Apple Risks App-lash on iPad


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Mr. Gao co-found and became the CFO at Oxstones Capital Management. Mr. Gao currently serves as a director of Livedeal (Nasdaq: LIVE) and has served as a member of the Audit Committee of Livedeal since January 2012. Prior to establishing Oxstones Capital Management, from June 2008 until July 2010, Mr. Gao was a product owner at Procter and Gamble for its consolidation system and was responsible for the Procter and Gamble’s financial report consolidation process. From May 2007 to May 2008, Mr. Gao was a financial analyst at the Internal Revenue Service’s CFO division. Mr. Gao has a dual major Bachelor of Science degree in Computer Science and Economics from University of Maryland, and an M.B.A. specializing in finance and accounting from Georgetown University’s McDonough School of Business.

By playing hardball with media companies on App Store subscriptions, Apple risks a painful rebound.

Few media outlets can afford to not have their mobile applications available through Apple’s App Store. With the iPad, Apple has an early lead in tablets, with a 75.3% share of global tablet shipments in the fourth quarter, Strategy Analytics estimates. And while its share of smartphone shipments was only 16.1%, the iPhone is the phone of choice for many affluent consumers.

But that hardly justifies Apple’s terms for subscriptions sold within its App Store. The company will keep 30% of the revenues and won’t automatically give publishers information about their subscribers. While publishers can avoid these strictures by signing up people on their website, that is hardly ideal.

Publishers are likely to be receptive to alternatives. And, unlike with the iPod, Apple may not dominate the tablet market for long. Devices running Google’s (NYSE: GOOGNews) Android mobile operating system already are flooding the market. They had 21.6% of global tablet shipments in the fourth quarter, up from 2.3% in the third quarter. Android could arguably have as much impact in tablets as it has had in smartphones, where it had a 32.5% share in the fourth quarter.

Google isn’t wasting time trying to exploit this opportunity, unveiling a more publisher-friendly payment system Wednesday, a day after Apple announced its plans.

Google lets publishers keep about 90% of the subscription revenue. More important, it would give publishers the names and addresses of their subscribers, unlike Apple, which would only give consumers the option of providing that data to the publisher. This is a crucial issue for publishers that need detailed information about their customers to more effectively sell advertising and to market other products. Google imposes some limits: It would let consumers opt out of receiving marketing materials.

It is surely no coincidence that Time Warner’s (NYSE: TWXNews) magazine unit unveiled new apps for subscriptions to its Sports Illustrated magazine to run on Android phones and an Android tablet last week. The company has yet to announce a comparable deal with Apple.

This highlights a danger for Apple. By potentially alienating content providers, it could undermine its longstanding advantage in apps, particularly if it continues to lose share to Android in the tablet market. Use of media is a major reason people buy tablets. A Forrester Research survey last month found 49% of tablet owners used them to read newspapers and magazines. If publishers decided to more aggressively promote Android tablets, Apple sales could be affected.

Apple needs to remember that, in tablets, as in smartphones, it isn’t the only game in town.


[More from H-P Joins Tablet Scramble]

Write to Martin Peers at


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