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Microsoft-Apple flap over App Store fees reportedly about Office for iOS

An earlier report The Next Web on Tuesday alleged that Apple(s AAPL) was keeping a Microsoft(s MSFT) SkyDrive for iOS app update out of the App Store over a revenue-sharing dispute. But it looks like that’s only part of the story. The companies are reportedly at odds over another, much bigger and more important product coming to iOS next year: Office.

AllThingsD reported Tuesday that Microsoft wants to bring its productivity suite to Apple’s App Store, but it doesn’t care for Apple’s standard 30 percent revenue sharing model:

[T]he companies are at loggerheads not over the 30 percent commission Apple asks of storage upgrade sales made through SkyDrive, but over applying that same commission to Office 365 subscriptions sold through Microsoft Office for iOS, which is expected to launch sometime next year.

Microsoft’s Office apps for iOS are said to be free, but Office 365 will be one of the key components that makes the apps useful. “On first launch, a Microsoft account will provide access to the basic viewing functionality in the apps. Word, PowerPoint, and Excel documents will all be supported, and edit functionality can be enabled with an Office 365 subscription,” the Verge reported last month.

So, if this is still the case, Apple won’t get a cut from the app itself because it’s free. It’s the subscriptions — to Office 365 and/or SkyDrive — where Microsoft will be making money.

Microsoft is apparently trying to get Apple to take less than 30 percent of that subscription fee. Apple takes 30 percent of all app, content and subscription sales made through its App Store, whether it’s magazines, books, newspapers, music, games or services, like Office365, which is Microsoft’s cloud-based productivity suite. The report indicates Apple is “not at all willing to negotiate” on this. (This explains why someone at Microsoft went public with at least part of the dispute; a possible negotiating tactic.)

In any case, it’s not clear why Apple would bend on this, especially now that the scenario is public. If the company starts making exceptions for anyone it probably won’t be long before more developers try turning the iOS app approval process into a bartering system.

5 Responses to “Microsoft-Apple flap over App Store fees reportedly about Office for iOS”

  1. The dispute between Microsoft and Apple has serious consequences for App developers who publish ‘free’ apps in the App Store, only to then charge users to activate the app or to upgrade to a version with better functionality.

    As Microsoft seems to be at odds with Apple’s stance that all in-app purchases should require a 30% payment to Apple (in perpetuity), will this force app developers to develop HTML5 web apps to by-pass app stores?

    This blog article looks at this in more detail:

  2. Rodney Willis

    Microsoft should drop their own 30% cut for apps launched on their mobile and Windows 8 stores if they wish to make a good argument to not pay it to another vendor. That said, I find Apple’s 30% cut distasteful as well.

  3. greatartiststeals

    Whether Apple cares or not, MS Office is the defacto standard in the industry…if MSFT ultimately chooses not to bring MSFT to the iPad, it only makes the iPad less desirable to a large group of users who need Office. As popular as the iPad is, the other pads will catch up and once they do, the 30% premium to be on the iPad becomes less appealing to the developer community…

  4. Matt Eagar

    Not 100% of all subscriptions pay Apple royalties. For example, I have several print magazine subscriptions that I have activated on iPad, and there are services like Dropbox which offer free apps and don’t pay Apple a cut of the revenues they bring in from outside of iTunes. I can see how Microsoft would feel slighted.

    That said, there are already several decent iOS apps (some dating back to the original App Store debut in 2009) that allow creation and editing of documents in MS Office formats, so Apple probably doesn’t feel too compelled to give Microsoft any relief here. Maybe if Microsoft were not so insanely late to the party, they might have some negotiating power.