Microsoft’s Nadella to Apple’s Cook on Office revenue sharing: Drop dead

“With the launch of Office for iPad yesterday, Microsoft again effectively cut Apple out of most of the revenue stream by making the apps free to download,” Gregg Keizer reports for Computerworld.

“Office for iPad can be downloaded free of charge and used to view documents and spreadsheets, and present PowerPoint slideshows. To activate the three apps — Word, Excel and PowerPoint — for document creation and editing, users must sign in with valid Office 365 subscriber credentials,” Keizer reports. “But because the apps are free, Microsoft is not obligated to fork over 30% of the sales revenue to Apple, a condition of the App Store for paid apps and all in-app purchases.”

“The only revenue for which Apple is due its 30% commission will be what’s produced by in-app purchases of an Office 365 plan, the same scenario as has existed since mid-2013 when Microsoft first dropped Office Mobile for the iPhone into the App Store,” Keizer reports. “In early 2011, then-CEO Steve Jobs put it plainly: ‘Our philosophy is simple — when Apple brings a new subscriber to the app, Apple earns a 30% share,’ Jobs wrote in a February 2011 statement. ‘When the publisher brings an existing or new subscriber to the app, the publisher keeps 100% and Apple earns nothing.'”

Read more in the full article here.

Related articles:
Apple takes their usual 30% cut of Microsoft’s Office for iPad subscriptions – March 27, 2014
Microsoft releases hobbled Office for iPad; requires $100/year subscription to create/edit documents – March 27, 2014
Microsoft CEO Nadella to use his first press conference to talk a lot about Apple – March 27, 2014
Microsoft Office for iPad: 5 big questions – March 26, 2014
Microsoft CEO Nadella expected to finally admit holding Office for iPad hostage a failed strategy – March 26, 2014
Microsoft Office on iPad: Too little too late? – March 23, 2014
iPad generation shuns Microsoft Office; one of Microsoft’s biggest squandered opportunities – March 14, 2014
Apple makes the world’s most advanced operating system freeware – October 23, 2013
Apple’s new free OS X for Mac hurts Microsoft and the Windows PC industry in myriad ways – October 22, 2013
Apple exploits Microsoft’s confused hesitation on Office for iPad – October 22, 2013
Apple’s OS X Mavericks available today free from the Mac App Store – October 22, 2013
Apple releases next-gen 64-bit iWork and iLife apps for OS X and iOS; free with new Macs and iOS devices – October 22, 2013

35 Comments

    1. Putting it mildly. Fact is displaying those docs is all most will need to do if they bother with it at all. It won’t inspire anyone to pay MS a cent (or any that do will do so only because they stay within the apple eco system) while cutting any enforced move to the Surface or other Windows centric devices. Cant see any real downside for Apple while MS is just trying to hold on to as many customers as possible even if it means earning nothing more from them. They are simply playing for time, keeping in the game with their cash cow in the hope of turning the company round in other ways.

      1. MS Office for iPhone is now free and allows editing documents. Only the iPad versions require the 365 subscription to edit docs. So one could edit on iPhone (downloaded to iPad) then open in respective iPad Office App. This must be how MS is empowering people to …. Well whatever their slogan is nowadays.

  1. I think the author of this story is trying to create a rift between Tim Cook and Satya Nadella where none exists.

    On the scale of things, the 30% slice of revenue from MS Office for iPad that goes to Apple is minuscule when compared to Apple’s entire revenue stream. I don’t think Cook is going after that slice of the market.

    You need to look at it proactively. It’s a win for Apple because it pushes the iPad deeper into the enterprise. Mobile workers who are constantly on the move can carry their iPads around with them and organise and edit documents on the go without resorting to their PCs. This can only boost sales of the iPad and gain greater acceptance in the enterprise market.

    I think Cook is willing to forego a sliver of income in exchange for much, much higher sales of iPads to organisations which in turn will result in greater adoption of iPhone and Macs in the corporate sector.

    Sometimes you have to give up the sardines to land the whale. I think Cook strategised right on this.

