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Why ComiXology ditched Apple's in-app purchase system

ComiXology made some big changes over the weekend, removing in-app purchase from its iOS app. In the same breath, the digital comics reader added in-app purchase capabilities to its Android app, using its own payment processor rather than Google’s. These moves come less than a month after Amazon bought ComiXology, adding fuel to the speculative fire about why ComiXology is overhauling its mobile offerings.

The ensuing outcry over what ComiXology did could fill a trade paperback. But lost amid the alarmist, rhetoric-filled rants proclaiming the death of digital comics and freedom of choice are a few key facts about ComiXology’s decision. The bottom line: There are no broadly-painted, black-and-white villains here, and this move could, in the long run, be better for people who love comics.

The rationale behind ditching the shackles of Apple’s in-app purchase system certainly centers around money, to the tune of millions of dollars. More important, it’s about a developer reasserting control of its platform. Yes, there’s a cost to radically changing how users get their comics fix—you now have to visit the ComiXology website to buy issues instead of purchasing them from directly within the iOS app. But there are deeper issues at stake with regard to what is available for sale in the first place.

Behind the Amazon deal

First, though, we need to consider why ComiXology chose to link up with Amazon. When ComiXology entered the market several years ago, the digital comics publisher had chosen a niche within the book market that none of the major players—Apple, Amazon, and Google—had much interest in, nor had done anything on their own to define. It was only after ComiXology reported a big year in 2011 that those three companies made a move into digital comics. That was the year where ComiXology reportedly grossed $19 million, making it the top-grossing non-game app in Apple’s iOS App Store. With Apple taking 30 percent of any in-app sales, that would put Cupertino’s slice of ComiXology sales at anywhere from $4 to $8 million, depending on how you estimate the total sales.

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iOS devices owners who want to buy comics through ComiXology will now have to do so through the company’s website and not via in-app purchase.

That 30-percent payout to Apple and Google for payment processing was a cost of doing business for ComiXology. The overhead is mandatory with Apple, and optional with Google if you have your own payment processing backend. In either case, the payments give you the pleasure of offering in-app purchases on iOS and Android; they did not defray any file hosting, bandwidth, or other costs. One of the primary benefits Apple touts is the promotional value of being on its increasingly-crowded storefront. In ComiXology’s case, that promotional value turned out to be just its presence in the store.

After ComiXology took in $19 million, Apple and others began raising their game as competitors in digital comics; even then, they were slow to move. Take comics giant Marvel: The Marvel app from ComiXology launched in 2010, but it took another two years before Apple finally added Marvel comics to iBooks. From ComiXology’s standpoint, it needed to find a suitable partner or face mega-companies with large-scale publisher leverage squeezing them out of the very market they had ignited.

ComiXology also found its content running afoul of Apple’s rigid guidelines about what could be sold through the App Store. Take the case of the series Sex Criminals, banned from being sold through the in-app purchase feature on ComiXology, and yet, still available for sale within Apple’s own iBookstore. That wasn’t the only incident where ComiXology might have felt it was being held to a different standard than other parts of Apple’s digital content stores, and it’s hard not to see that as an equally strong factor in the company’s decision to break out from Apple’s controlled ecosystem.

Did all those content restriction issues with in-app purchases motivate ComiXology’s latest moves? “As we move to complete the acquisition with Amazon, we are shifting to the web-based purchasing model they’ve successfully used with Kindle, which we expect will allow us to strike the best balance between prices, selection and customer experience,” says ComiXology vice president of communications and marketing Chip Mosher. That may read like a boilerplate response, but I’d wager it has more contextual meaning than it’s been given credit for thus far.

Better for creators

It’s safe to say that dropping in-app purchases in the iOS version of ComiXology hasn’t garnered rave reviews. Comics legend Gerry Conway summarily denounced the changes on Sunday. Getting rid of in-app purchases “is a very big deal,” Conway wrote, “because it strikes to the heart of what made Comixology’s app a near-perfect venue for discovering and falling in love with new comics, a venue creators and publishers have been searching for since the collapse of mainstream newsstand distribution in the late 1970s-early ’80s: it destroys the casual reader’s easy access to an impulse purchase. And that’s a terrible development for the future of comics.”

On social media, people hailed Conway’s take as what a real creator in the know thinks. As much as I deeply respect Conway, though, he hasn’t produced “first-run” comics work since well before the digital comic sales explosion began. I find more relevance in a pair of tweets by Chris Roberson, who is not only actively doing new comics work, but he’s also an indie publisher.

There are three very important points to keep in mind about the changes to the money involved in ComiXology’s new approach to selling comics to its users:

  1. Amazon is not absorbing, nor can it contractually subsume the 30 percent that gets paid to Apple from in-app purchases: By purchasing ComiXology what was previously ComiXology’s “piece of the pie” is now Amazon’s. That piece grows, but the publisher’s portion also grows, and therefore the amount that can be paid out to creators is larger. I asked ComiXology’s Mosher directly: Will the reduced overhead mean that more revenue can and will go to creators, whether they’re big-time publishers or independent creators? “Yes,” he said.
  2. Creator royalties are calculated based on gross revenue, so creator royalties will increase without the 30 percent cut off the top: Every publisher has different terms with ComiXology, and creators all have separate contracts with their publishers. If creators have royalties in their contracts, the gross revenue that’s calculated off of each individual comic sold is higher, period. One cannot account for the confidential terms of individual publisher agreements with ComiXology, but without throwing those out and starting over, Amazon cannot suddenly start dictating new terms, nor does it benefit from doing so.
  3. Should DC, Marvel, Image, Boom, and others retain IAP within their branded, ComiXology-backended apps, those purchases still sync up with the new ComiXology app: “As always, we are a buy once, read anywhere platform,” Mosher told me. “Any purchase on any part of the ComiXology-powered platform will sync with any other part of the platform.”

So from ComiXology’s perspective, having Apple in place as a middleman was a choice, not a requirement. And over time, the choice became less attractive for the company. Some industries can support giving away 30 percent of their sales; the comics industry, where the margins are razor thin as it is, cannot. Comics need fewer middlemen, not more. And that’s why ComiXology moved in a new direction.

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