Most news organizations and blogs have been reporting the same stuff I wrote about yesterday. For instance, MarketWatch spoke to an Apple rep who confirmed just what was in Apple’s press release: that Amazon has to remove any links to its web-based Kindle Store, and that if Amazon wants to sell ebooks from within its app it can, but only if it uses Apple’s IAP and pays the 30% commission.

However, Marketwatch does not confirm that Apple is forcing Amazon and other sellers to include IAP.

FutureBook writes that an Apple rep confirmed the same thing: that ebook apps will have to remove links to their web stores, and if they sell ebooks within the app they’ll have to use Apple’s IAP.

But again, that doesn’t mean Apple is requiring IAP, only that it’s not allowing other payment methods for in-app transactions.

I know, at this point I sound like I’m at the doctor and looking for loopholes to get around the cancer diagnosis, but there’s a reason I’m being so stubborn. Until Apple actually says publicly what it expects ebook sellers to do, the media will conflate various announcements, articles and blog posts into “news” that is only partly accurate. I don’t want to accept any single story as fact until there’s proof that Apple has actually said something.

But finally, here’s some actual Apple evidence, again reported by FutureBook, that seems to confirm everyone’s worst fears. It’s a section of Apple’s App Store guidelines:

11.13 Apps can read or play approved content (magazines, newspapers, books, audio, music, video) that is sold outside of the app, for which Apple will not receive any portion of the revenues, provided that the same content is also offered in the app using IAP at the same price or less than it is offered outside the app. This applies to both purchased content and subscriptions.

That’s pretty explicit: it clearly says books are included, and it clearly says the rule applies to “purchased content” as well as subscriptions.

Computerworld is reporting mostly the same thing, but it admits it hasn’t spoken to Apple, so I imagine it’s interpreting the rules and doesn’t count as a reliable source.

So I guess I have to stop hoping for the best. What’s unfortunate about this is that I don’t think it’s just a power struggle among companies, because the end result could quite possibly be higher ebook prices for consumers. Although Amazon is just as secretive as Apple, it’s widely assumed that the company is either barely eking a profit on ebook sales or even taking a loss on them, which means that its competitors are likely only turning a slight profit at best. Handing a 30% cut to Apple will surely wipe out any profit on iOS sales, thus negating the benefit of offering an iOS app at all. The options at that point are to either raise ebook prices across the board (Apple’s rules state that IAP prices must match prices elsewhere), or to pull the iOS app and deprive customers of being able to easily read their ebooks on their iPads and iPhones. A third possible alternative is to negotiate a lower commission with Apple, but that’s not a realistic option for every company, and if margins are truly as low as expected, it’s unlikely to be a viable strategy.

I’m unhappy with Apple this morning, as should be anyone who reads ebooks. The company appears to have invented a 30% tax on reading ebooks on the iPad.

Update: Although I usually loathe Gizmodo, this post from the smarter Australian version sums up Apple’s profit-killing maneuver quite accurately: “Apple’s new subscriptions – while justifiably wrapped in the smooth, glossy coat of user-friendliness – are a major power grab that inserts the company between basically every content provider and every iPad and iPhone user. …In technical terms, this is a dick move.”

“Official: Apple locks down the Kindle app” [Futurebook]
(Photo: Shirley Buxton)

Last week I was convinced that Apple wouldn’t try to enforce an In App Purchase (IAP) requirement on ebook apps, mainly because when it rejected the Sony app earlier this month, it approved a significant Kobo app update at the same time.

Sony deliberately avoided details while it begged for sympathy from the press, but between the lines it looked like it had tried to implement its own proprietary IAP functionality, which Apple has never allowed. No one should have been surprised that it was rejected (and I imagine Sony expected the rejection all along).

In addition, everything that’s been reported by real news agencies so far has focused on Apple’s scheme to make money off of magazine and newspaper subscriptions, not off of competitors’ individual ebook sales.

Well, today Apple finally clarified how this new IAP policy will work for subscriptions, and with two possible exceptions it looks like ebooks were excluded.

The crucial descriptive element for determining what falls under the new policy is “subscriptions”: if you sell some sort of subscription service, whether it involves text, pictures, music or video, Apple now will take a cut of any new customers acquired within the app. This likely includes companies like Netflix and Pandora, but I’m not sure if Apple will consider other subscription-based services — like Toodledo and scanR — to be “content providers” in the same way.

So the good news, if I’m reading this correctly, is that non-subscription ebook apps will still be around when the dust settles — and it’s unlikely that Apple’s new policies will trigger an across-the-board price hike as I initially feared.

The bad news, however, is that the new policy will probably lead to reduced functionality with your ebook app of choice, mainly when it comes to shopping and reading periodicals. Here’s why.

