Both the Justice Department and the Federal Trade Commission have started looking at the new terms Apple set this week for media companies that want to sell content on the iOS platform, according to a new report. Citing people familiar with the matter, the Wall Street Journal reports that the groups’ interest in Apple is only at a preliminary stage, and won’t necessarily develop into a formal investigation or action against the company. Beyond the U.S., a spokesperson for the European Commission has said the commission is aware of Apple’s new policies and is “carefully monitoring the situation.” Earlier this week, Apple issued a press release announcing its new subscription service for the App Store, in which it revealed new rules that forbid companies from including links in their apps to sell content outside the app, force them to offer the same subscription price via In-App Purchase—of which Apple gets a 30 percent cut—as they do outside the app. Banning apps from linking to external sites “sounds like a pretty aggressive position,” said Eric Goldman, director of Santa Clara University’s High Tech Law Institute. “It seems like that’s purely in the interests of Apple trying to restrict people doing transactions they don’t get a cut from.”
Apple has secured close to 60 percent of global touch panel capacity for 2011, leading to tight supplies for its competitors, according to a new report. Citing sources from upstream component makers, DigiTimes reports that Apple’s move was made in order to achieve its internal goal of shipping 40 million iPads in 2011, with the company holding control over the capacity of major panel suppliers such as Wintek and TPK. Sources from iPad distributors reportedly said that Apple’s 2010 order forecasts to OEM partners were also high, but the biggest problem on the supply side was not capacity, but instead low yields of touch panels. The report notes that aside from Apple, large companies such as Motorola, RIM, and HP are also competing for related components, leaving second-tier tablet makers “out of the game.”
While the majority of yesterday’s Apple App Store subscription press release focused on the company’s new subscription purchasing system for periodicals, the company also snuck in a policy change that could impact important non-periodical apps. Coupled with an existing policy that gives Apple a 30% share of in-app purchases, the new policy forbids publishers from providing links in their apps to sell content outside the app, where Apple receives no revenue.
This language echoed an earlier statement from Apple spokesperson Trudy Miller, who in responding to the unexpected rejection of Sony’s reader application said, “We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase.” While that policy appears from one perspective to be reasonable, the practical consequence is that companies are now faced with the business choice of raising their prices across the board as a way to recoup revenues lost to Apple, or cutting off support for Apple’s products and users. Under one scenario, both the company’s Apple- and non-Apple customers will pay more for their content; under the other, customers will pay the same prices but be unable to use the content on Apple’s devices.
The ramifications for traditional publishers, such as the New York Times and Time, Inc., are still being sorted out. “We have agreements with other other tablet makers on mutually beneficial business terms,” a spokesman for Time Inc. told the Wall Street Journal. “Apple’s latest announcement seems to be a step in the right direction, but it raises a lot of questions, mostly centered around consumer data, that we have to work through and agree on.” The New York Times, which has been preparing its own billing system to allow it to sell a digital subscription that includes both online and app access, said through a spokesperson that “We are working with Apple to understand how this impacts our plans, if at all.” Other companies that have not traditionally been understood as publishers, such as digital book vendors Amazon and Barnes & Noble, are being treated as publishers by the new policy and subjected to the same content-related fees and rules. iLounge reached out to both Amazon and Barnes & Noble for comment on how the policy changes might affect their e-reader apps for iOS, but had not received a response from either at the time of this article’s publication.
The impact of the change on other companies—such as those that provide subscription-based access to streaming media, like Netflix, Hulu, and Rhapsody—is even less clear. Rhapsody has already issued a statement airing its concerns over the changes, which states, “Our philosophy is simple too – an Apple-imposed arrangement that requires us to pay 30 percent of our revenue to Apple, in addition to content fees that we pay to the music labels, publishers and artists, is economically untenable. The bottom line is we would not be able to offer our service through the iTunes store if subjected to Apple’s 30 percent monthly fee vs. a typical 2.5 percent credit card fee.” The statement added that “we will be collaborating with our market peers in determining an appropriate legal and business response to this latest development.”
