Steve, it isn’t that you have these policies that is the problem, especially if they were in place when you made it possible to develop for iPhone. The problem is that these changes and decisions come from some hidden agenda, and that any developer at any time could be excised for doing nothing more than following your own guidelines.

Around the Internet: Slashdot | Reddit | The Guardian | Macworld Australia | TechCrunch

Perhaps consequentially, app stores are the preferred distribution model for only 15% of North American developers, with over half preferring direct sales to end-users or enterprises.

The reality of retail outside of the App Store is that retail demanding a 30% margin is not fantastical. In fact, a range between 20-30% on software titles as a retail margin are the norm. Retail provides vendors with the floor space love necessary to connect with the end user. As a venue with a complete monopoly over iPhone and iPad applications, App Store does not make any special promises comparable to real world equivalents that differentiate it from the basic service model provided by resellers.

If 85% of the developers believe the service is overpriced, and over half of app store developers responding prefer direct sales to end users and enterprises, it is possible they perceive the App Store as simply a credit card charging service, or at best, something akin to Kagi or other shareware sales venues.  I would otherwise think it a poor comparison because Apple does provide reseller value to the developer. The major difference between the App Store and a normal reseller relationship is that the App Store holds a monopolistic control over 100% of revenues generated from app sales (it is possible to generate other revenue from apps, but not on the app itself)  as well as extreme authorial control through SDK restrictions. This casts the 30% in a different light – if a reseller gets a percentage of all revenue generated, it is entitled to the same percentage that’s the norm in retail? Certainly Apple thinks so.

Another conclusion about the unhappy developers is that they know enough about how to set up a basic sales website and would like to shrink their overhead costs down to modest website upkeep and credit card fees. That makes sense. With so many App developers previously or currently being Mac OS X application developers as well, they may already have the infrastructure in place to do just that – they know they can be paying 5% or so on those sales instead of a mandatory 30%, at least for some of their sales.

Now in beta, Rev Mobile will allow deployment to mobile platforms, including iPhone and iPad. You can get started though working with Runrev by downloading the free Revolution Media.

I don’t want to jump on another Snakes on a Plane style  iPad discussion, but I will admit that the iPad is an interesting mobile platform as an extension to the iPhone platform. Revolution is blossoming into an incredible cross-platform development tool already. It already has a powerful 3D engine as well as Valentina DB support.

iPad vs Flash

Apple employees are conditioned not to leak news, so when every Apple loving tech journalist reports how  Steve Jobs slams Flash at an Apple employee meeting, it is as obvious as when he puts on a presentation at Moscone Center. The reasons for whatever Apple does are undisclosed business reasons.  Sure, Flash can be buggy on the Mac. But the responsibility is between Adobe and Apple – not just Adobe. I am reminded of this every time I try to open some PDFs on Mac OS X just to have them crash Apple’s Preview, or when Apple Quicktime crashes Firefox when trying to play back videos in a browser.

iPad vs Netbooks

Netbooks are just one of a collection of low cost computer devices – one that gives you complete freedom in a computer that isn’t tied to the App Store walled garden experience. Steve clearly hates them because the Apple laptop is a premium product at a premium price. Netbooks as they are now are computers. The iPad isn’t a tablet Mac – it is a big iPhone that gives you a better visual experience because you can see more, making it a brand new channel for content. Of course a Mac tablet already exists – check out the Axiotron.

iPad vs Kindle

I don’t own a Kindle. I have tried out various readers though, and I can appreciate how a standard, reflective screen I look at when I am working isn’t going to give me the same sense of comfort as an optimized reader screen. But the reader screen really isn’t doing anything for me that my paper copy of a book doesn’t do. I applaud Amazon’s announcement of a Kindle SDK to provide additional value on these easier to read devices, but they are going to implement a Kindle App Store as equally walled off as the Apple App Store.

iPad vs Tablet PC

I replaced a truly awful Dell laptop almost two years ago with an HP laptop that converts to a tablet experience. The handwriting system is surprisingly good, and using it to work with Mirye Shade 3D is interesting. But decades of keyboarding have made me a blazingly fast typist in comparison with using a pen of any type. An attachable keyboard is apparently coming for the iPad; give me one that works with the iPhone, just like the collapseable keyboard I used to use with my Palm V and Ill be happy.

iPad vs Snakes on a Plane

Remember this terrible movie? Snakes on a Plane was infamous because it leveraged internet ad placement and the online community to build up hype, much as Sony has done more recently with the much better Paranormal Activity. The iPad could turn out to be a wonderful device, and given the love and attention it has received from Apple, I expect it to be a quality experience.  On the other hand, I think just as the ‘net press helped enable a stinker of a movie, the ‘net press is very effectively doing Apple’s marketing for them, and lionizing a consumer device that doesn’t really change anything.

Id like to be able to swear off the iPad entirely at this point. But like any controversy surrounding Apple, I can’t commit to not coming back with more iPad vs X. Thank you, Steve, for giving a lazy blogger a reason to write.