1. Links to web stores might go away. Apple forbids apps that fall under these new rules to link to external payment mechanisms in the browser. This definitely prevents, say, a magazine app from linking to a web page that sells subscriptions, but it’s not clear yet whether the rule will also apply to apps that offer single payment purchases, like the Kindle, Nook and Kobo apps. Common sense says no, since they aren’t selling subscriptions, but Apple says publishers may not link to a page that sells content or subscriptions, so it’s possible this includes ebooks.

2. Ebook sellers likely won’t offer magazines and newspapers on the iOS platform. Since magazine and newspaper subscriptions are expressly listed under the new rules, companies like Kobo will likely have to either remove their own magazine and newspaper subscriptions, or use Apple’s IAP feature and take the loss (or else hike prices). I suspect this is why Amazon rolled out magazine and newspaper support to Android devices last year, but has so far held off on bringing the same functionality to iOS. (I’ve seen a Kindle magazine on the Kindle iOS app, and it works fine — the issue isn’t a technical one.) My guess is the Kobo subscriptions will stop showing up on iOS apps by summer.

It’s still possible that Apple will go after ebooks, but I’m not sure they have any reason to pick a fight over this, especially when the opponent would be Amazon. Besides, the crucial difference between ebooks and periodicals on iOS is ebooks are already here, and people are already used to paying certain prices for them; an across-the-board price hike would not only meet a lot of resistance but earn Apple a ton of negative scrutiny by the press and (more important) the government. Periodicals, on the other hand, are still in an embryonic state on the platform, and they’re often considered too expensive by customers in their current single-issue format.

I’m still no fan of this idea that iOS users are “owned” by Apple, but for now I’m cautiously optimistic that ebook apps will stick around for a while longer. And if not, hey, there’s always Android.

“Apple Launches Subscriptions on the App Store” [Apple]

(Photo: pasukaru76)

But based on today’s Kobo update, which managed to hit the store with its in-app browsing intact, I suspect this is mostly a false alarm.

The backstory: Apple cracks down on alternative purchase methods

The Monday Note has a good overview on Apple’s new-ish policy, which is technically actually an old policy that Apple has decided to enforce more stringently in 2011. The specific guideline states:

11.2 Apps utilizing a system other than the In App Purchase API (IAP) to purchase content, functionality, or services in an app will be rejected

That’s very clear — but then Apple confused the issue today regarding the Sony app when its spokesperson told Ars Technica, “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.”

What? That would mean every other ebook app out there would have to start offering true In App Purchase functionality, meaning Apple would take a 30% cut, meaning either price hikes or pulled apps.

How did the other app from today’s news cycle escape Apple’s clutches?

However, nobody is talking today about the new Kobo app update that hit the Apple App Store this morning. It was not rejected, it came out today, and it duplicates the functionality of the Kobo app for the iPad — meaning it includes a built-in “store” for browsing only, and when you’re ready to make your purchase you must leave the app and visit the website. In fact, it actually provides a lot more in-app functionality for browsing its store than the Kindle app. Here are some screen shots of the updated app from today:

So how do we reconcile this with what Sony is saying? Sony might be intentionally stirring up trouble to get itself some publicity, and to try to put public pressure on Apple to loosen its business model. (Good luck with that.) Apple might indeed be planning a major assault on all ebook apps, which would be a bad development for everyone except Apple.

However, Apple told the New York Times today that “it was still allowing customers to access purchases they made elsewhere within apps,” which would mean the Kindle and Nook apps are still safe.

Based on that, and considering the Kobo update got through the approval process just fine, I’m going to hold off on any calls for panic or outrage for now and assume that Sony was trying to implement its own in-app purchasing system, which has been clearly forbidden by Apple from pretty much the beginning.

Amazon teased that it would soon allow ebook lending a few days before Barnes & Noble held its heavily promoted Nook Color press event; I imagine the preemptive strike was intended to give pundits an extra talking point when they compared the new Nook to the Kindle.

And now, apparently caught up short by the U.S. launch of Google Books, Amazon will today preview its own web-based ebook reader to the press. Google’s web interface for ebooks is one of its biggest selling points over the Kindle ecosystem, so it makes sense for Amazon to finally lift the lid on this long-missing feature.

