Could Apple offer iTunes affiliate revenue to carriers as a subsidy for LTE data plans?

Could Apple offer carriers iTunes affiliate revenue to subsidize LTE data plans?

Last week we saw Amazon drop a bit of a bomb on the competition by offering a $50 per year data plan. At 250MB a month, it isn’t a very good data plan, but people will buy it. I wondered how Amazon could have negotiated such a good deal with AT&T. Perhaps they’re cutting them in on revenue from users who shop on Amazon while using a Kindle Fire HD via the LTE data network? It was purely speculation, but it intrigued me enough that I spent a bit more time thinking about this whole topic. And I quickly realized that Apple actually has a pretty well-established iTunes affiliate program.

In case you aren’t familiar with affiliate programs, they allow someone to earn a commission by promoting some other company’s products. For example, website (like iMore and many others) can link to great new music via iTunes, or amazing new apps via the App Store, and receive a percentage of any referred sales, without costing the end user anything extra.

The last time I checked, Apple’s iTunes affiliate program paid a 10% commission on sales. So what if they struck a deal with wireless carriers like AT&T and Verizon, essentially treating the carrier as the affiliate on any sales conducted over the cellular network? The carrier would make additional revenue on all iTunes and App Store sales, and Apple could use this to negotiate lower priced data plans for its customers.

It seems to me that any vendor who can get its customers a lower priced data plan (versus other vendors), has a significant competitive advantage. Amazon has started down this road already, and I think Apple could be next if they want to be.

Can Google, RIM or Microsoft do the same? I don’t think so. At least not with something compelling to sell to the end user. Android users don’t tend to spend much money on apps (as least based on the developer discussions I’ve had). Google doesn’t really sell anything other than Adwords (and consumers don’t care to buy pay per click ads). RIM doesn’t even have an affiliate program created yet, but at least their users actually spend money on apps. And Microsoft? They’re hardly out of the gate yet.

Apple has a huge app and iTunes ecosystem that people actually spend money on. Every day. Amazon has a massive retail backend along with a great library of digital content (even if they have very few apps). Both companies have well-established affiliate programs. Cutting in the carrier as an affiliate seems to be logical.

It seems to be a competitive advantage.

But would Apple do it?

Chris Umiastowski

Chris was a sell side financial analyst covering the tech sector for over 10 years. He left the industry to enjoy a change in lifestyle as an entrepreneur, consultant, and technology writer.

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There are 5 comments. Add yours.

mtcowdog says:

This concept has great potential. If, as posited, Google can't do something similar, Apple could do more to android through this approach than through a billion lawsuits.

Raptor007 says:

Amazon could have worked out a deal with AT&T, since they would be the only 4G LTE carrier on the device and 250MB is well not enough to get anyone moving users will likely take the opportunity to upgrade their data plan and voila AT&T gets a big revenue bump and device and user exclusivity.

As for Google not being able to do this and Apple hurting them more this way than with lawsuits, well you shouldn't stare at your rearview mirror so much because you will miss that car flying past you.

Google has their own juice and methods to boost revenue and get carrier subsidies as well. I also really get tired of the holy war mentality of iOS vs Android vs Windows Phone crap. I can, do and will use any OS and device at any time so long as it meets my needs.

I have a MBP, an iPad 3 and will very likely get the iP5 but for many reasons yet I still find Android to be a solid competitor and Windows Phone to be a challenger worth watching out for. Keep your friends close, but your enemies closer; and the enemy of my enemy is my friend.

Rene Ritchie says:

Chris isn't primarily an iOS user. He could care less about the platform, he's writing about their revenue potential. Google doesn't offer affiliate programs for Google Play, so it rules out the type of subsidy he's talking about here.

The only platform war is the one you brought'n'ed ;)

dloveprod says:

Would be nice, my main reason for wanting a connection always on my iPad is to locate it if it was lost or stolen, 250 Meg's would be more than enough for that, everything else I would tether.

robnaj says:

Google could make program were if the carriers comply then they would get some money for the adds Google makes from android. And Microsoft I believe give XBOX Live money cable in order to get all of those apps that most streaming boxes don't have.