Why the Mac App Store is such a priority for Apple
November 1st, 2010
Daniel Eran Dilger
Apple not only announced plans to open a Mac version of its App Store, but slated an aggressive target to begin selling titles within three months. Here’s why it’s so important to the company.
I got started advocating for a Mac software store in 2006, almost two years before Apple opened its iPhone App Store and month before the company started selling iPod games.
The writing was on the wall; Apple iTunes Store was already selling blockbuster amounts of music, and Apple was also operating a major online store with everything from peripherals to software to cables and ink cartridges. Why not merge a store into the Finder?
My prediction was based on the idea that Apple could tie its online retail presence into the Finder, much like the iTunes Store fit right into user’s existing music libraries. That would enable the company to help users buy exactly the right type of RAM or toner carts they needed, based on what their system already knew to be installed.
What I didn’t foresee was what Apple would do a month later: iPod games. However, having already primed the imagination pump, it seemed obvious to me where Apple was headed with iPod games, particularly a few months later when the iPhone arrived.
With iPod games, Apple was clearly experimenting with how to package, market, and securely deliver software. I was confident–or at least optimistically hopeful–that Apple was doing this to revolutionize how all software was sold, for reasons I’ll address in a moment.
Apple’s New Dual Processor Game Console
Walk before you run
In an industry where observers often forget that buildings require foundations and that good plans are more important than an enthusiasm to start building, Apple’s introduction of iPod games was roundly criticized.
Why weren’t small Mac developers invited to the party? Why wasn’t the open source community asked about how they would design a games platform? Why didn’t Apple allow customers to share software downloads like borrowed books? Why didn’t Apple just turn the whole concept over to Richard Stallman and let the GNU collective crank out a whole library of free games, something that had worked so well for Linux and Pandora?
From my perspective, Apple’s iPod games efforts were clearly a fledgling experiment. Once the iPhone was unveiled, it seemed very obvious that iPod games were simply an exercise in developing a secure software mechanism designed to make software a way to add value to Apple’s hardware, rather than a way to create new value, something that has dogged Apple for 30 years (and a problem I’ll articulate below).
And so it was that while everyone else seemed to think of iPod games as manure, I sensed that they were only a sign that a pony was around the corner. That pony turned out to be a really fast racehorse, but Apple’s history of partnerships with its software developers has been more along the lines of horse meat.
Apple reinvents software for its own survival
As a company, Apple doesn’t seem too worried about all the indigent criticism directed at it by open software ideologues. It is, however, very serious about the threats posed by software companies that get all chummy with its platforms. And for good reason.
In the late 70s, Apple’s hardware fell in love for the first time. And as most young creatures do, it fell for the first person to show it some attention. It was VisiCalc. The steamy romance caused little Apple IIs to fly off the shelf, establishing Apple as a major hardware maker in the emerging PC market.
Apple’s dependence upon VisiCalc didn’t last long however, as VisiCalc brought its software to other platforms, and particularly as Lotus invented 1-2-3 as a VisiCalc killer. Apple should have learned, we can now say in retrospect, that software is a heartbreaking player of fragile new hardware platforms.
In the early 80s, Apple partnered with Microsoft in developing the Macintosh. Steve Jobs recognized how important software would be in launching a wildly new hardware platform, so he arranged a marriage between the Mac and Microsoft’s Word and Excel, two ugly siblings that weren’t getting any action in the DOS PC world, where Lotus 1-2-3 and Wordperfect were still the heartthrobs everyone wanted to date.
The launch of Macintosh helped Microsoft more than Apple. It turned the minor language interpreter and DOS maker into a credible applications vendor via its Mac apps. But the Mac itself didn’t take off until Jobs lined up another mate: the offspring of Adobe PostScript and Altsys PageMaker. Wedded to Apple’s Mac and LaserPrinter, this desktop publishing family earned Apple enough money to comfortably take a nap in, where it dozed off while Microsoft snuck out of the compound armed with Apple’s real value: an easy to use desktop environment.
Microsoft married its copy of Apple’s technologies with its own Office apps to set up the Windows PC family, which ruled the PC desktop for the next twenty years as Apple struggled to find reasons for people to buy its non-Windows hardware.
If Apple blogged its software strategy
Despite recently pulling in more revenues than Microsoft, Apple remains small enough that it must keeps its plans secret to remain competitive. But since you clearly are among those interested in knowing what the company is doing, here’s my take as Apple’s unauthorized biographer.
As a hardware maker, Apple doesn’t want to keep experiencing the pain of marrying a software partner, undergoing a few years of an abusive relationship, and then going through an expensive divorce that requires Apple to maintain its partner financially while it goes off to earn even greater fortunes with a younger, more attractive hardware maker.
