Microsoft’s new Windows Store could be a disaster from Day One

Microsoft has announced the details of its new Windows Store for the upcoming Windows 8 smartphones, tablets and desktop computers. The cut it will be taking from developers in commission quite simply makes no sense.

Microsoft wants to take a 30% commission. It has also set a minimum app price of $1.49 (around 99p); this excludes free apps (obviously).

Why is this a problem? Because that’s the same cut that Apple and Android take from their developers on their app stores. And why is that a problem? Because they think they are in the same league as Apple. They aren’t. Apple has won.

The sooner rival companies like BlackBerry and Microsoft accept this tremendous blow to their egos, then they may begin making some headway. You have lost, throw out your plans and start again.

As mentioned earlier, Apple charges 30% commission on its apps, as does the Android Market app store, which sits in second place. Both can do that because they are the only game in town. They have critical mass, and will continue to do so.

Microsoft’s Windows Mobile 7 and the forthcoming Windows 8 does not. Microsoft’s Windows Mobile is so insignificant in the mobile space right now, they are a less than 1% blip. Its tablet marketshare is non-existent. This is not expected to change for a long time, even with the Windows 8 launch. Even if it does start to grow, why push developers away?

From the developer’s perspective, they want critical mass. They want to sell their goods to the largest market to make the most money. Android and Apple is where that is.

In order to get any developers to even consider a rival platform you need to incentivise. BlackBerry has been learning that the hard way – their App Store is such a tumble weed riddled joke that it has had to effectively provide an Android emulator to allow its customers to access a rival company’s store. Name another business sector where that would be allowed to happen with a straight face.

Both BlackBerry and Microsoft have to approach the problem as a market disruptor – similar to what Nintendo’s Wii did to the entrenched Xbox and Playstation video game market. Something out of left field. Nintendo stopped the hardware arms race and released an archaic console technology wise, but a new gesture based control system that brought casual gamers back to the market. Sony and Microsoft struggled to catch up.

We’ve seen it happen time and time again in tech history. A big lumbering company moves into someone else’s tech space and think it’s enough to match the leader. Sorry, but no. You need to do better, and perhaps accept losing money for several years to claw some market share and brand loyalty. A loss leader strategy is the only way to go.

The company has announced that for apps that sell more than 20,000 its commission drops to 20%. This still isn’t enough. If Microsoft were serious about this store it’d be looking at 15-20% maximum. Hell, I’d probably take 0-5% for the first year and then ramp it up a couple of percent every year until they reach some kind of decent market position.

Secondly, Microsoft should not be setting any price floors for apps – it sends the wrong signals. Why? Android has just done a promotion celebrating its 10 billionth download and is offering a selection of apps for 10p. Apple has done various promotions of 69p or less.

The only reason I can fathom Microsoft’s ruling here is that it wants to ensure that 30% share is worth its time – 30% of 99p is better than 30% of 69p. Maybe it needs to pay server costs. I can only presume that this bizarre logic was made by the accounts department.

Microsoft should not be setting any limitations on its developers. It will be lucky to get any. It should be bending over backwards to cater to their needs, not its own. I can confidently say if Microsoft doesn’t, Windows 8 will become an irrelevance from day one. Consumers want a wholesome software/app eco-system. The operating system and hardware are less and less important.
twitter: @allanswann

Type: White Paper


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