The open market?

We’ve often said that Apple’s brilliance doesn’t just lie in the fact that it produces gadgets that everyone loves. From a business point of view, it’s genius lies in the fact that it also creates new markets around those products, from which it can continue to enjoy strong revenue streams.

When the iPod came out, the company brought us iTunes, which has become one of the world’s biggest entertainment markets, selling music, video and other media products.

When the iPhone came out, Apple the company bought us the App Store, which now has over 250,000 applications in it.

By creating these marketplaces, Apple has opened up opportunities for app developers, artists and producers to sell their wares. Apple takes a slice of every piece of content sold in this market (30% of the value of every app sold) meaning it can earn revenue from its iPhones, iPods and iPads long after that initial sale.

What’s interesting is the way these markets are portrayed.

With the App store, for example, Apple likes to give the impression that it is a giant, open market where users can get anything and everything created by a huge army of developers toiling away around the world; its famous slogan to promote the store is: “There’s an app for that.”

Except the market isn’t really open. To get an app into the store, developers must go through a submission and approval process that developers say can be fairly opaque. You submit your app, wait a bit, and hope for the best. Mainly, it seems, the apps get approved, but sometimes they don’t, and there have been numerous complaints from developers who have felt they have been hard done by.

Overnight, Apple released an update to its developer guidelines, indicating that it is going to become a lot tougher on the content and quality of apps.

“We have over 250,000 apps in the App Store,” the company said.

“We don’t need any more Fart apps. If your app doesn’t do something useful or provide some form of lasting entertainment, it may not be accepted.”

“If your app looks like it was cobbled together in a few days, or you’re trying to get your ?rst practice app into the store to impress your friends, please brace yourself for rejection. We have lots of serious developers who don’t want their quality apps to be surrounded by amateurs.”

“We will reject apps for any content or behaviour that we believe is over the line. What line, you ask? Well, as a Supreme Court Justice once said, “I’ll know it when I see it”. And we think that you will also know it when you cross it.”

Existing app developers say the guidelines represent a further articulation of Apple’s existing philosophy about what makes a good app.

But when Apple makes snide warnings like this – “If your app is rejected, we have a Review Board that you can appeal to. If you run to the press and trash us, it never helps.” – it’s probably not in the best interests of any developer to bite the hands that feeds you.

But let’s pretend for a moment that you are an app developer starting out. You are young, unknown and certainly not seen as one of Apple’s “serious developers”

You’ve got a great idea for a get-rich-quick iPhone App that cashes in on the latest celebrity scandal. It’s got a short shelf-life – a few months at best – but you feel you might be able to sell a few thousand copies at $1 a download.

You spend a week or so building the app, submit it to Apple, wait patiently for the money to roll in and then discover it’s been rejected on the basis it “doesn’t do something useful or provide some form of lasting entertainment”.

Apple might argue that it’s spared its audience from a crap app, but the developer might rightly argue that an entrepreneurial opportunity has been lost, and an entrepreneur has been restricted from participating in the world’s biggest smartphone application market.

It’s a hard balance for Apple to manage. Given it controls, maintains and supports the market, they have the right to administer it how they see fit.

You could also argue that there are all sorts of products require approval before they can be put on sale, such as medical and health products.

However, I can’t think of many markets where a single corporation gets to decide if a product is fit for sale, based on something as notoriously difficult to judge as good taste.

The thing to remember here is that this is not some small-time online sales site – this is a giant, cash-fuelled marketplace, where companies can be made or broken with one app approval or rejection.

Apple’s needs to realise that it’s approach – “there’s an app for that… as long as we decide there is” – gives it enormous power.