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A new release of the Mac OS and version of Apple xCode, the Apple owned tool for building applications for Mac OS X in C++ or Objective-C, always brings with it a measure of hype into the Mac OS developer community that can occasionally slop over into the Mac OS user base. But I have yet to date see a release of a developer tool, let alone an SDK, receive this much attention since the original public showing of Java – yes, the Apple iPhone SDK. And this isn’t even about the actual release, but the availability of the beta! The final release is scheduled for some time around June, 2008.

I don’t want to talk about the technical details of the release, but as John Milton put it, to justify the way of God to men on the release format and what the business implications are for the release and the iTunes Store venue. Along with the interfaces, you get an updated version of Apple xCode. Like most developer releases, you should always expect to be running Apple tools on the newest generation of processors and the most up-to-date version of the operating system. Yes, that means as a hard core developer, you need to have a modern computer and the most modern version of the operating system – if you are a starving student on an old PPC Mac, you are out of luck. While backwards compatibility would be nice for the unmonied, at the end of the day, Apple – like any sensible company that is giving its tools away for free – needs to control its costs. Getting you to upgrade means you aren’t actually developing for free, but it does mean Apple can release tools sooner rather than later. Apple is also offering an official developer program for iPhone for $99, which if it just answers one question for your commercial product – more than pays for itself.

Why the New Version of xCode?

If your experience with cross-platform development consists of working with products like Runtime Revolution or REAL Software’s REALbasic, you’ve been mostly protected – unless you go out of your way to support native features – from historic cross platform issues such as the nuances of operating systems. On the other hand, except if you were using these products during the move from the PPC processor to x86 architecture, you didn’t really have to worry about the hardware end. Apple’s move from PPC to x86 was extremely smooth, and a real joy compared to the move from the Motorola 68000 series to PPC.

With the Apple iPhone, you don’t have a move to a huge assembly of parts in a spacious tower case, but an entirely new hardware framework that has to also include a (for its size) spacious screen and the ability to synchronize data very, very quickly.

If the hardware end fascinates you, there are plenty of tear downs available – check them out on Apple Insider and YouTube.

So first things first – at least with this release, hold Apple blameless for making you upgrade your development tools and extracting $99 – or even making you upgrade your hardware. I am sure these will more than cover Apple’s out of pocket costs but it really isn’t asking all that much. Windows developers – you are out of luck. Your development tool set is going to cost you at least the sell in cost of a Mac Mini at $599.

The Apple Walled Garden

It has been widely reported that you will follow Apple guidelines in developing your applications – or else. While this annoys many, Apple doesn’t want to get your tech support calls.

Back in the early 1990’s, I used to sell Now Utilities – a great set of utilities that patched the Mac OS. Since it patched the OS, it generated a huge number of support calls to Apple whenever a modest update to the operating system was released. Apple knows the pain it is avoiding here, and does not want its technical support center getting called about your applications.

Say all you want about preserving user experience – this is a real cost issue.

The iPhone and iTunes Monopoly

If you want to sell your iPhone apps, you will do so through the iTunes store – and Apple’s taking a 30% cut.

That certainly does monopolize how you sell your application – but these types of constraints are nothing new if you have been in the game or console industry for more than just a few years. Remember the Super Nintendo? Back then, you had to buy your cartridges from Nintendo, and you only got them if you could pass Nintendo’s rigorous quality standards – and morality standards for specific target markets. While life became somewhat easier after the release of the original Playstation, instead of paying for both the media and a royalty on game runtimes, you only had to pay the royalties. This is really nothing new. If you ship games on most platforms, you are paying the console game maker – Nintendo, Microsoft and Sony – just for the right to develop and deploy those games. This is how they get by with selling the consoles so cheaply compared to their cost.

You also do not need to look any farther than Microsoft for a parallel system in deployment of XNA based games through xBox Live. Microsoft also just announced at Game Developer Conference that you’d be able to develop Zune games using the same methods.

Spurious Comparisons

The 30% that Apple is asking you for – is that a lot? A small number of shareware and traditional developers have sent me their praises and complaints.

For those who have saddled themselves with expensive online processing systems to make their small business more convenient to run, this seems like an excellent deal. It really isn’t a good comparison. Most expensive online processing systems are just that. They add convenience, but they don’t add any value in improving your sales in a strategic way. You could say that iTunes Store does give you strategic value – because its the only place you will buy apps, and not being there means you have no business on the iPhone using the SDK. You should say that Apple is doing you a favor by ensuring that you are forced to carefully reconsider if your solution could be delivered as a web application.

For those who use business systems that pare merchant costs down to below 5%, it may seem positively tyrannical. If you fall into this group, chances are you are not already selling through traditional resellers.

Traditional software resellers do not give you anything for free when it comes to marketing, and you are giving them somewhere between 20-40% of your list price. Just based on margins – the iTunes Store is a good deal – except for one thing: it is effectively your exclusive reseller. This is a huge upside to Apple, because in order for you to market your product, you are effectively marketing the iTunes Store – all roads lead to iTunes Store. The downside is that you are at the mercy of the choices that Apple makes – which iTunes Store your product can appear in (limiting access to specific locales) and limiting how your product is presented at the point-of-purchase.

From a strategic perspective, the iTunes Store monopoly shouldn’t make you happy. You aren’t gaining anything by being in there, except that its the only game in town and not being there means you aren’t in the market at all. That being said, this could also be a non issue for you if you can segment out your iPhone application business from the rest of your business, and that segmentation doesn’t bring with it additional disadvantages. Ill save the details on this, including some work-arounds, for a future discussion.

Deal or No Deal

So is this a good deal or bad deal for developers? While the answer is far more complex than a simple yes or no – Ill still give it a shot. Deal! If you are already developing on the Mac and you can carefully segment out your iPhone application from the rest of your business strategy, there isn’t a big downside to this. Your tool cost is low – not free – but low. And since the exclusivity doesn’t impact your strategy with proper segmentation, the 30% cut Apple is asking for is entirely reasonable.