Nervous Apple Cuts Off External E-Book Ordering from Apps

Last Updated Jul 25, 2011 4:49 PM EDT

Amazon (AMZN), Barnes & Noble (BKS), and Kobo have all had to change their iPhone and iPad e-reader apps to eliminate the ability to order books within the apps. Apple (AAPL) had finally enforced its new rules that forbid apps to let customers buy titles from outside the iTunes ecosystem.

After previous delays in implementing the new rules, why would Apple finally lock things down? Because management is nervous, and rightly so. The iPhone has enormous market share, and yet Google (GOOG) Android has eaten away at it. Apple executives are too smart to pull a RIM (RIMM) and assume that there is no threat. That's why Apple is taking a step that it knows could catch the antitrust attention of regulators. Better a potential problem in the future than a certain one now.

Fill the moat and raise the bridge
Apple was crafty in the way it created and then further developed the iOS ecosystem. Customers had to buy a device and then found themselves effectively locked in to purchasing apps, music, and e-books from Apple as well. Tie down everything that someone might want to do with a device, and you've ensured brand loyalty. For many, the expense and inconvenience of shifting platforms is enough to keep them close, even beyond what the innate appeal of product design can do.

But as much as Apple would like to completely dominate the mobile market -- and it clearly does -- the ecosystem, while an ingenious product marketing strategy, could only slow down everyone else and not stop them dead. Everyone else being Android. Google said that it now activates nearly 50 million devices a quarter, which is an astronomical number when you compare it even to the 29.5 million iPhones and iPads together that Apple sold last quarter.

Invading tech hordes
It's not just some amorphous set of vendor offerings that, on their own, couldn't come close to matching what Apple does. If research firm Strategy Analytics is correct, then Samsung may have sold as many Galaxy Android-based smartphone units as Apple did last quarter -- between 18 million and 21 million, by this estimate. Apple sold 20.3 million iPhones.

Combine such figures with the widespread available of Apple devices, even from Verizon (VZ) now, and the conclusion is clear: Apple is no longer the clear consumer favorite. Android vendors such as Samsung or HTC or Motorola (MMI) are selling a lot of units and a majority of consumers are consistently choosing them.

On the tablet front, Apple is clearly ahead with the iPad. But when I hear fans (including in the press) say that Android can't possible catch up for years, I remember hearing similar statements not so long ago about the iPhone hopelessly leaving Android smartphones in the dust.

No time for complacency
Apple (AAPL) is showing signs of being nervous -- in the best way possible. Like when Andy Grove talked about being paranoid when he headed Intel (INTC). Management has to find a way to push back and defend Apple's established market.

It's why the company is taking a big chance. There are few things that make antitrust regulators and prosecutors sit up and take notice quite as quickly as preventing consumers from having choice in where they can buy products and services. Apple already has heavy vertical integration, with devices, software, and content.

Essentially preventing third parties from doing business is another step -- and forget about the fanboy argument of "It's their platform, they should be able to do what they want!" This is business and the markets and regulators act in somewhat predictable ways.

Not that something will necessarily happen. But Apple has taken a risk with this approach. The shifting market dynamics explains why. Executives there probably feel that they're better off pushing back against growing competition than worrying about what authorities might do.

At worst, they have to address the situation. At best, they don't. But if Apple falls back now, then it already acts as though it's been ordered to change its behavior, and without any guarantee that its actions would satisfy the powers that be.

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Image: Flickr user Brendan Adkins, CC 2.0.
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.