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

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An earlier report The Next Web on Tuesday alleged that Apple was keeping a Microsoft 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.

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