agencies. Apple is now an ad agency. With iads(something you need to opt out of, not opt into like with their subscription model) they gain all of your user data. It might be protecting your data from OTHER ad agencies, but you user data is still being collected by a company who makes ads.

I don't understand why they even need 30%. Why not take 10% and just propel the App Store experience above those of the rival companies. They have plenty of money to spare on something like this

Rene, more research please! It's business as usual.
Why 30%? It is the same revenue share model that Apple's main "media tablet" competitor charges publishers on its platform. That competitor is Amazon Kindle. Amazon charges Kindle Periodicals publishers 30% of revenue, and the publishers don't even get to set the price. It's even worse if the content is pushed to the Kindle over whispernet, where the revenue going to the publisher = (price - delivery costs) x 0.70. For stuff going over whispernet, it is even more squeezed as Amazon charges $0.10 to $0.15 per MB for the USA and UK and $99 per MB for the ROTW.
This is all after Amazon changed the model to give more money to publishers with the 70/30 split. It was worse before. Where was the hue and cry when that happened? Nada.
Maybe Google's deal will get Apple and Amazon to provide a better cut. Who knows, but it's business as usual.
But, what the heck? A lot of you guys are essentially defending publishers, and want them to get a more money. Where was the uprising for music publishers when Apple demanded essentially 30% of a music single download? What right does Apple have to 30% of that? What about apps? Why is it a constant 30%? It costs Apple the same to support a $0.99 app as it would a $999 app. What are people's rationalizations for that?
Lots of crazy talk about what's fair or not without any context here.

Evil is not a zero sum game; just because Apple is wrong does not mean Amazon is right, and vice-versa. However, here are two clear differences that make Apple's actions here worse:
1) Amazon charges only those who use the infrastructure. The whispersync-subsidizing bandwidth charges may be high, but at least they are levied against usage of the system. Apple's model charges a cut whether or not you use any Apple infrastructure for delivery, even if you dint want to use Apple's infrastructure at all.
2) Amazon's policies and fees apply to Amazon suppliers and customers only. Apple is forcing its terms and price increase on non-Apple customers. Apple is deliberately impacting non-Apple customers. Gruber likes to make the Disneyland analogy, where the Mouse is entitled to take a cut off the overpriced Coca-Cola because they run the park. That's might be ok, except here the Mouse is also telling Coke what they can charge over at Magic Mountain. That might be legal, but it most definitely more than just greed, more than just hardball business - it is just plain wrong.

1) Amazon takes 30% cut of revenue. Look at the T&C. The equation is simple:
publisher revenue = (price - delivery cost) x 0.70
If the periodical syncs over whispersync, the delivery cost is about 0.15$ per MB in the USA and the UK and 0.99$ in the ROTW. This means the publishers revenue is even less and are paying for part of the "free" wireless bandwidth on Kindles. This is the delivery cost. After that, Amazon takes its 30% cut for having a periodical on the Kindle. How is that different from Apple? If publishers want to use whispersync, that revenue split is more like 60/40 or 50/50 depending on how much they want to transfer. If they only go over WiFi there is no "delivery cost", and the split is 70/30.
2) Apple wants to make sure that iOS subscription prices aren't undercut. If publishers don't like the deal, they don't get to play in Apple's backyard. This is a pretty bog standard business tactic for the big boy stores. Publishers are familar with it. Amazon in particular is familar with that class of business tactic. Apple is being nice compared to Amazon here.
Really, if you want a some kind of happiness between publishers, content providers and distributers/stores, the solution us simple. Pay more for stuff. But then, that is diametrically opposed to what we as consumers want.
Google want be all sunshine and roses either with their 90/10 split. TANSTAAFL. Something else will be part of such a deal.

I'm not really concerned about periodicals. The concern I have is that based on Apple's statements the 30% cut would apply to Amazon's ebooks as well. Amazon can't change the price of a lot of high selling ebooks, they are agents, this would leave Amazon with nothing. One of the reasons I purchased an iPad is because it's a general purpose device that reads kindle books. Nook books , etc. This would invalidate my reason to have an iPad and an iPhone.
I really don't care about periodicals but do care about ebooks.

