The battle of Apple and Google subscriptions

Two different models and two different philosophies, but which of the US giants will win out?

That's not the only problem in Apple's near horizon, though.

Last Friday, US antitrust regulators started examining Apple's new subscription system, which is being investigated by both the Justice Department and the Federal Trade Commission. The European Commission also announced an investigation.

They are looking into whether Apple is funneling customers to its app store instead of letting them conduct their transactions wherever they decide. Also under investigation is the 30 per cent margin Apple is set to receive on those transactions.

When we contacted Apple to ask whether or not it had violated US or European antitrust laws the response was "no comment."

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Alan Davis, a partner a lawfirm Pinsent Masons, did have something to say though. He claimed Apple could face penalties of up to 10 per cent of group turnover and the possibility of a damages action by the complainant, if proved to be guilty of trust practices in the European Union.

But would it take for Apple to be punished?

"The European Commission "would then need to prove that Apple is dominant in that market and also show that Apple have abused that dominant position, for example, through excessive pricing and/or imposing conditions that foreclose the market to their rivals (including the complainant)," Davis said.

"This is a complex area of the law and a difficult case for the competition authorities to prove evidentially."

That seems to be the key. Other experts say it will be hard to prove that Apple actually has market power (a necessary condition to abusing that power), unless its market share in the selling of paid content online grows to about 60 per cent.

Apple still has time to rectify things and back up to avoid penalties, according to Davis.

"If the charging mechanism hasn't yet been implemented (I understand changes will be effective from 30 June 2011) there certainly is time to change their mind without the risk of enforcement action and fines being imposed by the competition authorities," he said.

He also pointed out the possibility of a solution to this case in terms of a settlement agreement between the European Commission and Apple, which, is becoming more in vogue for these types of cases. The settlement agreement, he argued, would originate a series of commitments from Apple to the commission.

Enter Google

And yet, things could get worse for Apple.

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Google took only hours to respond to Apple's highly criticised subscription service. CEO Eric Schmidt presented Google One Pass in Munich last week and the product seemed devoid of all the controversial aspects of its rival.

Not 30 per cent of the revenues, but a more modest 10 per cent will be kept by Google.

There is no rigid subscription system, but a more flexible approach allowing everything from a pay-as-you go system based in micropayments for individual articles, to monthly, bimonthly, yearly, or even bi-yearly commitments.

It also will not funnel customers into Google's app store, but allow publishers to set a price and sell their content wherever they want.

Voil! There was Google slapping the face of its enemy, right at the appropriate moment.

The announcement was rather hurried and some clarification is still required, but it was unarguably a great move by Google.

Major publishers announced they had a deal with Google on the first day that One Pass was launched. Among them were Axel Springer and Stern.de from Germany, Nouvel Observateur from France and Prisa, from Spain, publisher of El Pais.

Another publisher to embrace Google's solution swiftly was Focus Online, the third most-read news site in Germany. It now charges 10 cents (eight pence) per article, according to a blog posted on the Guardian website. Focus online currently has "five or six" features a day going through Google One Pass.

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