Original URL: http://www.theregister.co.uk/2011/02/25/apple_under_siege/

Apple under siege: Antitrust probes and product delays ...

Will developer backlash be too powerful for Apple this time?

By Wireless Watch

Posted in Mobile, 25th February 2011 12:23 GMT

Apple is accustomed to a few months of over-excited headlines at this time of year, in the build-up to the refresh of its mobile product line, and its iPad 2 should, indeed, turn up next week.

But this week the company is under huge pressure, and negative comments are flying, indicating the new environment in which it will have to work, at least on the mobile side – one where its leadership is being undermined by Android and it will have less power to ignore or dismiss the hailstorm of criticism of its practices.

This week we have seen publishers erupting in fury at its new subscription charges, which have already attracted antitrust probes. Also, there are rumours of a delay of several months to the iPad 2, and a slackening of iPhone sales momentum in the face of Android, plus the ongoing rumblings about the company‘s need to come up with a clear succession plan for ailing CEO Steve Jobs, on his third period of sickness leave.

iPad 2 delays?

The reports of iPad delays come courtesy of Yuanta Securities analysts via Bloomberg, and cite "production bottlenecks" at assembly partner Hon Hai Precision Industry in Taiwan. The research note says that Apple made design changes earlier this month, and these could push the shipment date back from April to June – an increased window for challengers such as Motorola Xoom and Samsung Galaxy Tab 10.1 to get into the shelves ... and the consumers' minds.

"Our checks suggest new issues are being encountered with the new production and it is taking time to resolve them," said Yuanta analysts Vincent Chen and Alison Chen. As a number of Android 3.0 tablets are being launched in April and May, the delay in iPad 2 shipments may give the Android camp a brief window of opportunity. If the two-month delay (from a date that was never confirmed by Apple in the first place) does materialise, Yuanta will reduce its shipments forecast for the device from 30.6m to 23m units. Apple has sold 15 million first generation iPads to date.

In further signs that the Apple machine may be less invincible than it used to be, the iPhone has slipped to sixth place in the affections of the UK, traditionally one of its strongest markets. This is the finding of a mobile tracker survey from uSwitch.com, which shows HTC dominating the smartphone rankings in February to date. The HTC Desire was the bestselling smartphone in the UK on several occasions last year and still tops the uSwitch rankings, followed by its Desire HD upgrade and a third HTC model, the midrange Wildfire. After that comes BlackBerry Curve 8520, Samsung Galaxy S and iPhone 4.

The main factor is the rising number of attractive deals associated with Android handsets, says the tracker, with highly spec‘d smartphones, especially the Galaxy S, being offered for free with two-year data contracts as low as £20 a month. Ernest Doku at uSwitch.com commented: "The competition is taking a huge bite out of Apple's market. And with over 800,000 deals currently giving away a smartphone for free, it's easy to see how consumers are being lured away. HTC has outsmarted the smartphone market by customizing its handsets at a range of price points, as seen by the Wildfire acting as an aspirational Desire.

The subscriptions row

The most serious problem for Apple has been the row over its new content-subscription charging policies and its latest tussle with anti-trust authorities looks set to center on these unpopular arrangements. According to The Wall Street Journal, several US regulators have started to scrutinise the terms and conditions Apple is imposing on iPad content suppliers, and the European Union is monitoring the situation.

Any investigations are at an early stage, and may not progress further, but they are reported to center mainly on allegations of "funnelling". In other words, media firms are encouraged to sell via the App Store, so that Apple can gain its 30 per cent cut of the revenue. The partners are not actually barred from selling in other stores, but they cannot offer a better price elsewhere than in Apple‘s shop, and apps cannot link directly to other content sources.

The issue came to light when Apple barred a Sony ereader application from the iPad and iPhone, because this would have linked to Sony‘s own eBook Store, depriving Apple of its share of the revenue when a consumer purchased a book to read on an iPad. Apple has not yet engaged in the expected face-off with Amazon over the same issue, but may hold back from that to avoid quickening the antitrust bodies' interest further. Last year, it was forced to relax its restrictions on apps created with Adobe Flash following probes by the EU and the US Federal Trade Commission.

Apple sparked publisher fury last week when it introduced its subscription scheme, which could "blow it" with valuable partners, as Forrester Research CEO George Colony put it in a blog post.

Colony thinks that Apple‘s success has gone to its head and it is overpricing subscription fees in iTunes Store, which should be about 5 per cent. "Apple is blowing it," he writes. "This time around, Apple's hostile position could result in a 2014 App internet market that looks something like this: 80 per cent Android, 10 per cent Apple, 10 per cent other."

Responding to complaints by email, Jobs wrote: "Our philosophy is simple: when Apple brings a new subscriber to the app, Apple earns a 30 per cent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 per cent and Apple earns nothing.

"All we require is that, if a publisher is making a subscription offer outside of the app, the same (or better) offer be made inside the app, so that customers can easily subscribe with one-click right in the app. We believe that this innovative subscription service will provide publishers with a brand new opportunity to expand digital access to their content onto the iPad, iPod touch and iPhone, delighting both new and existing subscribers."

Digital music service provider Rhapsody issued a statement calling Apple's conditions "economically untenable", adding it will consult with similar companies to determine an appropriate legal and business response. Publishers are also unhappy at Apple's reluctance to share subscriber data.

Copyright © 2011, Wireless Watch

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