If you want to claim that these sorts of practices -- Party A dictating what Party B can do with Parties C, D, and E is standard practice among "big boy" companies, you might want to provide a citation or two. It's fun 'n easy. Here, I'll start:
http://bit.ly/fzeMNB In 1997, the FTC ruled against Toys R Us (note, not a monopoly, just a store with a large position) for attempting to use its position to force its supplies to sell more expensively to warehouse stores, under the threat of losing storefront access to Toys R Us.

Amazon's policy for resellers for Marketplace resellers in the UK:
http://www.amazon.co.uk/gp/help/customer/display.html?ie=UTF8&nodeId=200...
Price Parity
Price is an important factor customers consider when making buying decisions, and customers trust that they'll find consistently low prices and other favourable terms on Amazon.co.uk. Of course sellers are free to determine the prices at which they sell products on their various sales channels. However, in order to offer customers the best possible experience on Amazon.co.uk, since 1st May, we are asking sellers who choose to sell their products on Amazon.co.uk not to charge customers higher prices on Amazon than they charge customers elsewhere. Accordingly, sellers selling under the Amazon.co.uk marketplace Participation Agreement need to comply with price parity requirements as set forth below.

Um, no.
Googling around suggests the average Kindle book size is 800KB. For the sake of argument, let's assume a standard $7.99 paperback. That would be, according to your numbers, a delivery charge of 12 cents per book -- a whopping 1.5% of the cost of the book. For a $19.99 new release, the delivery charge would be 6 tenths of 1 percent. And somehow you assert that changes the revenue split from 70/30 to 40/60? Dude, if you are going to pull numbers out of your ass, at lease try to make some sense.

Sure, if you price right and the size of the content is small, you wont be squeezed. But consider what happens with this policy for periodicals who may want to sell a new issues at $0.99 an issue? If they want have some kind of picture content, it can drive their issue sizes to 1 MB or more. What about display advertising, the real way magazines make money?
Here's an article:
http://www.pcpro.co.uk/blogs/2011/02/15/the-true-cost-of-publishing-on-t...
Ever wondered why newspapers and magazines published on the Amazon Kindle rarely contain photos?
...

Not a fan of this move. But let's remember that the 30% outside-app purchase tax would only apply where the purchased product is then available to an iOS app. So Apple aren't actually taxing all Kindle users unless Amazon can't adapt...
The logical result of this: Kindle would not be able to support sharing books cross-platform as it currently does (or least, iOS would not be part of that sharing/syncing). = Killing one of the biggest advantages Kindle has over iBooks. Pefect for Apple - really not good for the rest of us.

If they enforce this on Amazon, then it would serve to boost iBooks. They may figure that driving sales to iBooks vs amazon is with losing one of the maIn advantages the iPad hardware has. I personally will be more likely to leave the Apple ecosystem if they start to drive away the content I consume (which is primarily ebooks).

I don't know that a 30% cut is unreasonable. How much do print subscription aggregators get of the subscription price? There are some third parties that sell subscriptions for more than 25% off of what the publisher would charge, and of course the 3rd party will get his cut of the smaller price. The policy that's disturbing is the attempt to control what the publisher can charge outside of the app store, and it smacks of monopolistic behavior. If there was an alternative store that was viable, there would be no way they could pull this off.

Bring on Android and BlackBerry! This is another example of Jobs' arrogance. I was already holding out for BlackBerry Playbook because of Apple's refusal to run flash. Now I have yet another reason... Jobs is messing with my Netflix and my New York Times. Jobs is not doing this because of an altruistic concern for consumers, he's doing it because it's a revenue stream for Apple. The only winner in this plan is Apple, not me and not you.

I'm a longtime Mac user and basically depend on Apple's hardware for my livelihood, but the new iPad subscription model smacks of greed. It's clear that the 1984 commercial represents an Apple spirit that perished long ago. I hope magazine publishers in large numbers find other, more reasonable avenues for distributing their content and resist the urge to submit to Apple's perceived chokehold on digital publishing. Digital magazines are a questionable venture at this point anyway, and I think Apple's terms will only serve to dampen the fledgling medium's overall momentum.