Editorial

Office for iPad revenue model called 'unfair' for Apple, except it's not

Did you know Apple won't earn money off Office 365 subscriptions sold at a Microsoft Store, Best Buy or other non-Apple outlet? It's true! Apple will not make any money off something it has no control over for a product it doesn't make.

If this sounds obvious, it's because it is. But that's not stopping Computerworld from running an absurd article with this headline: "Nadella to Cook on Office revenue sharing: Drop dead." The implication being that Satya Nadella, Microsoft's CEO, is trying to swindle Tim Cook, Apple's CEO, and not deliver payment for something Apple should reap profits from. The only problem with this supposition is it's absurdly stupid (and there are actually a million problems with it, but I was trying to be nice by saying there's only one problem).

As confirmed by Apple, Microsoft will pay the standard 30 percent cut of in-app purchases to Cook's company. This means 70 percent of the revenue from all Office 365 purchases made within the new iPad apps will go to Microsoft, while the remaining 30 percent goes to Apple. If a person already has an Office 365 account from work, however, Apple won't receive a cut from it. Similarly, if a person were to buy an Office 365 subscription directly from any retail store outside the apps, then Apple won't receive any cut of the proceeds.

According to Computerworld, this isn't good enough for Apple, since the revenue it earns from the apps will be "a pittance for a company that recorded $57.6 billion in the December 2013 quarter alone." So, in other words, a company that makes billions on its hardware sales, music sales, movie sales and app sales won't significantly increase its bottomline from three apps. Shocking news, right?

As explained by Computerworld, Microsoft recently said it has about 3.5 million Office 365 subscribers. If all of those subscribers had purchased their subscriptions through one of the Office for iPad apps, then Apple would only make $105 million annually on the sales. This is an affront to Apple, Computerworld argues, because, again, it makes a boatload of money, and it's simply not fair that Microsoft won't give Apple more since it "cut Apple out of most of the revenue stream by making the apps free to download." This argument is again absurd, as the apps are free to download simply to view files. If an iPad owner wants editing functionality, he or she can purchase it through an app, where Apple will get a cut.

The payment method doesn't seem to bother Nadella or Cook publicly, however, as the two chief executives exchanged pleasantries on Twitter regarding the Office for iPad release.

In reality, the apps are great for both companies. For Microsoft, it should bring in more Office 365 subscriptions or at least provide an incentive for companies to keep their subscriptions. Conversely, Apple makes a decent cut off subscriptions to a service it doesn't have to maintain, and it also brings a big-name productivity app to its store. It's been beneficial so far, with all three of the Office for iPad apps ranking in the top 30 of the iPad's app purchases chart (Word sits at No. 4, Excel at No. 12 and PowerPoint at No. 29), meaning subscriptions are being sold within the apps at a decent rate.

If that arrangement is Nadella telling Cook to "drop dead," then that's certainly a new way to say it.

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61 Comments

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I have to say this is such BS. Apple has no right to anything sold outside of the iOS ecosystem. Quite frankly, the iPad app should just provide a link to a website where one can subscribe instead of doing it inside a native app container so they can cut Apple out of the 30%. I hope Microsoft removes the native feature in a month or so. That will anger Apple even more.

Ok tip to whom ever was giving the title to this article. I didn't read the article yet but I can tell you this. It's biased. Why would I go to that conclusion? The title says so. What part of the title of the article does that? Answer: "except it's not" part. I know the part "where unprofessional-ism looks better" is concern, it is not "better" when the biased is already revealed in the article title.

Poor starving Apple. They've become like whores that go through your pockets while you sleep, looking for more money.... Um, so I've heard. ;)

When Apple first introduced the Macintosh they bundled their own word processors, MacWrite, for free. At the same time Microsoft offered Microsoft Word as a solely for-purchase option. Interesting to note how the great "free" software won that battle. I don't even think MacWrite exists today. Meanwhile over half the people who buy Macs seem perfectly comfortable forking out for Word.

Just because something is "free" or looks like it's "free" doesn't mean to say it's good, great or even adequate. Just look at Google Docs.

Major_Plonquer said,

Just because something is "free" or looks like it's "free" doesn't mean to say it's good, great or even adequate. Just look at Google Docs.

Google Docs along with every other awful "free" office suite knockoff out there.