As a consequence of the change, Apple will likely face antitrust scrutiny over its new policy, although it remains to be seen whether its position in the market is seen as strong enough to force action, and to establish Apple’s position in the market, the market itself must be defined. While publishers might claim that Apple dominates the market for consumer tablets, and is using its position to restrict competition, Apple might define the market as including all digital and print media, suggesting that any publisher unhappy with Apple’s terms is still free to reach customers through other means. “Millions will be spent litigating how broad the market is,” Herbert Hovenkamp, an antitrust professor at the University of Iowa College of Law, told the Wall Street Journal. He also said that digital media is the most plausible market definition in this case, and that he doubts Apple currently has a sufficiently dominant position to warrant scrutiny. Should Apple reach a point where it is selling 60 percent or more of all digital subscriptions through the App Store, according to Hovenkamp, “then you might move into territory where an antitrust challenge would seem feasible.”
Apple has posted a support document outlining the differences in calling features between the GSM and CDMA models of iPhone. As the document notes, “depending on your wireless carrier’s network technology (GSM or CDMA), there are different methods for enabling and using” many phone features. The list of features includes call forwarding, call waiting, caller ID, conference calls, inserting pauses when dialing, and hold. Notably, the GSM model of iPhone supports up to five calls simultaneously in conference call mode, while the CDMA model supports only two, and doesn’t offer support for placing a call on hold, while the GSM model does. [via 9 to 5 Mac]
Following this morning’s announcement of a new subscription billing service for the App Store, Apple has updated its App Store Review Guidelines to reflect changes related to the subscription service, as well as to add new language relating to those who try to ‘cheat’ the App Store system. As reported by Mac Rumors, the new guidelines state, “If you attempt to cheat the system (for example, by trying to trick the review process, steal data from users, copy another developer’s work, or manipulate the ratings) your apps will be removed from the store and you will be expelled from the developer program.” The report notes that the language was likely added to give Apple further power to deal with developers who hide unauthorized features as “easter eggs” inside their programs, as well as those who steal content from other developers.
Apple today announced the launch of its long-rumored subscription service for the App Store. According to the announcement, the service is available to all publishers of content-based apps on the store, including magazines, newspapers, video, music, and more. The service will use the same App Store billing system as In-App Purchases, and will allow publishers to set the price and length of subscription (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly). Customers are able to choose their subscription length with one-click, are automatically charged based based on their chosen length of commitment, and will be able to review and manage all of their subscriptions from their personal account page, including canceling automatic renewals. Notably, Apple processes the payments, and keeps the same 30 percent share as it does for other In-App Purchases.
“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 Apple CEO Steve Jobs. “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.”
The announcement goes on to say that publishers offering Apple’s subscription service from inside the app may also leverage other methods of acquiring digital subscribers outside of the app, such as selling digital subscriptions online, or providing free access to existing subscribers. Apple notes that there is no revenue sharing or exchange of customer information in such cases, and that it will be up to the publisher to provide an authentication process for such subscribers. In addition, publishers may no longer provide links in their apps which allow the customer to purchase content or subscriptions outside of the app.
A new report claims that Apple and Samsung are negotiating a component contract that would see the iPhone maker purchase $7.8 billion in parts from Samsung this year. Citing industry sources, the Korea Economic Daily, via the Wall Street Journal, reports that the massive contract would include LCD displays, mobile application processors, and NAND flash memory chips used in the iPod, iPhone, and iPad. The report notes that should the contract push through, Apple would become Samsung’s largest customer.
Apple has released its iOS 4.2.6 update for the Verizon iPhone 4. Posted online early last week ahead of the device’s launch, iOS 4.2.6 “fixes a bug to ensure Personal Hotspot data usage is accurately reported (for Verizon iPhones),” according to a listing on MacUpdate. Notably, iLounge’s test Verizon iPhone 4 arrived with iOS 4.2.6 pre-installed, so it is unclear how many units will actually require the update. iOS 4.2.6 for the Verizon iPhone 4 is available now through the Update feature in iTunes. [via Wired]
Apple and Verizon Wireless are now accepting pre-orders for the CDMA iPhone 4 online. While Verizon is offering to ship the orders to customers, users ordering through Apple’s Online Store have the choice between shipment or reservation for in-store pickup. Notably, Apple is already citing a shipment date of “by February 18,” indicating that it may have already sold through its entire early allotment of units set aside for online sales. Both companies will be opening their retail stores at 7:00 a.m. tomorrow morning for sales to customers on a first-come, first served basis; in the past, Apple has reserved a large number of units for brick-and-mortar launch-day sales.
