February 17, 2011, 10:16 PM — First developers and content companies hated it. Then the media got in its shots.
Now the federal government and European regulators are casting a skeptical eye toward Apple's recently announced
shakedown terms of business for content providers selling their product through Apple's App Store.
The Wall Street Journal reports:
U.S. antitrust enforcers have begun looking at the terms Apple Inc. set this week for media companies who want to sell their content on its popular iPad and other devices, according to people familiar with the matter.
The Justice Department and Federal Trade Commission's interest in Apple's new subscription service is at a preliminary stage, and might not develop into either a formal investigation or any action against the company. But it comes as Apple has attracted growing antitrust scrutiny in the U.S. and Europe.
The swell deal Apple is imposing on agreeable content providers calls for it to get 30 percent of the revenue a media company generates from sales through Apple, while making it impossible for customers to buy the content cheaper elsewhere -- like at the content producer's site.
Apple has made a huge blunder here, one likely born of arrogance. The phenomenal success of the iPad seemingly has led the company to believe it can act in a high-handed manner with business partners, without repercussion. It's doubtful Cupertino was prepared for the initial negative reaction to its content subscription system.
Likewise, Apple probably was surprised by Google's immediate response -- announcing a content subscription plan with a much lower take (10 percent) and more generous provisions for media companies (see link above).
And now Apple's hardball terms for content providers are drawing the attention of antitrust regulators. With chief executive and product visionary Steve Jobs out with seemingly serious medical issues, the timing for Apple couldn't be much worse. Expect some serious backtracking by Apple -- less restrictive pricing and linking policies and a lower commission rate, for starters. This was a power move that blew up in Cupertino's face.
Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.