Major_Plonquer said,
When Apple first introduced the Macintosh they bundled their own word processors, MacWrite, for free. At the same time Microsoft offered Microsoft Word as a solely for-purchase option. Interesting to note how the great "free" software won that battle. I don't even think MacWrite exists today. Meanwhile over half the people who buy Macs seem perfectly comfortable forking out for Word.

Just because something is "free" or looks like it's "free" doesn't mean to say it's good, great or even adequate. Just look at Google Docs.

The very reason many people are buying to MS Office is not the price or free reasons but the compatibility reasons. Office is kind of defacto standard in word processing field and compatibility is the main reason many people are forced to buy Office. Apple or Google with their tremendous money power should invest heavily in Desktop version of Office productivity suite rather than limited functionality online model.

The best part wasn't even mentioned:

If a user buys a subscription within the app, Apple still gets 30% even if the user is switching to another platform!

At least that pathetic article is bringing Apple and WIndows fanboys together based on the comments on that article LOL.

That fake quote they put from Satya though is disgusting IMO. So rude and horrible to say to anyone.

How you have me curious. I wasn't planning on going to that site to give them ever more views. :s
Maybe instead of linking the article, neowin should post a screenshot of the whole page.

Enron said,
Microsoft should get 30% of whatever gets sold through iTunes on Windows.

Ha! Genius!!! I would love to see that happen.

Enron said,
Microsoft should get 30% of whatever gets sold through iTunes on Windows.
for those that don't understand the concept, if apple sold things though the WINDOWS App store, then it would be the exact same thing... nice trick.

rippleman said,
for those that don't understand the concept, if apple sold things though the WINDOWS App store, then it would be the exact same thing... nice trick.

Yeah cause the iPad has official alternative ways to install apps!

so spotify, xbox music, pandora, netflix, hulu plus, etc will drain apples bank cause people don't buy it directly through apple how shocking

Well, why don't we see it at the other side of the coin?

I mean, Microsoft is releasing a strong product, which is a key feature that was uniquely available on Windows based machines (RT, Phone, and Desktop). Meaning that there would be less people migrating to MS' platform because of office choice.

Seeing it from that point of view... I wonder who is unfair...

Jose_49 said,
Well, why don't we see it at the other side of the coin?

I mean, Microsoft is releasing a strong product, which is a key feature that was uniquely available on Windows based machines (RT, Phone, and Desktop). Meaning that there would be less people migrating to MS' platform because of office choice.

Seeing it from that point of view... I wonder who is unfair...

But windows tablets has the complete version of office (the one you use on desktops) in a touch friendly fashion. The one one the ipad is not feature complete.

It really is rediculous. It's a Microsoft SERVICE that is also available on iPad among OTHER platforms. What is next? Apple wanting 30% of Netflix's revenue because they have an iPad app out as well?

When you think about it, Microsoft didnt have to give Apple a 30% cut. If anything its a nice gesture since having an iPad app will help them get new customers,. But the same goes for Netflix and any other company that has an app out for iPad attached to a paid service.

It's Apple's store.

It's no different than you buying a ticket at a movie theatre. The theatre takes their cut then sends the rest to Hollywood. Or buying a Office 365 subscription from Best Buy. They take their cut too.

What is next? Apple wanting 30% of Netflix's revenue because they have an iPad app out as well?

This...I don't even...this is not what's going on here. Not even close. Apple only takes a cut when you use their systems/infrastructure, whatever you want to call it, to sell stuff. If it's outside of Apple's system, they do not get a cut, and Apple isn't demanding a cut of it. So no, Apple will never want 30% of Netflix's revenue just because they have an iPad app out.

benthebear said,
It's Apple's store.

It's no different than you buying a ticket at a movie theatre. The theatre takes their cut then sends the rest to Hollywood. Or buying a Office 365 subscription from Best Buy. They take their cut too.

This...I don't even...this is not what's going on here. Not even close. Apple only takes a cut when you use their systems/infrastructure, whatever you want to call it, to sell stuff. If it's outside of Apple's system, they do not get a cut, and Apple isn't demanding a cut of it. So no, Apple will never want 30% of Netflix's revenue just because they have an iPad app out.

I think you're minunderstanding me...

