Yesterday when pointing out the stupidity of Ben Thompson’s Microsoft tweet I was in too much of a hurry to elaborate on one point. Here is his tweet again.
Imagine people arguing in 1998 that Microsoft deserves 30% of all software sales with zero alternatives allowed lmao – Ben Thompson
Imagine people arguing in 1998 that Microsoft deserves 30% of all software sales with zero alternatives allowed lmao – Ben Thompson
The Windows operating system was a product for Microsoft. There was an elastic relationship between the development costs and the revenue it directly generated. I know because I worked at Gateway Computers and I still remember taking inventory of all the Microsoft Certificates of Authenticity (COA) which we paid about $125 a piece for.
Microsoft would develop for Windows and then sell their little COA’s for $125 each. Since there was a direct revenue stream from selling the OS, you can’t compare Microsofts funding model to Apple’s. Windows was a fully self-funded profit center.
Apple doesn’t sell their iOS operating system. So there is no variable relationship between the development costs and any OS revenue stream. Apple has to spread the development costs of it’s OS over all hardware and app sales. This makes perfect sense.
And as I mentioned yesterday, it shouldn’t be just a hardware model. Because in a worst case scenario, like an exploding Samsung Galaxy S7 situation, people could stop buying your hardware overnight. If iPhone sales fell of a cliff, Apple is still going to invest billions of dollars into OS development for future models.
So having a two-pronged funding model for iOS is prudent. It is kind of like Apple’s equivalent to a subscription revenue model. It allows a revenue stream that is variable with usage/development of the OS.
Ironically, there is a great deal of weeping and gnashing of teeth from iOS developers who say that they need to move to a subscription model. They say that they need to match revenue with their development expenses. They don’t want to collect the money up front and budget for the future.
And yet, they are the very characters who are railing against Apple for trying to do the same. Developers are crucifying Apple for the very thing that they themselves are trying to foist on their own customers.
Microsoft would develop for Windows and then sell their little COA’s for $125 each. Since there was a direct revenue stream from selling the OS, you can’t compare Microsofts funding model to Apple’s. Windows was a fully self-funded profit center.
Apple doesn’t sell their iOS operating system. So there is no variable relationship between the development costs and any OS revenue stream. Apple has to spread the development costs of it’s OS over all hardware and app sales. This makes perfect sense.
And as I mentioned yesterday, it shouldn’t be just a hardware model. Because in a worst case scenario, like an exploding Samsung Galaxy S7 situation, people could stop buying your hardware overnight. If iPhone sales fell of a cliff, Apple is still going to invest billions of dollars into OS development for future models.
So having a two-pronged funding model for iOS is prudent. It is kind of like Apple’s equivalent to a subscription revenue model. It allows a revenue stream that is variable with usage/development of the OS.
Ironically, there is a great deal of weeping and gnashing of teeth from iOS developers who say that they need to move to a subscription model. They say that they need to match revenue with their development expenses. They don’t want to collect the money up front and budget for the future.
And yet, they are the very characters who are railing against Apple for trying to do the same. Developers are crucifying Apple for the very thing that they themselves are trying to foist on their own customers.
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