Scuffle between Apple, Sony over in-app purchases could doom iOS Playstation Suite

Feb 1, 2011

Sony (SNE) complained to the New York Times about Apple (AAPL) rejecting an e-reader app it submitted to the iTunes App Store in a story published today, in which the Times claims Apple is tightening its restrictions on allowing apps to access outside content. As numerous tech writers have already pointed out, Sony’s complaints and […]

Sony (SNE) complained to the New York Times about Apple (AAPL) rejecting an e-reader app it submitted to the iTunes App Store in a story published today, in which the Times claims Apple is tightening its restrictions on allowing apps to access outside content.

As numerous tech writers have already pointed out, Sony’s complaints and the Times’ story are a little premature. Supposedly, Sony’s app would allow users to purchase e-books from Sony’s Reader Store by launching the store (or some kind of non-Safari browser) from within the app. This isn’t something Apple allows to happen, and it bounced the app because of it, most likely. Other e-readers, like Amazon’s (AMZN) Kindle app, use Apple’s Safari browser on its iOS devices to purchase e-books. If developers want to provide direct in-app purchases, however, Apple wants its cut.

This isn’t a major policy change, except for a single claim that NYT and Sony make during the story — that Apple is increasing restrictions on outside content being allowed into apps. Sony’s president of its digital reading division, Steve Haber, told the Times that he was told by Apple that the company wants all purchases to go through them, and that external content like e-books won’t be compatible with apps if it’s not purchased through Apple.

What about other e-book readers?

Wait a minute, though — what about Kindle, which uses Safari to make purchases and the dedicated app to actually download the e-books? (As an aside, Amazon just dropped a significant update for Kindle in the middle of January, which is even more evidence that Apple isn’t messing with it.) What about DropBox, an app that allows you to share files between you iPhone or iPad and your computer? Will Apple be putting restrictions on the thousands of cloud-accessing apps trading files back and forth, to make sure nobody is accessing content they’ve actually already paid for without giving Apple a slice?

The short answer is: no. In fact, the tech blog community at large seems to be calling out NYT’s reporting in this case, because it’s more or less impossible — as well as not in the company’s best interest — for Apple to start restricting things like e-books and other files from being accessible by apps.

Apple is a company in the device business. That’s why it puts out new hardware every year — because it wants first-adopters, it wants hype, and it wants iPhone sales. Apple makes more money from selling hardware than it does from digital content. Why would it sacrifice the capability of its devices to be what users want them to be — e-readers, music players, document readers and whatever else — in order to pick up a 30 percent cut of the potential in-app sales its missing? Thirty percent is Apple’s cut of what’s sold in the App Store, including in-app purchases, but Apple gets 100 percent of the sales of iPhones. It’s not going to sacrifice its core business to make sure it gets a piece of Sony’s e-reader business.

Much more likely, it seems, is that Sony is held back by its own Reader service. The company doesn’t provide e-book sales from the Reader Store website, but only from within the dedicated Reader Store application — so it can’t do what Kindle and Barnes & Noble (BKS) do by utilizing Safari. Unable to convince Apple to give it special in-app sales privileges (which would undoubtedly be more convenient and less clumsy than opening a Safari page, like Kindle has to), Sony found a journalist and complained about big bad Apple trying to horn in on its content sales. And while it’s a bummer that Apple takes 30 percent off the top from in-app purchases, from a content perspective, that’s the price of doing business on the extremely popular iOS platform.

PlayStation Plans

Here’s an interesting thought, however — extrapolate Sony’s position with its Reader Store, in which the company seems sore about not being able to launch its own store from within an app, and one can’t help but wonder if this same situation might be a deal-breaker for Sony’s PlayStation Suite, a recently announced service for devices running Google’s (GOOG) Android 2.3 Gingerbread operating system. That service is meant to provide a dedicated platform for publishers to create PlayStation branded games that are compatible with both Android devices and the NGP, PlayStation’s upcoming successor to its PSP handheld game console.

PlayStation Suite is meant to be a conduit to Sony’s PlayStation Store, it seems, and the company is signing off on all the games that developers create for it, as well as pushing late-generation PlayStation games to Android devices, as well. There has been some speculation that while PS Suite is starting on Android, Sony hasn’t named the OS as being an exclusive carrier — and it’s only a matter of time before the company tries to tap into the massive user base with iOS devices, too.

But if Sony can’t reach an agreement with Apple over the Reader Store, or decides not to go with an Apple-legal Safari workaround, then an iOS PS Suite might be dead in the water. And if Apple is indeed tightening restrictions on content being allowed on its devices from outside sources — which, however unlikely, isn’t necessarily out of the realm of possibility — that could have some major, dire consequences for users of its devices, as well.

The latter scenario seems really, really unlikely, if not just kind of a stupid potential move on Apple’s part. But the former scenario, one that sees Sony refusing to cut Apple in on its PlayStation profits and unable or unwilling to make developer agreement-friendly workaround, seems entirely plausible. And it could mean that Sony’s great big gaming platform for the iOS is going to end up stalled before it even starts moving.

Update: It appears Sony isn’t just upset about Apple forcing it to create a web-based store for its e-book business.

According to a report by Ars Technica, Apple is requiring developers to make any content available by outside means for an app also be available through in-app purchase, where Apple can get its 30-percent cut. It won’t directly stop apps from using outside content — that’s something that would be nearly impossible for Apple to enforce — but it does give Apple license to drop any app that isn’t at least giving users the opportunity for a convenient, Apple-paying in-app purchase.

It’s a significant change because instead of altering how things work for users, Apple is putting the hurt on content providers. Makers of e-readers like Amazon and Barnes & Noble will be required to change how their apps offer content to include the in-app option, and that will mean overhauling their apps as well as how they do business. And it’s not just e-book sellers — all content providers that sell content for use in iOS apps are subject to the change.

Obviously Sony isn’t happy about the policy change, and it’ll be interesting if other big companies, like Amazon, will take the change lying down. Apple may have just angered a lot of companies with the resources to stand up to it.

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Phil Hornshaw

Phil Hornshaw is a freelance writer, editor and author living in Los Angeles, dividing his time between playing video games, playing video games on his cell phone, and writing about playing video games. He’s also the co-author of So You Created a Wormhole: The Time Traveler’s Guide to Time Travel, which attempts to mix time travel pop culture with some semblance of science, as well as tips on the appropriate means of riding dinosaurs. Check out his profile.

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