economics

Apple’s Advocate Explains the Grab for 30%

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Like many, I reacted very negatively to Apple’s new policy: any paid content inside iOS apps be available through Apple’s subscription system, must be available at the lowest price, and must give Apple a 30% cut of that price.

John Gruber has written a very thorough analysis of the popular arguments against this new policy, and attempts to divine Apple’s reasoning for implementing it:

Apple doesn’t give a damn about companies with business models that can’t afford a 70/30 split. Apple’s running a competitive business; competition is cold and hard. And who exactly can’t afford a 70/30 split? Middlemen. It’s not that Apple is opposed to middlemen — it’s that Apple wants to be the middleman. It’s difficult to expect them to be sympathetic to the plights of other middlemen…

This is what galls some: Apple is doing this because they can, and no other company is in a position to do it. This is not a fear that in-app subscriptions will fail because Apple’s 30 percent slice is too high, but rather that in-app subscriptions will succeed despite Apple’s (in their minds) egregious profiteering. I.e. that charging what the market will bear is somehow unscrupulous. To the charge that Apple Inc. is a for-profit corporation run by staunch capitalists, I say, “Duh”.

Gruber has scored a direct hit on Apple’s strategy, and his explanation makes it seem very solid for Apple, its customers, and content creators. The biggest losers are Apple’s competitor middle-men. I think Apple’s main interest is being the best damned middle man in the business. The only problem is that some of those middle-men make products I really like, and Apple will only play ball with them if Apple gets to make the rules.

Daring Fireball: Dirty Percent

Responsible Economic Recovery

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The Bush administration’s proposed $700 billion, no-strings-attached bailout of the financial industry is meeting strong opposition from Congress on both the left and right. Senate Banking Committee chairman Chris Dodd, a Democrat, said, “What they have sent us is not acceptable.” Kentucky Republican Jim Brunning said the plan would “take Wall Street’s pain and spread it to the taxpayers… It’s financial socialism, and it’s un-American.”

Not only is this plan risky, but it’s extremely expensive. For comparison, the “liberal,” Democrat-written economic stimulus act passed earlier this year totals $256 billion – $904 per American. (This includes spending over the next 10 years, not just the tax rebate check this year.) The Bush bill would give up to $2293 directly to irresponsible businesses on behalf of every single American. Conservatives, please take note!

The current financial crisis must be dealt with quickly – if we take no action, we will be in a horribly worse situation. But we have to make sure that we take the right action; there are no second chances at this. The rationale for any government intervention is that preventing the failure of these huge companies is not in the public interest. Indeed, if some of these huge companies were to fail, it would have a devastating impact across America. By contrast, the Bush bailout is simply a $700 billion check to the companies that are reaping the consequences of their irresponsibly risky actions.

The federal government must take actions that are truly in the public interest. This means not only keeping these huge companies from failing, but making sure that they cannot continue to take advantage of middle class Americans who are already struggling. Regulations must be put in place to ensure that taxpayers’ investment in these companies actually will benefit them.

The Barack Obama campaign has started a petition online for an economic recovery plan that actually works for Americans. This issue is clearly not a matter of left versus right. Americans need to come together and demand accountability and responsibility from big business and Washington as they plan our economic future. I encourage you to go sign it – this isn’t about Barack Obama or John McCain, or left versus right. It’s about protecting all Americans.

Here is the text of the petition:

Show Your Support for a Responsible Economic Recovery Plan
We are facing a financial crisis as profound as any we have faced since the Great Depression.

Congress and the President are currently debating a bailout of our financial institutions with a price tag of $700 billion in taxpayer dollars. We cannot underestimate our responsibility in taking such an enormous step.

Please sign on to show your support for an economic recovery plan based on these guiding principles:

  • No Golden Parachutes — Taxpayer dollars should not be used to reward the irresponsible Wall Street executives who helmed this disaster.
  • Main Street, Not Just Wall Street — Any bailout plan must include a payback strategy for taxpayers who are footing the bill and aid to innocent homeowners who are facing foreclosure.
  • Bipartisan Oversight — The staggering amount of taxpayer money involved demands a bipartisan board to ensure accountability and oversight.

Of Stocks and Bailouts

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My eyes have been pretty much glued to Google Finance for the last two days, what with the biggest stock drop since 9/11 and all. It’s interesting to watch pan out… I’m not incredibly pessimistic about things in the long term, but it makes me wonder how much our economy will change in terms of who pulls the strings.

Merrill Lynch got really lucky and was bought out by Bank of America, saving them from bankruptcy or a federal bailout. Bank of America’s been doing OK, but I have to wonder what will happen when they grow so big that the federal government can’t afford for them to fail. Will they get bailed out? At what cost?

I noticed that my bank, Wells Fargo, has done pretty well through all of this. Word is that they’re much more conservative in their commercial banking and mortgage operations, and didn’t bring financial hell upon themselves because they weren’t giving out crap mortgages in the first place.

More disturbing to me is how the Fed will be bailing out AIG, the country’s largest insurance company, and taking an 80% ownership stake in the company. This means that the federal government will own the country’s largest insurer. While I don’t completely subscribe to laissez-faire economics and politics, this definitely seems a bit off. Let me get this straight: our government is buying the biggest parts of the so-called “free-market” at the same time that it takes out huge deficit-spending loans from China to finance its prolonged occupation in a country that has its own budget surplus.
Yes. That most certainly makes sense. Now if you would please excuse me while I go wring out this towel that’s dripping with sarcasm.

I’m not opposed to socialized government ownership of things. But with how our government is handling the economy in a system that’s designed to minimize government interference in such things, it makes me think twice about putting the same people in charge of more stuff. (side note: Bush and McCain are still plugging our economy’s resilience and strength. Hmmmm…)