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Tuesday, March 18, 2008

Is apple adopting monopolistic practices?

Ever since Apple made the SDK announcement for the iPhone app development, I've been pretty excited, for it presents enormous opportunities for the developers to develop some ground breaking apps; mainly because of the embedded accelerometer. I was so excited that I downloaded the SDK the first day it was made available, alas I can install it on a mac only. I am now waiting to learn Objective C 2.0 (suffice to say, a language that I did not like from early days of my programming career), so that gives an idea of how much I had been looking forward to the SDK.

But what I have not been happy about was revenue sharing with apple. The way the whole structure is setup, first off you need to sign up for apple's developer program for which you've to pay $99 (for standard) to $299 (for enterprise). $99 could be or could not be a big deal, depending on your financial situations. But that's just the first step. If you don't want to sign up for the developer program, you can only test your applications on the iPhone simulator and not the actual handset. So once you develop your application, it goes through a certification process and gets put on itunes store. Fine enough! But then is the most interesting part: Apple wants to take away 30% of the revenues you generate from selling your application on itunes. And my question is WHY?

1. By developing new applications that are in demand, developers are increasing iPhone sales in the market (Much more profitable for Apple since each iPhone is sold twice it's production cost). iPhone is a platform and platform doesn't make a device popular with consumer but only developers. Applications make the device popular with the consumer.
2. All applications developed at a production cost. Developers have a certain profit goal in mind as well. But since they now have to give 30% to Apple, some of that revenue sharing is going to get transferred to the consumer, making the applications marginally more expensive than they should be.
3. A developer has an option to develop a "free" app. In which case, obviously, apple doesn't get 30% share. But then what does the developer (mostly independent, high school, college kids) who develop iPhone application for fun? Why should they pay $99 to apple? Why should they face the loss of $99 when they are just giving away their hard work, creativity for free?
4. On the contrary, distributing applications for mac's is free. Why? Perhaps because Apple wants to gain more market share in that area. After several decades, they have just been able to capture a miniscule sixteen percent of the market share. But only in eight months iPhone already has around 25% market share. Apple is definitely taking advantage of their position in the market. Think of a world where you would have to share revenues with Microsoft for distributing applications for windows.
5. Let's say I just want to write an app for MYSELF ONLY!! Okay, I finished the app but I can't install it on my iPhone unless I pay 99$ to apple because I can only test it in simulator without paying 99$.

I see the fees for the developer program and the fact that every application has to go through the certification process and then through the iTunes store on 30% revenue sharing basis as a barrier to entry and hence I think Apple is adopting monopolistic behavior with the iPhone. What say you?

*UPDATE* : A friend sent me this news earlier this morning:

I'm glad :)


I am the Walrus said...

maybe not so much a monopolistic practice.. but does sound like a sneaky franchising scheme.. ;)