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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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