Another take on RIM's App World

Since we are going all out this week, giving “all sides” a chance to make their points on certain issues, how about a different perspective on the App World launched by Research in Motion (RIM:TSX, RIMM:Q)last week? Our colleague Jason had some fun with the topic (see prior post “Is RIM’s App World a cruel April Fool’s joke?” April 1-09), and here is a guest blog from Richard Sung outlining his first impressions (written last week):

“Does RIM’s App World measure up to Apple’s App Store?

RIM’s App World officially opened up for business yesterday, and the big question on everyone’s mind is “How will this measure up versus Apple’s iPhone App Store?” Ultimately, this will be determined not only by end user adoption of applications served up by the store but also by the number of developers providing applications as well. For RIM, this is a much needed capability, and up until now, the market for add-on applications for BlackBerries has been a patchwork composed of carrier mobile stores, RIM’s own site, software company sites, and third-party web sites like Handango. Getting customers to buy these apps has understandably been somewhat difficult, as each store had completely different ways of paying and of getting the apps licensed. In contrast, Apple has gone for simplicity, handling the licensing and payments (tied to a user’s Apple ID which is connected to a credit card) and sold around 300 million apps through the end of 2008.

The trojan horse for Apple was also application support for the iPod Touch, and Apple has said that it’s sold more than 30 million iPhones + iPod Touch devices in total. How does this compare with RIM’s opportunity here? While RIM has shipped more than 25 million devices through 2008, applications on App World can only be for relatively new phones (ones with the scroll ball or the Storm screen click). With Blackberry subscribers around 14 million, most of these users should be on a Pearl or better — a near-term opportunity of 15 million would be a reasonable guess here. An audience of 15 million users is nothing to sneeze at in other words.

How will App World measure up for developers? The revenue split is better than Apple’s (80/20 vs. 70/30 for Apple), though the cost differential might be negligeable at the end of the day. This system might work better for larger software companies… here’s why.

The payment system being used is E-Bay’s Paypal, which takes a cut of 2.9% for payments out. This impacts developers of all size. The other pricing detail is that paid apps need to cost at least $2.99 (compared with $0.99 for Apple’s App Store), though this is subject to revision in the future. Submitting applications to the BB App World will cost USD$200, and this includes 10 applications submissions. For small-time and part-time developers, this might be a big deal, as registering as an iPhone developer costs $99 all-in. This will dissuade users from creating Freeware applications, because developing multiple updates to multiple applications could end up costing thousands of dollars over time. Larger software companies won’t have a problem with this, as the superior cut of profits will pay for the higher application submission costs.

This difference in pricing for developers and consumers suggests that RIM is trying to go up-market somewhat, dissuading applications that are extremely trivial in nature. Does this make BB App World less fun? Perhaps. It’s the low-end nature of the iPhone App Store that allowed an application like Koei Pond (a best-seller on the App Store) which simply has fish swimming in a pond, with the user able to interact with the fish using the touchscreen.

There are some advantages and disadvantages to RIM’s BB App Store, based on initial observations:

1) Licensing is more flexible. While the initial incarnation of BB App World is only allowing the static model (no license is required when the app is purchased), the developer interface does allow for pool licenses (multiple licensed purchased at one time) and dynamic licensing (a license key is generated at the time of purchase). The dynamic licensing could come into play with users purchasing trial version of the software – it’s possible that software companies may want to simply provide trial versions of their applications and get 100% of the license money later on by handling their own payment system. The other way of getting around this revenue split is to charge for other services – for example, an electronic fax software could be free but charge per fax delivered.

2) Managing the carriers. On one hand, the carriers have to be unhappy with this move from RIM, because it means that carriers are one step closer to becoming the “dumb pipe”. However, unlike the iPhone App Store (which can also be accessed over Wi-Fi), the BB App Store will control how apps are sold on different carrier networks. The developer kit does indicate that application developers can restrict where the app gets sold, and this also means that carriers will have the ability to restrict whether an app gets put onto their network. In the future, hypothetically speaking, Rogers Wireless could restrict a Skype voice application from being distributed on BlackBerries in Canada. Good for the carrier though not so good for the consumer.