This kept happening because Apple historically leapt into relationships with anyone expressing any interest, out of fear that a bad relationship is better than no relationship at all. Recently, Apple has taken a series of steps to prevent the expensive heartache of being jilted by its software lovers.
Don’t break my hardware heart
Particularly since 2000, Apple has figured out that, in many cases, it’s better to please yourself in the software department than to partner with another vendor you depend on for your software satisfaction. Final Cut, Logic, iLife and iWork were all acquisitions or new creations, not marriages of convenience with a partner capable of leaving.
The iPhone App Store converted Apple from being a hardware partner to being a platform vendor. Apple doesn’t hook up with software developers to create software that works on the iPhone; it maintains room and board for developers to sell themselves to its clients, whose entire experience is controlled by Apple. Apple’s not the hardware side of a marriage; it’s now a pimp (ahem, “madam”) for software workers who are free to leave but not to break the rules.
When iPhone developers start causing trouble, Apple can simply delist them, making the value of their software rather worthless. Google introduced a copy of the App Store for Android, with the promise that developers can pretty much do anything, as long as they put out for Android. The problem is that there’s no money in the free-for-all Android Market, so its stable is full of rather undesirable tricks who harbor viruses and other disturbing maladies.
The result has been that the software available in the App Store has added a lot of value to the iPhone and iPad for consumers, helped sell a lot of hardware, and brought in over a billion in revenues for its developers. In contrast, Android users buy the hardware primarily to use Verizon or Sprint’s network, and its software does little for developers or users, while Google earns a thin piece of mobile ad revenues.
Bringing the brothel back to the Mac
Apple’s challenge now is to convert its existing software marriages into business relationships housed in an environment that Apple maintains and controls. Observers are asking how Apple can possibly demand a “new” 30% cut of software revenues through Mac App Store, how it could impose new rules, and how it can launch the App Store while also allowing alternative forms of distribution of Mac software. I see none of these as real problems.
First, while Apple’s critics like to howl about the 30% software cut in the App Store (or the 40% cut in the iTunes), they seem obliviously ignorant of the real costs of doing business. Outside the App Store, developers already pay at least 50% of their revenues to retailers. Of course, they can also set up their own fulfillment stores and try to market their products directly, but that costs a lot, too, particularly the marketing required to create public awareness that they’re even there.
Anyone who doubts Apple will find developers interested in delegating the costs of marketing, merchandizing, sales fulfillment, and software update distribution to Apple for a 30% cut needs only to look at the existing iPhone App Store. Currently, Mac software developers are unable to sell their work any more effectively than Android, Symbian, or Windows Mobile software. They pay more to retail their software, and must develop their own barriers to software theft, as consumers generally prefer not to pay for the software they use unless it’s too easy and simple to not throw down a few bucks.
“Controversial” quality control
Secondly, while Apple’s rules were (and continue to be) issues generating controversy, there’s little real credibility in the claim that strict rules haven’t helped the App Store achieve its success. If the iPhone has started out like Android, with little more than tens of thousands of individual wallpapers or ringtones masquerading as “apps,” plenty of buggy, ugly titles, and lots of adware junk, consumers would have quickly tired of returning to iTunes to search for and buy new apps. They haven’t.
Two years after the iPhone App Store appeared, Apple launched the iPad App Store to resounding success, a seal of approval from both developers and customers. The critics who have long imagined an imminent revolt occurring among App Store developers have lost all credibility. It just works.
Apple’s quality control standards are only novel in the world of computer software; there are no other large, successful retailers who stock tons of defective junk and other garbage at the haphazard whim of their suppliers. Even WalMart exercises staunch control over what its stores sell, to a degree that makes Apple look downright permissive.
How Mac App Store titles are different
Thirdly, it does not appear to be problematic that the Mac App Store will exist independent of existing software. While I haven’t yet seen a full detail on how Apple expects its new store to work, it seems to be the case that it will not simply be packaging up existing Mac software to sell online through a new storefront.
Instead, it appears Apple has plans to inaugurate a new class of apps that will be somewhat exclusive to the Mac App Store. First of all, Apple touted features of the iOS App Store (including autosaved documents and autoresume apps) as being endemic to Mac App Store titles. This will require some reworking, as today’s Mac titles don’t constantly behave like iOS apps.
Apps will also need to be created in line with a new set of guideline specifications, which include not using optional installs (including Java, Flash, or Rosetta for interpreting PowerPC code on Intel Macs). Apple is getting tough on creating a software market that put it in charge, rather than the whims of its developers. It makes sense that Apple would assert control over the relationship, as it’s Apple platform on the line here, not the developers’.
