Mobile software developers received a shock recently when Google (NASDAQ:GOOG) removed the GameStop (NYSE:GME)-owned Kongregate video game application from Google’s Android online “app” store. Kongregate was banned on the grounds that companies wouldn’t be allowed to host their app stores inside of Google’s app store.
The move was a surprise to GameStop as well as independent developers — what did this mean for apps that are real digital storefronts like Barnes & Noble’s (NYSE:BKS) Nook app? Wasn’t the Android App Market’s openness precisely what was supposed to make it more attractive to businesses compared to Apple’s (NASDAQ:AAPL) app store?
Kongregate returned to Android’s online store within days, leaving some to breathe a sigh of relief while others waited to see if this move marked the beginning of mobile digital storefront owners restricting competition through their services en masse.
While Google’s policy on distributing new storefront apps is still nebulous, The New York Times reported Tuesday that Apple is making it clear to outside interests that they can’t use Apple’s store to distribute software for competing stores.
Apple’s first shot was rejecting Sony’s (NYSE:SNE) e-bookstore, the Sony Reader iPhone App. According to Sony, the app was rejected because Apple now requires all “in-app” purchases via the iPad, iPhone, and iPod Touch be made directly through the App Store, rather than through an outside company’s own app.
Apple’s new rules will, if broadly implemented, affect just how profitable Apple-platform apps are for many different businesses. Amazon.com’s (NASDAQ:AMZN) app, which offers the exact same e-book and e-magazine downloading services as the one Sony had rejected, will no longer be able to make sales without ceding 30% of the revenue to Apple. (Apple takes a 30% cut of every sale through the App Store, regardless of price or content.)
The same is true of popular video game apps like Electronic Arts’ (NASDAQ:ERTS) Pogo, a mobile version of the website gaming community that makes the bulk of its revenue not from subscriptions but secondary, in-app purchases.
The move also marks an explicit effort on Apple’s part to halt competition on its iOS mobile platform. The company’s own iBookstore has been a notorious flop since opening for business in the middle of 2010, getting trounced by Amazon’s Kindle app largely because of Apple’s lack of support from Random House publishers. Now that it has blocked Sony’s e-bookstore, it seems likely that Apple will move to block Amazon and Barnes & Noble’s outlets unless they agree to share a portion of each sale directly through the App Store.
Apple’s new policy could result in an exodus of developers to Google’s platform, provided they don’t institute the same rules for the Android store. With multiple media industries looking to apps as a pivotal revenue stream for the future, a bumpy ride is ahead as vendors hammer out just how that new revenue is distributed.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here.
