APPLE’S IPHONE CALLS SHOTS WITH APPLICATIONS
By Joseph Menn 2009-06-09
Much of the advance debate devoted to the Apple conference that begins on Monday in San Francisco has concerned the features and pricing of forthcoming iPhone models.

It was the sleek design and intuitive user interface of the iPhone that vaulted Apple from nowhere into a leading position in the smartphone market.

But Apple has held on to that position because of the tens of thousands of applications for the handset available through Apple’s year-old online store, which Nokia, BlackBerry maker Research in Motion and, most recently, Palm have been unable to match.

“This is a race to capture developer resources, and Apple is way ahead,” said Kathryn Huberty, Morgan Stanley technology analyst. “It’s all about gaining share, and then the hardware sales will follow.”

In the long run, the most important thing to come out of the Worldwide Developers Conference will probably not be the latest phones. It will be the revisions to iPhone software and the App Store, which aim to widen Apple’s lead.

A big innovation is that the store will start allowing developers to collect money not just when a user buys and downloads an application, but through follow-on transactions or subscriptions. Apple is likely to show off some of the most compelling repeat-purchase offerings at the conference.

The change dramatically increases the potential pay day for developers, provides Apple with an additional revenue stream from the percentage it takes on app sales, and gives users more choice – and more reasons to stick with the iPhone instead of switching to the me-too hardware reaching the marketplace.

Some of the biggest beneficiaries among developers, at least at first, will be game publishers. Six-year-old Gameloft already has dozens of titles for the iPhone and iPod touch, including Asphalt 4, a racing game that allows players to use the device as a steering wheel.

In Asphalt 5, players would be able to pay more for extra cars and different tracks, and suggest their friends do the same, said Michel Guillemot, Gameloft chief executive.

He said there was a coming wave of customised community play. “We’re just at the beginning. People were used to being in a world of pre-set constraints. This is a revolution.”

The special attention Apple is awarding game developers could pay off double if Apple uses them for another expected move in hardware, to a touch-screen tablet computer or netbook. Analysts expect such a device to be announced this year and to ship early next year.

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