Mac apps that only work from the App Store?
This also appears to mean that apps in the Mac App Store will be the same securely-signed, single-bundle, easy to install and update, exclusively Apple-API app files that the company sells through iTunes for iOS devices. Unlike existing Mac development, Apple now requires Mac App Store developers to obtain a company-signed certificate to encrypt their apps for sale in the Mac Store. That likely won’t do anything to prevent developers from selling their apps outside of the store, but it’s unlikely that developers would want to.
For starters, the app security that Apple currently uses on its iOS devices to limit casual piracy only works because the iPhone and iPad have a secure OS that requires that all apps be signed. This prevents apps from working on the devices unless they are legitimately obtained from iTunes via the user’s account (or are signed by a corporation or developer using an ad hoc security certificate that allows it to run on that specific device), unless of course the user has performed a jailbreak to disable the security system.
On the Mac, there is currently no requirement that apps be securely signed. The Mac App Store will set up an environment that enables signed apps to run. However, this won’t prevent them from being distributed without the signature by developers. That will likely be avoided by developers themselves, particularly once they witness how their sales implode once an unsigned, easy to steal version of their software hits widespread unauthorized distribution.
Developers could create their own secure environment for running their signed apps securely yet independent of Apple, but that would be an awful lot of work for little benefit.
People who think developers will be excited at the prospect of “saving” that 30% cut Apple charges by selling their apps directly are apparently unaware that developers customarily lose a 50% to 90% cut of their software revenues to piracy when there’s no DRM to stop consumers from stealing it. Just ask Android developers. Or Symbian developers. Or today’s Mac developers.
The flip side is that Mac developers will be able to float limited or trial versions of their apps outside the store (they can’t within the store, according to Apple’s rules). This offers them the ability to promote their wares independently from Apple, while still benefitting from the secure sales within the Mac App Store (something they can’t currently do with iOS titles). Additionally, Mac apps that are rejected by Apple can still be sold by the developers themselves on their own (albeit without DRM); iOS app developers are just out of luck if Apple rejects their app.
Six Reasons Why Apple May Never Open the iPhone
A new take on developer love
And so it is that Apple is maturing into a leather hearted matriarch presiding over a stable of developers that everyone with a Mac will want to experience, repeatedly. Apple is ensuring that software on the Mac isn’t a market that carves value out of its side, but rather a break-even opportunity to enhance the value of Mac hardware sales while encouraging high quality, affordable software that adds value to its hardware in a way that its developers can’t easily take to other platforms.
This initiative is so important that Apple forced it into its late 2010 schedule of events, displacing some of the resources needed to deliver the next iPad or Mac OS X Lion. This is a big deal.
Apple isn’t alone in realizing that managed software markets are important to platforms. Microsoft has been talking about a Windows store for some time. The company attempted to launch one for Windows Mobile in 2009 after announcing the intent to do so in September 2008. Despite having an installed base similar to Apple’s iPhone (at least at the time), and lots of developers (including important ones in corporate and government circles), the company completely failed to make it work, and finally abandoned the entire effort to start over from scratch with Windows Phone 7.
This all happened before
Apple certainly didn’t invent the concept of managed software markets. Nintendo created what is perhaps the first hardware-approved consumer software portfolio when it launched the NES game system in the mid 80s with a licensing chip that prevented third party developers from creating software independent of its “seal of approval.” Every video game maker since has followed suit.
Nintendo’s lockout chip was largely in reaction to the glut of awful, unrestricted software that strangled Atari’s video game system a couple years earlier. What’s interesting is that Nintendo used its licensing chips to keep game software prices high and to extort high licensing revenues from developers, something Microsoft and Sony have emulated, as all of the video game hardware makers rely upon software to bolster their thin hardware margins.
Apple’s App Store security is intended to keep software quality high and enable prices to be cheap yet sustainable for developers due to volume sales. The company exacts a very low cut intended only to maintain the store and cover expenses, and the company has regularly reported that its App Stores are run at break-even, not to make a big profit from developers. This makes it most ironic when Windows Enthusiasts look up from their Xbox to decry the supposedly high cut Apple is charging in iTunes.
Also interesting is the historical reversal of Atari and Nintendo, this time played out of order by Apple and Google. Rather than fixing the fatal flaws of a predecessor like Nintendo, Google’s Android Market is reversing the success (that Apple has demonstrated how to achieve) by setting up a Atari-esque free-for-all market where low quality abounds amid piles of unsold merchandise.
And Apple’s priority to get the Mac App Store up and operational? It’s already twenty five years late to the software licensing party. Good thing its still years ahead of everyone else in the desktop and mobile computing world in that regard.