Acting on an earlier tip, iLounge’s editors have now confirmed that Verizon Wireless business customers who pre-ordered Apple’s iPhone 4 have been de-prioritized in favor of consumer orders for the device. Reader reports, as well as a call to Verizon’s business customer service line, established that Verizon has not shipped phones that were ordered and paid for by business customers early on February 3, despite having delivered units earlier today to non-business “consumer” accounts.
“We never got any emails with tracking info,” reader Scott told us. “Our order status only shows this: Order Status: COMPLETED. The Verizon rep said my order is ‘Paid Pending Shipment,’ which means it hasn’t shipped yet. They are telling people that it doesn’t matter when they ship our orders because the phones can’t be activated until the 10th. But that’s not true.”
“Ordered mine on the business site,” said reader Neil, who reported that he succeeded at 3:49AM, roughly an hour after the pre-order system began accepting orders earlier than expected. “[Verizon’s] website says that the order is completed but I have not received a shipping confirm… Not cool treating business customers like this.”
“Ordered mine at 3:30am on the 3rd through my business account,” confirmed Nick, another reader. “No sign of tracking info or that it is in inventory (Status says completed as of Sunday but waiting for inventory). Why would they put their largest financial contributors behind consumer purchases? I called my rep on Friday to ask and they told me that no one would be getting their phone before Thursday.”
Another report concerns a reader who received an empty box instead of the iPhone 4 he had ordered and paid for. “I received an empty sealed box today,” explained Ric. “I got charged for the phone. I called Verizon and they told me that someone else got the phone and already activated it. They have suspended that phone but they do not know when I will get my phone. I am very PO’ed.”
Numerous readers who ordered through Verizon’s consumer division have received and activated their iPhone 4s without issues, contradicting the Verizon customer service claims that pre-ordered phones could not be activated until February 10.
An Apple shareholder proposal designed to force the company to disclose its succession plan for CEO Steve Jobs has gained the support of Institutional Shareholder Services (ISS), a proxy-advising service. Bloomberg reports that the ISS wants Apple to disclose a CEO succession plan every year, and that the move is backed by the Laborers’ International Union of North America. “A vote for the shareholder proposal to adopt a succession planning policy is warranted in light of the company’s limited disclosure regarding this issue and the market’s expression of concern over CEO succession at Apple,” ISS said in a report. Apple, through its proxy statement (PDF Link), has asked shareholders to vote against the proposal, claiming that public disclosure of the company’s succession planning — which is required of the board and CEO annually, and included naming candidates for succession — could give competitors an unfair advantage, and give them the opportunity to poach current or future executives. The proposal will be considered at Apple’s annual shareholder meeting, which will be held on Wednesday, February 23 in building 4 on Apple’s Cupertino campus.
Both Verizon’s and Apple’s websites have stopped taking pre-orders for CDMA iPhone 4 units. According to an announcement from Verizon, pre-orders were halted at 8:10 p.m. EST yesterday, ending “the most successful first day sales in the history of the company.” Verizon’s website now indicates that customers—presumably all customers, and not just current Verizon customers—will be able to order the phone online beginning at 3:01 a.m. Eastern Time on February 9, while the handset will launch in stores at 7:00 a.m. local time the following day. Interestingly, both Apple and its GSM carrier partner AT&T sold out of their pre-order allotments of the iPhone 4 within a day, after experiencing technical issues that seemed to be more far-reaching than those faced by Verizon customers yesterday; it’s also worth noting that the Verizon iPhone’s early pre-orders were limited to current Verizon customers, while AT&T’s pre-orders were open to any qualified party.
“This was an exciting day,” said Dan Mead, president and chief executive officer for Verizon Wireless. “In just our first two hours, we had already sold more phones than any first day launch in our history. And, when you consider these initial orders were placed between the hours of 3 a.m. and 5 a.m., it is an incredible success story. It is gratifying to know that our customers responded so enthusiastically to this exclusive offer – designed to reward them for their loyalty.”
