Egypt has become the poster child for trying to tie people up and prevent access to the outside world. After a short stretch of apparent accommodation, Apple (AAPL) has applied the commercial equivalent. The company has locked down iTunes and told Sony (SNE), among others, that it cannot sell ebooks or other content within its apps and may not give the customers access to material they purchased outside of Apple's online store. The move not only stabs media partners, but puts Apple into a very bad long-run position.
Apple outright rejected the app that allowed ebook purchases through the Sony reader store. The ramifications are enormous. How long before the Amazon (AMZN) or Barnes & Noble (BKS) iOS reader apps are history? It means that consumers can't buy music from some source other than Apple and then run it on an iPhone, iPad, or iPod touch.
[Update: According to Apple, it is enforcing a long standing rule that it would seem the company didn't previous enforce, so it's still effectively a new condition. Also, users don't have to buy content from iTunes, but if a developer offers content to a user, it must also offer to sell to the user through iTunes.]
It's really a back stab to many in the content areas. Publishers thought they would get a subscription plan for iOS, so they could sell without sending a 30 percent cut to Apple -- an amount of commission that their business models were never meant to support. Media companies have greeted the iPad as an escape from declining subscriptions. But dependence could clearly lead to servitude.
So why would they do it? Because Apple wants to lock consumers into buying only its hardware. The company has said all along that profit from iTunes is barely above breakeven (though I'm not included to take any corporation's word for something if it doesn't appear in financial statements). The whole point is to sell devices.
But Apple has an interesting model. It not only wants to sell iPads and iPhones, but to keep selling them every two years as upgrades. That coincides with carrier agreement terms. How to do that? Make sure that all the media someone buys is locked to an iDevice.
That has two implications. One is that Apple doesn't want content available to play on other devices. Buy an ebook from Apple, and you won't be able to use it on hardware running Android. The other implication is that Apple doesn't want to open the door for people to get content elsewhere. Why? If the content will work on other devices, it loosens the ties that bind.
It might seem like smart strategy, but it's really foolish. Apple has tipped its hand too soon, before it could get a complete hold on the market. More Android handsets ship than iPhones. The same is likely to eventually happen with tablets.
And now Apple, through its action, has told all business partners to be wary. Developers first couldn't use tools to write for multiple platforms. Then Apple relented. What if Apple changes its mind again? It's not that hard to imagine.
Egypt is the perfect model, not only for trying to control outward communications, but in what happens when someone tries to force control over others. Eventually they get peeved. The same is true for a business, whether you talk of customers or business partners. And no one, not even Apple, has such a lock on consumers as to make their whim mandatory for others in the industry. Or to keep government regulators around the world from their own arm twisting.
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