[FoRK] $100M for iPhone Developers

[Jeff Bone]

On Mar 7, 2008, at 9:57 AM, Luis Villa wrote:

> (2) making the store *exclusive* and taxing every sale by 30% is
> almost certainly a bad thing for incentive and innovation; my guess is
> that it is such a bad thing that it will  I believe in other contexts
> we'd call this a command and control economy, and we know that in the
> long run those don't work very well. But hey, they're consistent,
> UI-wise: http://images.google.com/images?q=russian+propaganda+posters

Nb, the model here is much more like the game console model, where the  
vendor exercises significant editorial control over the platform, than  
it is like the PC model.  And I'm not sure that's entirely a bad thing  
for a mass market;  I would say the market for low-cost (and free)  
software on Windows has suffered from a very high noise-to-signal ratio.

I also don't think this is going to be the exclusive channel.  In the  
last release of the iPhone OS, Apple *did not* completely re-break  
known jailbreak hooks.  At some point it's going to be clear that this  
isn't an arms race they can win indefinitely.  At that point, the mom- 
and-pop ISV has a decision to make:  do you avoid the App Store  
channel and rely on a high level of geekiness in your (inherently  
greatly reduced) target user base to have (a) jailbroken (?) their  
phone, (b) found you on the Internets, (c) downloaded and installed  
your software, and (d) paid for it, or do you just pay the tax and do  
the deal via the approved Apple channel?

If I'm making software for money, I'm going to go the App Store  
route.  It has higher expected returns.

The key thing here is that even small payments add up quickly in a  
mass market.  It's conceivable that the iPhone installed base could  
quickly get into the 100s of millions of units.  Even low-cost apps  
quickly get to mean big money with any reasonable market penetration.   
And a 30% vig to Apple is more than worth it w/ them handling the  
channel, payments, etc.

FWIW, back when we were attempting to do deals with the Magic Cap  
hardware vendors (Sony, Motorola, Phillips, and Panasonic for  
starters) it was common for them to want a piece of the action.  Our  
software had a recurring revenue piece, and they actually wanted *us*  
to pay *them* for access to (i.e., bundling the basic apps on) the  
device, and they wanted a piece of that recurring revenue.  Point  
being, this sort of thing isn't uncommon in the consumer device space  
--- the economics are completely different from what you see in the  
general computer market --- and this isn't at all the surprising /  
appalling thing that some folks are making it out to be.

jb
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