European publishing groups are set to meet later this month to discuss Apple’s recent policy changes for publishers, according to a mocoNews report. Following Apple’s recent move to reject the Sony Reader app and subsequent announcement that it is “now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase,” the International Newsmedia Marketing Association (INMA)—which represents some 5,000 members in 80 countries—is holding a meeting with the European Online Publishers Association and the magazine association FIPP on February 17 in London to discuss Apple’s new rules. “The relationship between Apple and publishers has always been direct so its very difficult to find out what is happening elsewhere,” said Grzegorz Piechota, the European president of the INMA.
Many publishers who previously relied on web-based forms for handling subscriptions are confused with Apple’s stance. “Some say they feel betrayed,” Piechota said. “They believed that it would be a great way to access content from newspapers and magazines. So they hyped the iPad, and many of them invested in apps for it. By promoting these apps, they promoted the device. Publishers in fact helped to make the iPad successful on the market.” In explaining Apple’s inconsistencies when dealing with publishers, Piechota said, “Apple said yesterday that that in their policy with Sony Reader, they are not changing anything, just enforcing existing rules. But when they talk to publishers direct, they are saying something else. Apple has been contacting some publishers, and not contacting some. Some get emails, others get informal phone calls,” he said. “The whole process of accepting or rejecting apps is not transparent. It’s very hard to explain why some apps are being accepted and some are being refused; some apps allow you to read content that is bought somewhere else and others that won’t let you do this.” Noting that publishers in Belgium and France have taken the matter to authorities, Piechota said, “Legal action is the least wanted solution. It is slow and will damage the relationship between Apple and publishers. The first thing is a dialogue. As publishers we need to know what Apple is playing at.”
The results of a new study by Nielsen show Apple’s iAd to be more effective than traditional TV advertising, according to an AdAge report. The five-week study, funded by Apple and Campbell’s, found that those exposed to one of the soup-maker’s iAds were more than twice as likely to recall it than those who had viewed a traditional TV ad. In addition, iAd viewers were five times more likely to remember the brand “Campbell’s,” three times more likely to remember the ad messaging, and four times more likely to buy one of the brand’s products than their TV ad-viewing counterparts. “We have a lot of data that goes many years back for TV print, out of home and radio, but we’re searching for more validated metrics in mobile,” said Jennifer Gordon, director of global advertising for Campbell’s Soups. “This does show, in really traditionally brand metric terms, that iAd really outperformed.” According to the report, the TV and mobile audiences were queried separately via mobile and online surveys, conducted with members of Nielsen’s panel and recruits from various apps, respectively.
In an unexpected repeat of the problematic online launches of past iPhones, the pre-ordering systems set up by both Verizon Wireless and Apple have turned away some iPhone 4 customers who arrived for the companies’ 3:00AM sign-up process. Attempts to order the iPhone 4 through Verizon Wireless’s web site failed for more than five hours, as some customers who attempted to sign in to the ordering page were presented with a broken “Sorry, an error has occured” page, promising to get “this fixed as soon as we can.” Other customers reported successes in ordering only after extended problems with the site; one noted that “Verizon’s web site was a disaster” with an early-morning order taking an hour to get placed. Separately, some customers attempting to order the iPhone 4 through Apple’s online Apple Store website were presented with inaccurate information denying their eligibility to pre-order the phone, despite confirmations from Verizon that they were in fact eligible.
As has become common with Apple’s iPhone launch problems in recent years, Twitter discussions have popped up to express the frustration and distress of customers who have been unable to place their orders. Apple has previously made only modest attempts to apologize for pre-ordering issues, instead citing high demand for its products.
Updated 9:08AM: iLounge’s editors have been testing both Apple’s and Verizon’s ordering systems this morning with mixed results. One editor has found that adding an additional line of service to an existing account appeared to be successful in placing an order through Verizon’s site, whereas other editors have been unable to get orders placed through either Apple’s or Verizon’s pre-ordering systems. It’s obvious at this stage that some users (and some web browsers) are having different experiences than others, though the reasons for continued generic error messages on some accounts remain unclear. We’ve updated the title of this story to reflect the uncertain nature of the errors.
