The App Store is an accident of history. (But one that was predicted here). Apple (AAPL) had been making MP3 tracks available for a few years on the iStore. When they added a bit more memory and processing power to the iPod, they realized that it could run third party applications, so they made an iStore for applications. And amazingly they were only doing it as a service to users; they didn’t see the business potential.
Now after a little over a year, there are over 100,000 Apps and there have been over 2 billion downloads. 125,000 developers have signed up with Apple and 19.6% of Apps are games. All this has brought up some very pertinent points.
- This is the biggest success and the fastest growth, by a huge margin, of any new gaming platform in history. It has changed everything.
- Most App authors self publish to cut out the greedy publisher. They end up making far less money as a result. Apps need marketing and marketing is one of the jobs of a publisher.
- Intense competition has driven down App Store prices remorselessly. This is largely due to self publishers, in their ignorance, using the price mechanism as a marketing tool.
- Apple put up very little in the way of barriers of entry to publishing on App Store. This means that there are vast quantities of total rubbish on there.
- The other side of Apple’s policy is that there has been a vast flowering of creativity on App Store. The biggest ever in the history of the video game industry.
- Because Apple set this up as a service, not as a proper business, there is little IP protection. Piracy is rampant. Several game publishers have reported it as being in the 90% zone. Even at the stupid low prices that Apps are, people will steal to save pennies.
- The App Store gives you instant global distribution. 77 countries can download your app the instant it is available. This has shocked the whole digital IP distribution industry. There are now lots of App Store clones for other platforms.
- High street, cardboard and plastic retail distribution of digital IP has been shown up as being a dinosaur, their business model is now in steep decline.
Apple realizes that they have a business model that is a license to print money. So it is pretty obvious that they will use it as a template. First for their imminent tablet device, which will be like a cross between a netbook and an iPhone. Then with their home console which will evolve from Apple TV just as the iPhone evolved from the iPod.