Google and Apple tax on developers

Before Apple sent its iPhone out into the world, anyone with a great idea for a cellphone app had to deal with the carriers — a difficult and time-consuming proposition. Apple simplified the process so a bright high school student could bring an app to market.

What’s a fair price for offering that platform? Apple concluded that it was 30 percent of the price of the app. If the app generates additional revenue, Apple wants some of that, too. “Our philosophy is simple,” Steve Jobs said in February 2011. “When Apple brings a new subscriber to the app, Apple earns a 30 percent share.”

The subscription announcement generated controversy, including assertions that Apple was being shortsighted as well as greedy. James McQuivey, a Forrester analyst, noted at the time that nearly all the cost in an app was in its creation — distribution is close to being free. Selling an app, he argued, was more like processing a credit card payment. The charge for that is only 2 or 3 percent.

George Colony, the chief executive of Forrester, picked up Mr. McQuivey’s point and said Apple was “blowing it” by charging so much. Apple “risks replaying the PC wars of the early 1980s when Microsoft welcomed everyone into their development world while Apple stayed ‘pure’ and scared away its allies,” he wrote.

This time, he concluded, we might easily end up with a situation in 2014 where Apple would have only 10 percent of the apps market and Google’s competing Android system would have nearly all the rest.

In some respects, this forecast has come true. Android has indeed become a formidable competitor in terms of the number of devices using that platform. According to new numbers from Gartner, over the last year sales of Android devices doubled to 120 million. Apple’s iOS system, meanwhile, grew 36 percent to 24 million units.

In other ways, however – number of downloads, percentage of paid versus free apps — Apple is still the system of choice.

That certainly strengthens its hand. But there is another reason why Apple has not reduced its cut: Google is charging the same 30 percent. (Neither Apple nor Google was willing to discuss their app pricing policies in any depth.)

“The surprise here is not that Apple hasn’t changed yet. It’s that Google hasn’t done it first,” Mr. McQuivey says now. “Apple has no reason to contemplate changing its model until it is forced to. Google is the only player that could make a pricing change like this that Apple would be intimidated by, and even that is a bit of a stretch because Apple’s position — at least with its customers — is so strong.”

Nevertheless, both he and Mr. Colony still say it will happen.

“Google will eventually want to drive deeper developer commitment to its platform screens, including phones, tablets, and TV. The best way to do that is to make those developers some money. Then Apple will be left with a dilemma in which it will pretend not to be intimidated right up until the time that it changes its pricing model,” Mr. McQuivey said.

It’s a bit like Apple saying that 10 inches was the only size for its tablets right up until the moment it introduced the 7-inch iPad Mini.