Here’s my only partly tongue-in-cheek idea of how things work with Amazon, based on this pattern of announcements:

• The company has a spreadsheet of possible features and product changes, but won’t roll out anything new unless it identifies a specific threat from a narrow list of enemies. The current enemies list is just B&N and Google.
• These potential announcements range from huge game-changers–aka a steep price drop or new model announcement–to what are essentially PR blitzes designed to steal focus from competitors or counter negative PR.
• What doesn’t trigger a response: anything tablet related. This is yet more evidence (if any is needed) that dedicated ereaders and multi-purpose tablets aren’t in the same product category, at least according to Amazon’s business strategy, no matter how many times the media tries to force this connection.
• With the exception of gifting–which really was just a customized gift card feature and probably required almost no added expense to turn on–most of the new features are works in progress and not fully baked when announced. Kindle ebook lending, extended periodical subscription access, and today’s forthcoming web interface all have yet to be seen in reality, even though they’re getting press coverage.

It seems clear that if you really want to see what Amazon has up its sleeve, your best strategy as a competitor is to engineer a massive prank on Amazon, by creating a fake super-ereader and announcing it to the press during an expensive media event. If you get crazy enough with your fake device, you could probably trigger Amazon’s team to dump its entire secret feature matrix on the press!

…Okay, that’s probably not very plausible. But based on Amazon’s behavior to increased competition in 2010–the fact that its current strategy is mostly defensive, and mostly relegated to very minor works-in-progress features–I’m making the following guesses about what’s going on. (Sure, I’m no smartypants analyst, but I accurately predicted the Kindle 3 lineup and pricing back in June.)

On the touch screen issue, the fact that Amazon didn’t already do this to compete with Sony means one or both of the following: that the technology is too expensive for Amazon’s current profit model, and that it doesn’t see Sony as a real competitor right now. Considering how everyone who uses one of Sony’s new touchscreen readers (the ones with the cool infrared sensors) raves about them, and considering how natural a fit touch technology is with this product category, I imagine Amazon is going to have to do something about this very soon. I expect a higher-priced touchscreen Kindle next year–something priced in the Sony Daily Reader/Nook Color range, and probably with a slightly larger Pearl screen to further differentiate it from the Kindle 6″ and the DX, but sans stylus. I’ve possibly missed some acquisition but it seems like one path Amazon is looking into is IFSR sensor technology from Touchco, which it acquired earlier this year. Unfortunately, that solution requires messing with the actual display, so it may never be practical for E-Ink.

On the color screen issue, I think the reason Amazon hasn’t gone this route yet is due entirely to its limited options for an operating system. The only solution I can think of that would be both affordable and consumer-friendly would be a customized version of Android, and that would cede too much control so it’s probably off the table. If Mirasol can actually deliver a quality full color electronic ink screen like it’s been promising, and it can be produced affordably, then this might still be considered as a last minute tease. But it doesn’t make sense to try to get into Apple’s space unless you can at minimum compete with the Nook Color, which is an excellent device for its price. I don’t expect to see this in a Kindle product any time soon, then.

Finally, on the question of the EPUB format, I think it could happen any day now, but probably won’t as long as Amazon remains on top. I’d bet money that this feature is on Amazon’s threat-response matrix as an option of last resort. It’s likely very easy to implement but will come at a huge cost, which is that it will gives Kindle owners tacit permission to buy ebooks elsewhere or check them out from the library. (I don’t think most would, considering the prices and customer service Amazon offers isn’t replicated elsewhere at the moment, but I’m sure Amazon would prefer not to take the risk.) I think if Amazon starts to feel too threatened by B&N or Google, this is the biggest add-on it can toss out to the public that doesn’t require the expense of new hardware or OSes. But that also means that as long as Amazon maintains a healthy lead in the market, we won’t see EPUB support.

(Photo: kodomut)

I want the cheapest overall book prices: Kindle
Publishers have forced price increases across the board at all ebook retailers, so for many new releases you’ll see the same price everywhere. Amazon, however, also uses its marketplace power to prevent publishers from offering lower prices at other retailers, and it otherwise steeply discounts a wide variety of titles to keep sales going strong. On average, you’ll find the lowest prices there–which is good, because with a Kindle you can’t buy ebooks from any other retailer.

I want to be able to read ebooks that I check out from my local library: Nook or Sony Reader Daily Edition PRS-950
Almost every library uses a service called OverDrive to lend out ebook titles, and the Kindle won’t work with OverDrive. It’s likely that the Kindle will never support library loans, at least not as long as Amazon refuses to support the EPUB format.

I want to be able to go online and check email, use Wikipedia, read news, etc. on my device: Kindle or Nook
For Internet connectivity no matter where you go, you need a device with 3G wireless. The three big brands–Kindle, Nook, and Sony Reader–all offer a 3G version, but the Sony Reader Daily Edition restricts web browsing to Wi-Fi even though it costs $70 more. That leaves the Kindle 3G+Wi-Fi and the Nook 3G+Wi-Fi as your best buys.