Apple has updated its iTunes Store Terms of Service to reflect the new In-App Subscriptions option, debuting in News Corp.‘s The Daily newspaper. A notice at the top of the new terms notes that “[a] new ‘In-App Subscriptions’ section has been added to the Terms and Conditions to explain how in-app subscriptions auto-renew, how the auto-renewal can be managed and turned off, and that we may require permission to provide personal information to the Licensor for marketing purposes which, if declined, will not affect your purchase.” Specifically, the section notes that subscriptions are non-refundable, and will “automatically renew for the applicable time period you have selected, and your Account will be charged no more than 24 hours prior to the expiration of the current Paid Subscription.” Users will be able to cancel automatic renewal by going to a new “Manage App Subscriptions” section of their account, and the auto-renew feature is turned off automatically should the publisher increase the price of the subscription.
News Corporation has announced a live video feed for its launch of The Daily, an iPad-specific publication that will be introduced by company chairman/CEO Rupert Murdoch and Apple iTunes executive Eddy Cue. In-app subscription billing through iTunes is expected to be introduced during the event, enabling News Corp. to charge a recurring 99-cent fee to continue use of its publication. We will be updating this story with additional information regarding the event, which kicks off at 11:00AM Eastern Time today.
Updated: A full play-by-play of the event can be found in chronological order by clicking on the title of this news story. In sum, News Corp. and Apple announced a 99-cent weekly recurring subscription package with an annual $39.99 subscription option—numbers designed to make the $30 million dollar initial setup cost and $500,000 per week expense of operating the publication become profitable over time. Advertising is initially expected to be a smaller contributor than subscriptions to the publication’s bottom line. News Corp. did not commit to the publication’s editorial tone, deflecting questions from the audience as to whether it would shift from the company’s traditionally conservative or “downmarket” perspectives, but claimed that it was being designed to appeal to “everybody.”
Editor’s Note: Comments to this article have been closed as they were largely impertinent to the announcements made today. We’re not interested in hosting a debate on News Corp.‘s well-established political agenda, or discussing whether the company’s products are actually “fair and balanced.”
Apple has revealed that it will begin taking online orders for the Verizon iPhone February 9. In a press release reminding current Verizon Wireless customers that they can pre-order the iPhone 4 beginning tomorrow from either Verizon’s or Apple’s websites, Apple also said that “all qualified customers will be able to order an iPhone 4 on Verizon through the Apple Store for delivery or reserve for in-store pick up beginning February 10.” In addition, Apple’s retail stores will be opening at 7:00 a.m. local time on February 10 for sales of the CDMA device. Apple notes that due to high demand, orders will be fulfilled on a first come, first served basis.
Apple has been sued yet again over the alleged sharing of Unique Device Identifiers (UDIDs) and user information, according to an InformationWeek report. The suit, filed in San Jose, CA by Alameda resident Anthony Chiu, claims that Apple knowingly transmits to third parties, without user knowledge or consent, data which could be used to identify individual users. In addition to Apple, the suit also names 50 “John Doe” defendants, leaving open the possibility that some third-party developers could also be added to the suit. “Consequently, anyone who has used a mobile device to browse the Internet to obtain advice about hemorrhoids, sexually transmitted disease, abortion, drug rehabilitation, or care for the elderly; to search for jobs, seek out new romantic partners, engage in political activity; in fact, to do more or less anything; can be reasonably sure that the browsing history created by such investigation has been incorporated into a detailed dossier for sale to marketers,” reads the complaint. Apple was targeted in a pair of similar complaints filed in December following the publication of a Wall Street Journal article which claimed that some apps shared personal information without consent.
Apple has released the third beta version of iOS 4.3 to its paid developers. Listed as build number 8F5166b, it is unclear what has changed in the new version from prior betas, which included the new Personal Hotspot Wi-Fi sharing feature and enhanced AirPlay support for Safari and third-party apps. In addition, the release is once again accompanied by a new preview build of Apple TV Software 4.3. Separate versions of iOS 4.3 beta 2 for the iPad, iPhone 4, iPhone 3GS, third-, and fourth-generation iPod touch are available as downloads for paid iOS developers from Apple’s iOS Dev Center.
For more information on iOS 4.3, see our Full Breakdown article.