I'm pointing out that since its Microsoft's service its not normal for Apple to take any cut. Computerworld claims Apple is get screwed by only getting 30% of the in-app sales. Like you, I disagree. I therefore make the comparison with Netflix. Another service that has an iPad app. Just to demonstrate how silly the argument is.

Heartripper said,
It looks pretty fair to me. Apple provides the infrastructure, the tools and, in a sense, the user base and this has a cost.

The 30% for in-app purchases you mean? I agree.

My comments are related to what Computerworld said on the matter. About Apple being screwed over and deserving a bigger piece of the profit of Micrsofts own service. Which is like saying they deserve a piece of Netflix's their service because they happen to have an app for iPad as well.

Again people throw $2000 on an MBP, which is obsolete in 2 years. And they pay $99/year for Spotify etc. But they cant afford $99/year subscription for productivity on 5+ devices!

But as we all can see Word is now number #4 in TOP GROSSING of all apps in the store! And Clas of clans which is #1 heaves in $654,000 a day!

Who is spending $2,000 on a MBP, $99 a year on Spotify, and complaining about the $99 a year cost for Office 365? Can you also explain how a MBP becomes obsolete in 2 years? I have a feeling that your statement is false.

The things people pull out of thin air to try to support an argument never stops blowing my mind.

benthebear said,
Can you also explain how a MBP becomes obsolete in 2 years? I have a feeling that your statement is false.

The things people pull out of thin air to try to support an argument never stops blowing my mind.

I'm on mobile or I'll link you the Apple support page where people were complaining about their 2011 MBPs failing left and right. Or maybe go to Apple subreddit, it was top thread all week.

AsherGZ said,

I'm on mobile or I'll link you the Apple support page where people were complaining about their 2011 MBPs failing left and right. Or maybe go to Apple subreddit, it was top thread all week.

I have an early 2011 MBP and never had a single problem with it! They sell a lot so just because quite a few people complain doesn't mean it's a common problem. You could have a 100 people complaining and actually less than one in 10,000 actually failing. People only go there when they have a problem, doesn't mean everyone has problems or that they are even common!

hobsgrg said,

I have an early 2011 MBP and never had a single problem with it! They sell a lot so just because quite a few people complain doesn't mean it's a common problem. You could have a 100 people complaining and actually less than one in 10,000 actually failing. People only go there when they have a problem, doesn't mean everyone has problems or that they are even common!

What is MBP.

Auditor said,

What is MBP.

Plugging MBP into a Google search will give you the answer. As one who avoids Apple products I didn't know either, but the search results were quite clear. Just three simple letters in your search bar...

Qun Mang said,

Plugging MBP into a Google search will give you the answer. As one who avoids Apple products I didn't know either, but the search results were quite clear. Just three simple letters in your search bar...

Rather than writing three words "Mac Book Pro", you could not resist to show off whole world that you know how to Google and used 3 lines to vent off your steam. I hope you feel much relaxed now and feel good about your knowledge of Google power. :)

AsherGZ said,
I'm on mobile or I'll link you the Apple support page where people were complaining about their 2011 MBPs failing left and right. Or maybe go to Apple subreddit, it was top thread all week.

Which is a load of crap - a few isolated incidents no different to any sort of mass produced product that will have a batch which may have issues. I've owned HP, Lenovo, Toshiba and Dell in the past - all of them have had batches with issues but I sure as hell didn't run off to a forum making up lies claiming that products are failing left, right and centre as you have.

I'm not paying $100/yr for text editing, are you kidding me? TEXT EDITING. I'd rather just buy the app for $5. #BadModel

Satsuki said,
I'm not paying $100/yr for text editing, are you kidding me? TEXT EDITING. I'd rather just buy the app for $5. #BadModel

The iPad apps are a small component of Office 365.

Satsuki said,
I'm not paying $100/yr for text editing, are you kidding me? TEXT EDITING. I'd rather just buy the app for $5. #BadModel

Text editing... because Word, Excel, PowerPoint, OneNote, Outlook, Publisher, Access... all they EVER do... and all they are for... is text editing. *Rolls eyes* Enjoy Evernote, if that's what you need.

For people that work... and work outside of Apple's walled garden (read: Most of employed people that don't flip burgers)... it isn't just "text editing".

Now... it may not be worth $100 a year, but that's a different topic.

wernercd said,

Text editing... because Word, Excel, PowerPoint, OneNote, Outlook, Publisher, Access... all they EVER do... and all they are for... is text editing. *Rolls eyes* Enjoy Evernote, if that's what you need.

