Apple rejects Sony e-reader app; Is Kindle next?

Says book sellers like Amazon must add in-app purchasing to their iPhone, iPad e-readers

Apple's decision to reject Sony's e-reader application today sparked speculation that Apple would soon yank Amazon's popular Kindle software from the App Store.

One analyst said it would be a mistake for Apple to do so because it would give Android smartphones and tablets a better chance of stealing market share. "If Apple did this, it would mark a major change," James McQuivey, a media analyst with Forrester Research, said in an interview Tuesday.

"It would signal a switch from focusing on the platform rather than devices, which is what Apple's done in the past," McQuivey continued. "Any of its content selling has been done with the aim of selling devices, not the content itself, but you can sell devices to someone only one or twice a year. If Apple's really after the content service [market], it's in a position to make money."

In an earlier blog post, McQuivey said a change "is a mistake" by Apple.

Apple has denied that it will pull Amazon's Kindle app, but acknowledged it is now requiring developers to add in-app purchasing to their software.

The blogstorm over Apple's intentions started after the New York Times published a story quoting a Sony executive as saying Apple had rejected the company's e-reader app and told Sony that all in-application purchases had to go through the App Store.

Apple currently takes a 30% cut of all app and in-app revenue, something that Sony's software -- and Amazon's Kindle, too -- sidestep by opening a separate browser window for actual purchases. Apple may modify that percentage when it rolls out a new payment technology Wednesday at the launch of News Corp.'s The Daily all-digital newspaper.

Later Tuesday, Sony issued a statement about Apple's rejection of its e-reader application.

"With little notice, Apple changed the way it enforces its rules and this will prevent the current version of the Reader for iPhone from being available in the App Store," Sony's statement read. "We opened a dialog with Apple to see if we can come up with an equitable resolution, but reached an impasse at this time. We're exploring other avenues to bring the Reader experience to Apple mobile devices."

Sony did not respond to questions about the specific rule or rules that Apple is now enforcing that resulted in the Sony Reader app rejection.

One option by Sony would be to rely on a Web-based e-reader, thus circumventing the App Store entirely.

Apple, however, clarified its position today.

"We have not changed our developer terms or guidelines," said Apple spokeswoman Trudy Muller. "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."

Apple's current iOS App Store guidelines, however, do not spell out that requirement in so many words. The most pertinent clause in those guidelines simply says, "Apps utilizing a system other than the In App Purchase API (IAP) to purchase content, functionality, or services in an app will be rejected."

The new interpretation forwarded by Apple hints that other apps, including Amazon's Kindle, will be required to add in-app purchasing functionality, giving customers a way to buy books within the app and Apple its 30% cut.

McQuivey's concern is whether this might be a first step by Apple to lock out all purchases that don't go through its App Store. "It may make sense from a shareholder's perspective, but whether it would be good for the long-term growth of the industry is another question," he said. "People are just now learning to love apps and online purchasing on smartphones and tablets, and this will create friction for that."

On his blog, McQuivey said the change would be "fundamentally at odds with the pro-consumer revolution Apple started" and contrary to his belief that companies can both partner and compete with rivals.

But if Apple eventually goes that route -- or simply makes it more difficult for the likes of Amazon, Barnes and Noble and Sony to compete with Apple on iPhone and iPad e-reader applications -- McQuivey thinks that Apple would end up winning, at least in the short term.

"They could get away with this," he said. "People aren't going to blame Apple right away, they're going to blame Amazon that they can't buy books on the iPad."

Amazon did not reply to a request for comment on the Sony rejection, and the in-app functionally Apple's now demanding.

McQuivey also highlighted the possible fallout to Apple from the Sony rejection, and Apple's demand that out-of-app purchases be backed by in-app transactions.

First, it would give consumers another reason to look at Google and its Android operating system, especially when the latter reaches tablets with the launch this year of Android 3.0, aka Honeycomb. "It would add to the open vs. closed debate between Apple and Google," said McQuivey.

Although that message might not sink in until next year, McQuivey argued that consumers will soon start to equate Apple's so-called "walled garden" strategy with the AOL of 15 years ago. The latter's closed ecosystem eventually failed to stem the shift to the open Internet.

And government regulators will be keeping an eye on the situation, McQuivey promised.

"The FTC [Federal Trade Commission] is going to get quite a few phone calls on this one," McQuivey argued on his blog. "Any company that has either a natural or contrived monopoly eventually comes under scrutiny for how it inhibits competition and innovation."

Apple has faced U.S. government scrutiny before, both in 2009 when the Federal Communications Commission (FCC) started an inquiry into Apple's rejection of Google's Voice app for the iPhone, and last year, when it questioned Apple's plans to ban all apps created with cross-platform development tools.

Last September, Apple conceded on the latter.

How this will play out is unclear, even to a close Apple watcher like McQuivey, who focuses on e-readers for Forrester. One thing's certain, however: Sony isn't alone.

"Sony's not the only one in this situation," said McQuivey. "I know of several others that are in a similar situation. But maybe this is just a way for Apple to float a trial balloon."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer or subscribe to Gregg's RSS feed. His e-mail address is gkeizer@computerworld.com.

Read more about mobile apps and services in Computerworld's Mobile Apps and Services Topic Center.

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