[Business] Capitalism, Apple Style
Robert Galbraith/Reuters Scott Forstall, senior vice president for iPhone software at Apple, discusses the new iPhone OS 3.0.
If you want to see what Apple makes different from pretty much any other company, look at this one line in its hour-and-a-half presentation on the new version of the iPhone operating system coming this summer:
That statement came in one section in which Mr. Forstall described new ways for iPhone app developers to sell their wares from within their applications. If you sell a game with, say, 10 levels in it, the game can offer another 10 levels for a set price. Apple, of course, handles the transaction, taking its normal 30 percent cut.
Apple also will allow developers for the first time to sell applications as subscriptions. Both of these are logical developments that may well encourage the use of iPhone applications to sell content.
But here is where Apple drew the line: if you offer a free application, you can’t interrupt users asking them to upgrade to a paid version. (Or if you do, Apple won’t process the transaction through its new system.)
That is a slap in the face of developers who want to profit from the “freemium” business model that lures paying customers by offering a free version first. It no doubt is leaving a fair bit of money on the table. But implicit is an insight about how developers would likely use such a feature to make applications that are more annoying than useful.
That seems to violate the company’s apparent philosophy that customers should be willing to pay a premium price for things that are aesthetically pleasing.
As best as I can tell so far, there is a lot in the new operating system that will allow advertising-based applications as well those that charge a fee. Significantly, there is a new video player and tools to embed streaming video in applications. But other companies might well have included specific tools to embed ads into applications or even started an advertising network to complement the iTunes store.
There’s one more tidbit in the announcement that shows how Apple is ceding a bit of control to the market that it might hoarded for itself: Its approach to turn-by-turn navigation. The existing iPhone map application links to Google’s maps and will give driving directions. But it doesn’t call out the next turn you should make as you are driving. The reason is that the companies that own the map data charge much higher prices to makers of navigation devices than they do to Web mapping services.
Apple could well have created a proprietary turn-by-turn map service to sell to its customers. But it didn’t. Rather, it has created the programming interface so that any developer can write a navigation application. But they have to pay for the map royalties, and presumably charge users something in return.
Apple, it seems, does believe in competition and capitalism, but only the decorous sort.
[nytbits]
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