3) Fewer conflicts… maybe. The big advantage for RIM in all of this is that RIM has fewer conflicts than Apple in approving new software applications because it really doesn’t do software very well. In other words, RIM won’t be putting out a next-generation converged communications app (for example) and developers won’t have to worry that it will have worked on something for months only to have it rejected by Apple. For example, Skype on the iPhone must have been in the works for a long time and is now only seeing the light of day. As noted above however, the big worry for developers will be on how much input carriers have on how an app gets distributed.

One important observation is that RIM appears to be targeting more professional developers with their App World based on the higher up-front charges for getting the app on the store. Where are these fees going? While some of this cost may be going to more testing expenses (there are a lot more models of BB that need to be supported… at least 7 families of devices). Is the Paypal integration a downside for the BB App World? Perhaps yes. I would have liked to have seen RIM manage the registration process themselves, getting closer to the end customer so to speak. They’re already setting up a registration process called MyWorld which will allow users to re-download purchased applications, so perhaps RIM is simply getting more payments sources lined up (Google Checkout perhaps?) Even better, this was the perfect time for RIM to set itself up as an intermediary between the carrier and the user – allowing users to pay for apps using the wireless account or prepaid accounts. In my view, RIM needs to add more payment options at this point, going for direct credit card payments, debit cards, etc in order to make the process as easy as possible for users.

Who benefits from this payment system in the BB App World? Aside from eBay, another undisclosed beneficiary of RIM’s payment system is e-commerce company Digital River (NASDAQ:DRIV). According to the App World vendor guide, paid applications going onto the BlackBerry app site, developers will need to employ technology from Digital River to handle payments through PayPay, and a percentage of that 20% cut for RIM goes to DRIV.

In summary, the BlackBerry App World is an important for RIM as it signals that it recognizes that applications will be an important competitive point differenting smart phones goings forward. Thus far, my opinion is that the App World will be different from Apple’s App Store, appealing to more upscale developers based on the difference in pricing schemes. This could by extension result in a small developer community as well. While RIM may ultimately miss out on some innovative applications (something which has been going on from the beginning), the upside is that we should expect hundreds of valuable new applications to show up over the coming year to RIM’s site, with a SIMPLER payment and licensing system than before. The bottom line for RIM is that as a developer, I think the new pricing and licensing scheme is workable. An improved system should result in better traction

The only downsides in terms of supporting both the iPhone and BB ecosystems remains the difference in programming languages, and if I’m writing an app in C++ for the iPhone and Java for the BlackBerry, the actual development effort is nearly doubled. On top of that, while the iPhone has a standard hardware set to deal with, the BlackBerry ecosystem still has important difference and capabilities to deal with. For example, the Storm has a touchscreen and has a higher resolution (480×360) than my current BlackBerry 8800 (320×240), meaning that BB app developers will need to tailor their software for working on different devices. Ultimately, the big question is whether developers will flock to the BB App World and I think the answer is “In time”. Especially for low-end developers, the resources in terms of money and time and addressable market just don’t add up to release an app on BlackBerry first before the iPhone.

The key takeaway for me is that I think RIM took the safe approach in designing its pricing scheme, ensuring that costs incurred in evaluating new applications for its app store were paid for up-front by developers instead of getting its money back through a cut of revenues from the apps. It’s a big improvement no doubt, but will it be enough to shake up the developer landscape at a time when Nokia, Google, Microsoft, Palm, and Apple are all vying for developers? I’m not so sure.

Richard
—
Richard Sung
phone: +1 416 500 2930
e-mail: richsung@gmail.com”

I’ve downloaded a few of the apps myself, and all I can report so far is that my Bold does a lot more “thinking” than it used to. Locking up the handset for literally dozens of seconds; reminded me of PointCast back in the day. It was unusable on three different occassions over the weekend, despite several “hard resets”. I’ve ditched a few of the newspaper downloads to try to get that under control, and things have settled down. Phew.

MRM
(disclosure – I own RIM)