The Tablet Wars are on.

Yes, the long-anticipated deluge of tablets is finally upon us. The iPad had the market to itself from its launch in April 2010 up until now – almost an entire year. And what a year it was for iPad sales. According to KPCB industry analyst Mary Meeker, Apple sold nearly 15 million iPads in the 3 quarters after its launch. This dwarfs the introduction of the iPhone, considered a phenomenon at the time. There is no doubt that Apple has found (or created) a market for a new form factor. Its imitators, while slow in coming, are finally here to cash in.

On the operating system front, Apple faces competition to its iOS platform in the form of Google (Android), HP (Web OS), Microsoft (Windows 7),  and RIM (Blackberry Tablet OS). In terms of device manufacturers, new tablets have just been introduced or are on the way from Samsung (Galaxy), Motorola (Xoon), HP (Slate), RIM (Playbook), and Dell (Streak) among others.

This onslaught arrives just in time as Apple is behaving badly. Or maybe they are behaving badly because of the new influx of competition. Either way they are really mucking things up for publishers.

In case you haven’t been following the various pronouncements from One Infinite Loop, here is the recap:

On February 1, the New York Times reported that Apple rejected a new app from Sony that was designed to allow purchases on the Sony Reader Bookstore. In other words, Sony submitted an app that was more or less the same as the Kindle app that has been available on the iPad since launch. For those not familiar with the Kindle app, it works like this: When you want to buy a book from within the app, you click on the “Kindle Store” button which opens a web page where you can buy the book. After buying it, Amazon whisks the digital file back to your iPad, returns you to the app, and voila— you can start reading a few seconds later.

It is a fairly seamless user experience and has the advantage from the user’s perspective of being device agnostic. That same digital file that is sent to my iPad is also available on any other device that I want to read on, including non-Apple devices. So y0u can read the same book on your Kindle reader, your Android phone, your Dell desktop, etc. And what is more the app will keep track of where you are in the book. This is what Kent Anderson referred to as the “Me at the Center” orientation of information whereby your stuff follows you around and knows where you are. From Apple’s perspective, however, all of these transactions happening elsewhere (e.g. in the Kindle Store or the Sony Reader Store) are transactions that it does not have a piece of.

And by a “piece” it means a whopping 30%.

Apple’s notion is that it will now receive 30% of all in-app purchases. And while it will allow purchase to be made elsewhere (e.g. via the publisher’s web site), no longer can publishers link out from within the app to make such purchases. Moreover, Apple additionally requires that if a publisher does allow purchases outside of the app, the same offer be made inside the app. Think about that for a moment: If Apple requires a 30% fee for all Kindle books sold via the iTunes store, where does that 30% come from? Does that come out of Amazon’s share or the publisher’s? Or do we have to raise prices across the board and force consumers to take the hit?

Just as the shock waves from Apple’s rejection of the Sony app were reverberating, Apple reinforced the point in their announcement of support for subscriptions within iTunes. It has long been a source of frustration for publishers that iTunes does not support subscriptions – forcing users to either purchase each issue of a periodical separately (e.g. the New Yorker or the BMJ apps) or to subscribe outside the app at the publisher’s web site (e.g. the Wall Street Journal or the Economist apps). Unfortunately, the solution that Apple has come up with only makes matters worse.

To pull out a few of the highlights:

• Publishers can no longer sell digital subscriptions on their websites unless they also make an in-app subscription option available (in other words, the Economist/WSJ model is no longer permitted).
• Publisher will forfeit 30% of in-app purchases to Apple.
• Publishers can’t link out to their own websites for transactions.
• Publishers will not receive any information regarding who their subscribers are except on an opt-in basis and will then receive only the sparest of data.

It is of course fair for Apple to exact a fee for purchases made in its store, just as all retailers have a markup on the goods they sell. Newsstands have markups of well over 30%, for example. What crosses the line, however, is Apple’s attempt to control sales taking place outside its store. If a publisher wants to avail itself of Apple’s installed base of one-click app store users, great. Apple can charge whatever it wishes for that service. The notion that publishers must use Apple’s store, however, is a case of Apple taking its closed-system mindset a step too far.

Moreover, the last bullet point about about user data is also particularly troublesome. While Apple portrays its policy as protective of user privacy it is, in fact, deleterious to user experience. If Netflix or Amazon or the Economist does not know who I am, they cannot provide the “Me at the Center” experience that I have come to expect.

While Apple’s announcement no doubt made many publishers lose their appetite, it made Eric Schmidt’s day. Twenty four hours after Apple’s press release the Google chairman paused during a trip to Berlin to announce One Pass, a new service from Google that provides a mechanism for publishers to sell digital subscriptions using a variety of business models. One Pass ties into both Web sites and mobile apps “in instances where the mobile OS terms permit transactions to take place outside of the app market” (meaning everyone but Apple). While Google also intends to a levy a substantive (but not outrageous) fee of 10% for One Pass, they will in turn provide far more customer data than Apple. Moreover, the Android platform in no way requires One Pass – publishers are free to use their own ecommerce and authentication services in their Android apps, bypassing One Pass entirely.

What does it all mean for STM and scholarly publishers? Apple’s new policies hit our community particularly hard for those publishers looking to the iPad as an additional source of incremental revenue. The Economist model of outside-of-app purchasing is well suited to our content as it is high-value and often must-have information that professionals will seek out and pay for. The impulse-buy enabled by the one-click in-app purchase is just not going to drive sales the way it will for a consumer magazine. Moreover, renewal rates for STM and scholarly periodicals are high — often topping 90%. So while it is one thing to pay 30% for new business it is quite another to pay that rate for renewals. Again, for consumer magazines with higher subscription churn this is not as big an issue.

On the other hand, STM and scholarly publishers have some options that are not open to other types of content providers. Many publishers are membership organizations that can bundle online access (and app access) with membership, thereby side-stepping Apple’s rules. Moreover, enabling institutional access via paired devices or institutional sub accounts provides another mechanism for publishers to add value without providing the 30% tariff to Apple and while retaining user data. A prudent strategy for many STM and scholarly publishers may be to focus on adding value (and raising prices) on membership and institutional subscription access and bundling mobile delivery into that price.

For those publishers that wish to provide a smartphone experience, a mobile-optimized view may be the best approach. Web delivery bypasses any onerous platform restrictions, delivering content in a mobile browser with an optimized reading experience. Users can be authenticated to a mobile optimized edition using the same protocols employed for desktop reading, thus maintaining the delivery of user data and ensuring a “Me at the Center” user experience.

For those publishers that wish to provide apps native to mobile devices (and especially tablets), it may be time to start looking beyond Apple. While the iPad has by far the largest installed base, if the smartphone market is any indication it will not take Android et al. long to catch up. Especially with Apple doing everything possible to encourage publishers and other content providers to focus their energies on competitive platforms.