Could Apple bet on the App Store revenues and licensing revenues and give away the iPhone OS to third parties?
Will we ever see a Motorola or HTC built phone running the iPhone OS? Will we ever see inexpensive chinese phones running it?… Let’s see what that would mean to Apple.
Apple’s iPhone with its iPhone SDK is currently the reference smartphone operating system everybody is looking at and together with the App Store, it is the business model every other company is competing with.
Apple is in the strongest position in the market: with more then 40 millions iPhones and iPods Touch sold and with the iPad coming soon, the iPhone OS is quickly establishing itself as the leading platform for mobile software and gaming.
The App Store recently reached 3 billion downloads: its success was so great everybody is trying to replicate the model. In 2008, Steve Jobs said: “Who knows, maybe it will be a $1 billion marketplace at some point in time […] I’ve never seen anything like this in my career for software. Phone differentiation used to be about radios and antennas and things like that,” Jobs said. “We think, going forward, the phone of the future will be differentiated by software.”
Intel, AT&T, Microsoft, Google, Palm, Nokia and RIM have their own software catalogs now. All these companies realized that user experience is the most important factor in the smartphones market and a new wave of operating system has started spreading since the iPhone was first introduced. Google Android, Palm’s WebOS, Windows Mobile and in the future Nokia’s Maemo and Samsung’s Bada OS.
With an estimated production cost below 200$, some “maccheroni math” tells us the iPhone is likely to produce a revenue of about 300$ for each device sold. Let’s say of those 40 millions devices 30 were iPhones. That’s something like $9 billion revenue from iPhones since January 2007 or $3 billion per year.
Back in August 2009, Steve Jobs said the App Store was pulling in $1 million a day in sales. Now, that was a long time ago, and the App Store has grown tremendously since then, but let’s go with that figure for argument’s sake.
$1 million a day means that Apple would be making $300,000 a day (its 30% cut). Extrapolated out over 12 months that would be about $90 million. Even if the stores doubles its size every year and even if licensing the OS the user base would double the current iPhone’s user base, and even if the license cost would double the revenue Apple takes form the store… the numbers would not approach the revenue Apple is making on hardware sales.
Therefore, unfortunately for all of you who would be looking forward to cheaper iPhone OS powered devices, my take is Apple will never license it.