Justice Department Implores Judge to Punish Apple, Change iOS Content Ecosystem

doj-sealNow that the U.S. Department of Justice has won the first round of its case against Apple over the matter of ebook price fixing, it’s seeking to punish the electronics giant and change the way content is sold on one of the world’s largest app ecosystems.

According to documents filed with the Southern District Court, the DOJ wants Judge Denis Cote to force Apple out of agency sales agreements for five years and to allow third parties to sell content through apps without paying a 30% commission to Apple.

Should Judge Cote, when deciding how Apple should be punished for fixing the price on ebooks, decide on the DOJ’s proposed remedy, it would change the way content is sold through the Apple app store and have a material effect on the company’s content sales business.

In the first nine months of fiscal 2013, Apple had net sales of $11.8 billion for its “iTunes, Software and Services,” about 8.8% of its $133.4 billion in revenue over that period. This segment includes “revenue from sales on the iTunes Store, the App Store, the Mac App Store, and the iBookstore, and revenue from sales of AppleCare, licensing and other services,” according to Apple’s latest filing with the Securities and Exchange Commission on its third-quarter performance.

Not only would Apple’s steady stream of revenue from these content stores be in jeopardy, but the cost of running these businesses would undoubtedly increase. Today, once an app is approved for sale in the App Store, the publisher sets the price and Apple takes 30%, no matter what it is. It requires no management or decision-making on Apple’s part. If the company were forced into a wholesale model, it could require more people and systems to manage putting into place new pricing schemes. If a publisher sells an app to Apple for $2.99, what price would Apple set? How will these decisions get made?