Apple is looking to move from the 30 per cent margin it makes on sales of apps through iTunes, lowering its take to protect the strength of the Apple ecosystem.
The Financial Times (paywall) reports that Apple is in discussion with media companies ahead of a launch for Apple’s TV streaming service and curated streaming music service Apple Music, which is built on the Beats service.
Lowering the take may help to appease a Federal Trade Commission investigation.
The Apple model of a 30:70 split was introduced in 2003 and has become the industry standard. Before that many operators were charging more than 50 per cent and asking for approval fees, often making apps – particularly those with licensed content – uneconomic.
The one territory where applications were spectacularly successful was Japan, where Java programs, usually games for the i-mode service, were sold, with the Japanese operator NTT DoCoMo only taking an 18 per cent cut. This led to a huge ecosystem and tempted O2 to launch iMode in Europe. This was done using the prevailing 50 per cent margin – and iMode failed.
History has shown that lowering the margin strongly encourages the growth of an ecosystem. The Apple move may well be defensive, reducing the opportunities for Microsoft and Google to tempt developers to work on their platforms first. Apple made $10bn from app sales last year and even with the toughness of Apple’s checking and approval procedure, this is a very lucrative revenue stream.
Full details of the new Apple deal are expected to be announced at the WWDC developers' conference today. ®