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Friday, February 11, 2011

Anger with Apple pushes firms to Android

The hardline approach taken by Apple towards media companies selling apps through its iTunes Store could push crucial content partners into the hands of competitors such as Google's Android.

Android has been rapidly gaining on iPhone and a slew of new Android phones and tablets are due out in Australia this year from vendors including Motorola, Samsung, HTC, and LG.

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IDC telecommunications analyst Mark Novosel predicts Android will overtake Apple's iOS to become the number one smartphone platform in Australia by the middle of this year. From preliminary IDC findings, by the end of last year Android accounted for about a quarter of all new smart phones shipped.

Apple is now strictly enforcing rules stipulating that all newspapers and magazine subscriptions for the iPad be offered through the iTunes store, ensuring its 30 per cent cut of all subscription sales, as well as that of the app's initial purchase price.

Apple is also asking subscribers if they want their information to be shared with publishers, which could see them lose access to important data.

In Australia, publishers have had their apps rejected for exploiting loopholes that allow them to sell subscriptions and accept payments without giving a share to Apple. Sometimes apps are rejected without an explanation.

With Android, publishers have far more control over their apps and do not have to give a cut of revenue to anyone. But until Android cements its lead, publishers have no choice but to dance to Apple's tune if they want a share of the App Store's spoils - more than $1 billion was spent there in 2010, according to investment bank Gleicher & Co.

Some publishers around the world have said they feel betrayed by Apple's hardline approach as their support for the iPad helped ensure its success. The European Newspaper Publishers' Association was among the first to complain, saying it feared newspaper publishers would lose access to critical information about readers of their digital editions.

Media companies are busily developing apps for Android-powered phones and tablets to ensure their content gets out on to other devices.

But despite their desire for strong competition to Apple, local executives have stopped short of publicly criticising the company, which they rely on to approve their apps.

"Both publishers and consumers will benefit from a competitive tablet market. That will stimulate innovation and pricing competition," said Fairfax Digital CEO Jack Matthews.

"We want to make sure we are developing for multiple platforms so that we can encourage that competitive environment." News Ltd declined to comment.

Patrick Lo, global CEO of home networking giant Netgear, encapsulated the private fears of many media executives at a small lunch gathering in Sydney last month.

He said content providers were very "wary" of Apple as the closed model of iTunes meant they were forced to pay a "ransom" to the company for selling their content on the service.

"Steve Jobs wants to suffocate the distribution so even though he doesn't own the content he could basically demand a ransom," said Mr Lo.

However, Graham Clarke, CEO of the Australian app developer Glasshouse Apps, said Apple was within its rights to impose strict rules over iTunes as it built the mall, so to speak.

"I've never had a qualm with Apple's 30 per cent [share] - I think they earn it a few times over," said Clarke, pointing to the millions of potential customers Apple opens up for app makers. "The opportunity would just never have been there without the App Store ... they handle so much of the process so all that developers have to do is create a great app and put it on the App Store and Apple handles the rest."

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