  2. “Microsoft returns to ‘freemium’ revenue model for Office for iPad, escapes the bulk of Apple ‘tax'”

    Does this silly man think IAPs don’t get the 30% cut? I think all the fluff made about this is just click bait for ad revenue. I think when it comes down to it MS probably don’t care. 30% is less than what they lose having boxes on shelves at any store with <5% of the customers of the App Store

  3. Is there any legal obligation for Apple to have the apps on their store? If not, take them off and anyone who wants it can download them from Softie’s site.

    1. No. The only way to legally get apps on the iPad is to download them from the App Store.

      If users purchase the Office 365 subscription from within the free app, Apple keeps 30% and passes on the rest to Microsoft. If the customer goes to the web site to purchase the subscription, Microsoft keeps the whole amount.

      1. Fortunately, we have only Apple products (going on 20+ years). Including iPads and iPhones. Won’t use anything else so I’m quite familiar with the App store. Sorry I don’t know all the legal requirements of the store or inner workings. It was just a question.

    2. No way. The fact that they are on the App Store removes one of the last obstacles some enterprises might have about giving iOS devices to their employees. As a result of MS Office being on the iPad Apple will get more revenue, in device sales.

        1. Journalists are right at the bottom of any poll of trustworthiness, along side used car salesmen.
          99.9% of journalists are liberals.
          Sheesh. It’s a mixture of denial and the herd mentality here…

    1. Drop the “liberal” from your comment, and I agree. It’s just a gratuitous political point that detracts from the larger truth you make about all journalism today in which is more about spin than facts.

      1. You can’t separate liberalism from journalism, or environmentalism or feminism. What I find amusing is that you rightly view the term as a pejorative.
        I’d be insulted if someone called me a liberal too.

        1. I tend to agree with you, except for that number you threw out about 99.9% of journalists being liberal. That doesn’t sound like a finding, but an unsupported assertion.

  4. “With the launch of Office for iPad yesterday, Microsoft again effectively cut Apple out of most of the revenue stream by making the apps free to download,” Gregg Keizer reports for Computerworld.”

    They managed to get the news exactly backwards >< .. MSFT is paying Apple 30% for all subscribers (about $100/year). You cannot do anything with the 'Free' version but view documents. That's it. You may as well send a PDF.

    1. “MSFT is paying Apple 30% for all subscribers (about $100/year)”

      That’s incorrect. Microsoft is only paying 30% for those that subscribe through the iOS apps. If you already have a subscription or subscribe through the web or desktop version, then Apple gets $0.

      1. That’s true, but that’s the way it’s always been.

        It’s a concession Apple makes to all devs, otherwise they’d be punishing them for being successful.

        Don’t forget, Apple is making about $500 per user since…. they have to buy an iPad to use this new suite of apps. It’s a pretty brilliant system.

  5. The comments on the site are overwhelmingly calling the author out on the most ridiculous click-bait headline, which is quite the opposite from the truth.

    1. The headline is not MDN’s, but Computerworld’s, so shame on them. Satya Nadella deserves a fighting chance to save Microsoft from itself. Journalistic sensationalism isn’t helping the cause. Guess it depends upon the ‘cause.’ \cynicism

  6. If my boss wants to buy office 365 for me, I’ll buy it through the iPhone/App Store if I can. That way Apple will get more money and MS less. I like that.

  7. Of the 3 Office products the only one I still use, and on a daily basis, is Excel. All of my Word docs, and PowerPoint presentations were converted to Pages and Keynote long ago, and new docs & presentations are created on those apps from the start now.

    The majority of my spreadsheets have also been converted to Numbers, except for 2 … my Company’s Expense Reports (for some reason the formatting will not convert correctly into Numbers) and a weight / activity tracker spreadsheet I created for myself about 10 years ago (for some reason the charts in the spreadsheet will not covert correctly into Numbers). There is nothing I can do about the Company’s expense report, I’ve got to use what they provide. But I may finally, this weekend, recreate my weight/activity tracker spreadsheet in Numbers, and move all of the data, so I can rid my personal life of M$ Office!

    As far as I’m concerned … I already have the best production suite available, and it doesn’t cost me $100/yr to use it!

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