For people that work... and work outside of Apple's walled garden (read: Most of employed people that don't flip burgers)... it isn't just "text editing".

Now... it may not be worth $100 a year, but that's a different topic.


It's an iPad. Since iPad 'productivity' right now is pretty limited to bloggers and the stereotypical café budding author, I'm not surprised they can't think any deeper than "just a text editor".

Start talking about macros and scripts and heads explode.

I'm a mid life computer eng and i can testify a good chunk of Office users don't really need office at all. The same can be said about Photoshop.

Satsuki said,
I'm not paying $100/yr for text editing, are you kidding me? TEXT EDITING. I'd rather just buy the app for $5. #BadModel

There's no reason to install/use MS Office since iWork is already free.

LaP said,
I'm a mid life computer eng and i can testify a good chunk of Office users don't really need office at all. The same can be said about Photoshop.

This is very true. When I hear people repeat the mantra that without Photoshop or MS Office people can't do real work, I cringe. Simpler apps usually do the job, and even for professional content creation, I find free tools like GIMP, Inkscape, Libre Office, Gnome Office, and Google Docs more than adequate.

Satsuki said,
I'm not paying $100/yr for text editing, are you kidding me? TEXT EDITING. I'd rather just buy the app for $5. #BadModel

If you think that's all Office does, you have problems.

Also - you can pay for "Office 365 Personal" which is much cheaper, and it's quite a bargain IMO regarding to what you get pay for.

Also - if you don't want to pay, you can still use the free Office Online or mobile apps.

Word, Excel and PowerPoint are at 4th, 11th and 26th position currently on the top grossing apps list in the Store, so clearly many people have use for the Office 365 subscription. Where it'll really explode is when all those enterprise iPad users start purchasing subs.

Satsuki said,
I'm not paying $100/yr for text editing, are you kidding me? TEXT EDITING. I'd rather just buy the app for $5. #BadModel

This isn't twitter so stop using hashtags.

you have to understand that the people that would pay for the subscription do use more than just the ipad apps, paying for the sub gives you all the desktop options also, so makes sense for the most part, the ipad apps are just to compliment the full suite that most would be using anyways.

korupt_one said,
you have to understand that the people that would pay for the subscription do use more than just the ipad apps, paying for the sub gives you all the desktop options also, so makes sense for the most part, the ipad apps are just to compliment the full suite that most would be using anyways.

Many people will pay for this subscription model is because they are plain lazy. I have known this person who just bought in to subscription which even she doesn't know that it is subscription just to prepare her resume. She went to the store and saw $99 price tag for office and just bought it. It is true Office has lots of features but majority of normal user, not business, can get by having very basic text editor.

This saga is same as before tablet inception. People were buying full blown high horse power expensive computers which they used none more than browsing web, listening song, watching movie and email check. With tablet, the normal PC shipment is down because really not many people needed full blown computer. Same thing is for office suite. Even people claiming to be doing scripting and macros on Office will be more likely be doing it on full feature computer rather than 8 inch tiny screen touch fad tablet. Even if you see some one doing it rest assured thats just a novelty which will wear off soon.

Correct, this is only the latest of a bunch of terrible click-baity articles from them. On one hand it's good to call them out, on the other I'm not sure if it's worth it anymore in this case.

If Neowin has any sense they'll remove the link to that loser Gregg Keizer's article so as not to provide them more views.

It seems like everyone in this country thinks wealth sharing is not only a good idea, but justifiable and necessary. Not that I ever read Computerworld, but I'll make doubly sure to avoid them in the future.

I can listen to music on my iPod that wasn't purchased from iTunes as well. Such horror. At this rate Tim Cook will be living on a park bench within months.

At what point has Tim Cook indicated he's not happy with what is currently happening? Microsoft are following Apple's guidelines, and both the computerworld article and this one is just clickbait over a non issue. Both companies seem happy to play by Apple's In-App purchasing 30% rule.

DomZ said,
At what point has Tim Cook indicated he's not happy with what is currently happening? Microsoft are following Apple's guidelines, and both the computerworld article and this one is just clickbait over a non issue. Both companies seem happy to play by Apple's In-App purchasing 30% rule.

He didn't, that's the point.