The Now Sync application though that went with the Palm Pilot was a crippled piece of crap that cost around $30 and generated lots of $25 support calls. The seed though of what I wanted to do though was already there – I wanted to leave the laptop in Portland can carry only the Palm Pilot on my regular trips down to San Diego.

Not long later I was able to achieve my goal with a Palm V, foldable keyboard and Palm Modem. But Apple doesn’t want that; they want to sell you on the digital hub life style with as many machines as they can possibly sell you. If you start noticing how, at least according to what Jason says, a previous generation of iPhone is actually more powerful than the one they just announced, you’ll be using your inner computer geek to make your phone choices – you might even want a phone that is not only as powerful as your computer but IS your computer.

I feel reasonably certain that’s why we haven’t seen an external keyboard yet. Sure, you can do a lot with just thumbs, but you probably can’t thumb a 10 page report at 60+ words per minute. It is something I could do on my Palm V which isn’t really possible with the iPhone.

For a 30% margin, Apple is getting a slightly rich return as a reseller, but not an absurd one. Where the problem comes in is that the App Store is pursuing a low price, popularity based strategy. The apps that get the most marketing value are those that sell in the greatest volume. There are some good arguments to this strategy:

• If its cheap, people will more often than not, make the spontaneous buy
• If its cheap, people who are unhappy with it are not likely to take the time to return it
• If the product is also a trend setting product, buying what’s popular has merit (all my friends bought it)
• If its a no touch cost product (direct download, fully automated), your total costs are spreadsheet simple

But this is directly contrary to a product image that is based on premium quality. Look at the return situation:

• You have to offer returns or you invite an unknowable situation where unhappy customers will sabotage you whenever possible
• Returns almost always include a variable touch cost of customer interaction; the more variable your touch cost is, the more expensive its going to be, since its not so easy to automate
• Even with credit card transactions at their lowest, a credit card company will still eat a base fee and a percentage per transaction

The problem is that this isn’t a quality issue – its a transaction issue. The popularity model with such a return policy does not ensure quality.  It is a strategic choice  by Apple to manage their channel costs. iPhone developers cannot make channel based decisions at all since the App Store is the only venue for selling iPhone applications.

Let me preface by saying I wish this wasn’t happening. I am going to MacWorld 2009 myself this year after several years of not attending. There was a period where I attended all of the San Francisco and Tokyo (Mac Expo Tokyo) shows every year.

Consider the announcement – Apple considers its retail presence as a suitable replacement for reaching millions of customers – a replacement that is 100% under its control and increasingly a venue more for the iPhone and iPod than for the Mac.

Now consider the following:

• Apple placed retail outlets after leveraging the many years of data supplied by thousands of resellers about where their customers were, and their buying habits
• Apple’s Made for iPod logo system ensures that if its non-Apple hardware that attaches to iPod (or iPhone), those non-Apple makers are going to pay and submit to Apple’s review (hey, where’s my attachable full sized keyboard like I had for my Palm V?)
• How much of an Apple Store is devoted exclusively to the Mac? Apple has done a brilliant job in using the popularity of the iPhone and iPod to promote the Mac by placing an iPhone or iPod next to each computer – come on, isn’t the Mac now just a peripheral to the iPod?
• Apple has made it virtually impossible to sell any third party application for the iPhone except through the App Store; the iPhone itself is carefully distributed and only available unlocked in markets where its otherwise illegal not to provide an unlocked option
• In the last several years, how many new and innovative products appeared at MacWorld that were either 1) not from Apple itself, or 2) not something new for the iPhone or iPod?
• Of the products Apple does want you to buy for the Mac – well – it makes the only ones that really matter, except for a few applications that aren’t strategic for them. Ask yourself – how many Adobe or Microsoft Mac products do not have an Apple made equivalent now?

Back in the mid 1990’s, if you went to a MacWorld, you saw some large and impressive third party booths from both hardware and software makers. In San Francisco, they would fill two large halls to capacity.  Just filling one hall in the last few years has been a challenge. And this sums it up as to why -

Apple dropped the “Computer” from Apple Computer because they are a digital lifestyle company, not a computer company. The Mac is just another object in a chain of consumer electronic objects it wants to sell you. And end-to-end, it controls every aspect of its products: from manufacturing to end customer purchases.

All of Apple’s software development, business expansion and acquisitions since the return of Steve Jobs have been to remove the ability of third parties to influence the stock value of Apple, while at the same time expand into new and profitable markets.

Sadly, a third party run, Mac specific show is just another third party influencer outside its control. How much bad press gets generated when Apple doesn’t release – or even announce – something new at MacWorld? Why would a company allow itself to be influenced by a third party event in a way that could impact its valuation?

And that’s it, right there. I know when I go to a MacWorld Expo – dammit – I want something new and special to come out for the Mac. And if there’s nothing, I think bad thoughts about Apple. Why would Apple need that when they can reach me when they want to, through a local mall?

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.