I want to spend less than $150: Kindle Wi-Fi
There’s a Wi-Fi Nook under this price point as well, but it’s $10 more than the Kindle model, so unless you want access to local library ebooks the Kindle is the better value.

I want the latest technology: It depends
You can’t have it all at the moment, but you can maximize a particular feature. For the best E Ink (grayscale) screen, choose Kindle. If you want a color screen (to view children’s picture books or magazines, for example), go with Nook Color. If you want to be able to use your finger to “swipe” through pages and a stylus to make notes directly on the screen, choose the Sony Reader (it ties the Kindle for the best E Ink screen, but since it costs much more, you should stick with the Kindle unless you want the touchscreen feature).

I can spend more than $500: iPad
Think of it as a Swiss Army Knife of readers–it will give you access to Kindle, Nook, Kobo, and (coming soon) Sony ebooks, plus so much more.

If you go this route, however, don’t buy your ebooks from the Apple iBookstore–the copy protection Apple is using is difficult to work with. There are free Nook and Kindle apps for the iPad, and Sony has announced it will release its own ebook app for the device next month. For public domain ebooks, there’s a free app called Stanza, and for library books there’s a free app called Bluefire.

If after a few months you decide the iPad is too heavy to be a dedicated ebook reader, supplement it with a lightweight and much more portable Kindle or Nook (depending on where you’ve been buying your ebooks); after all, you’re Captain Moneybags, you can afford it.

I want the one that’s the most recommended and the best reviewed: Kindle
The Kindle remains the one to beat in most mainstream media reviews, and Consumer Reports has given the two most recent Kindle models top rankings.

I want the one that’s easiest to use: Kindle
Amazon has put all of its customer service and online retail experience into creating a seamless browsing, buying, and reading experience.

I want a color screen: Nook Color or iPod Touch
Nook Color is being praised by early reviewers for its screen, size and underlying software. Despite its small size, the iPod Touch also makes for a great full-color choice (make sure you check out the screen on a Touch before dismissing it–it might surprise you).

I want to read comics: iPad, iPod Touch or Nook Color
The iPad screen is perfect for comic books, but if you need to stay within an ereader budget you might want to consider an iPod Touch–the screen is naturally much smaller, but Apple’s touch technology makes it easy to flick between panels and pages. You may also want to check out the new Nook Color. However, I haven’t found any reliable information on whether Barnes & Noble plans to actively support comic books on the device, so it’s a risky bet this early in the game unless you’re technologically savvy enough to make it work on your own.

Here’s a final one suggested by Nate at The Digital Reader. Thanks!

I already own ebooks from a bunch of different ebookstores, and I want to be able to read them on one device: iPad or iPod Touch
As I mention above in my “I can spend $500″ scenario, iOS devices are great in that they give you a way to access ebooks from all the major ebook retailers–Amazon, Barnes & Noble, Kobo, Apple, and soon Sony.

Not recommended, and why:

• Kobo (Borders) – It’s more expensive than the Kindle with fewer features. It’s the same price as the Nook but doesn’t have access to B&N’s larger ebook store or accessory line. There’s no 3G model.
• All Sony Reader models other than the $250 model listed above – They lack wireless connectivity and cost more than a Kindle or Nook.
• Anything else – When it comes to electronics that rely on software to function, you want a company big enough and dedicated enough to provide decent support. As Teleread notes, cheaper models look and function okay on the surface, “but you will find that their software is abysmal. Stick to a name brand.”

(Photo: Jane Rahman)

Free iPod touch! Hooray!

In an effort to promote its online ebook store, the website shortcovers is holding an iPod touch giveaway. The best part for those of you who aren’t feeling spendy is you can enter up to 5 times without making a purchase. Note: I mistakenly wrote that the entry limit was 25 when I first posted this. My apologies.

Of course, any ebook purchase between now and September 27th will also count as one of your 5 entries.

[Info page on shortcovers iPod touch giveaway]

I’ve been using the shortcovers iPhone app this week to read Kathy Griffin’s new biography, “Official Book Club Selection”–which interestingly was about 50 cents cheaper than the Amazon version earlier this week when I bought it (it’s now about 50 cent more expensive, go figure)–and I’d give it a B-. It’s not a bad app once you get into your book and start reading it, but there are some definite bugs and usability quirks that need to be addressed. But of course, if you win an iPod touch, you can also install Stanza, Kindle, or the B&N Reader app on it and read from whatever store or private collection you like.

Lastly, one bonus of shortcovers files are that you can read them online via the shortcovers website, or on your Windows or Mac PC using Adobe’s Digital Editions software. They also work on Sony’s ereader devices. Sorry, Kindle owners, you’re out of luck.