It is early July and we have not been reading analysts’ estimates on how much Apple may or may not make from application downloads through its app store for at least, what, 2 weeks (here’s a piece from a while ago). High time for another round then… This time, the number is “a few hundred million at best”, per quarter that is. And to be perfectly fair, the number was tagged as a guestimate. With another guestimate putting Apple’s iPhone revenue to $1.5 bn, the revenue per iPhone to Apple is thought to be around $600. Compare this to c. $27 in apps revenue per device (total number of apps divided by total number of devices). It’s 5%.
It is, I think rightly, pointed out that Apple uses applications as a lever for its hardware sales (“there’s an app for that”), and it is undeniable that a device gains more value the more you can do with it. So if you have a device that cannot only make phone calls, take photos (and now video), moonlight as a music player and a sat nav, etc but also finds restaurants, taxis, flight times and undertakers (yes, it does!), allows you to play all sorts of games and do other silly or enlightening things, the perceived value of the device increases and – relative to that – the perceived fair price for it decreases, which means that every little app increases the value of the iPhone a tiny bit, which in turn contributes to another little piece of profit to Apple in addition to its revenue share from the app itself (lowered price sensitivity due to higher perceived value arguably should result in higher sales).
Now this is largely known and acknowledged that Apple is – at least to an extent – replicating the iPod/iTunes model (though Apple also happened to provide the first commercially successful “cure” to free music downloads; hence a slightly different proposition here). But is this all bad?
Let’s have a look at the thing from an app provider’s perspective: if we take the above numbers (“a few hundred million” per quarter), the annual total would be, say $1 bn for Apple, which in return means that the app store “ecosystem” would generate c. $3.3 bn p.a. across the value chain (Apple takes 30% revenue share). That’s not too shabby for a device with such a small market share.
Also: iTunes (which is the world’s largest music retailer) took longer than the app store to generate the downloads it does today, and it is still early days, is it not?
MVNOs seem to be seeking the shelter of big incumbents. Or is it the other way around? Incumbents buying the brands built by MVNOs and internalizing cost along the way? I suspect it is the latter but the economics would work either way…
The times they are a-changing. Everyone has realized this by now (or so we should think). The question therefore is not so much will there be change but how will it look like.
Carriers are unlikely to concede defeat over the content side, not necessarily because they fear losing out on a lot of revenue (given their fairly average performance, SMS, voice, data, etc will outsell content as a source of revenue very, very significantly) but because of the strategic value of content as well as the unpredictability of its future impact: bear in mind that the emotional attachment to beloved brands, i.e. affinity (Transformers, Ice Age, Playboy, Tiger Woods, …), will remain higher than that to a network operator, and please do not take offense if you are working for one. Do not be mistaken: carriers are being trusted but they are not being loved. There is just not as much emotional attachment to a cellular network as there is to a rodent in love with an acorn…
Marketing and promotion is another point. We already see aggregation-type businesses become forces on Apple’s app store, such as 
