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SkyDrive decision reveals Microsoft's Office on iOS strategy

Gregg Keizer | April 5, 2013
"Microsoft doesn't want to give Apple any money," summarizes analyst

Microsoft's update Wednesday to its SkyDrive iOS app is proof that the software giant has no intention of sharing revenue with its fierce rival, Apple, and further evidence it will tie Office on the iPad to its subscription plans, an analyst said today.

"It appears that Microsoft doesn't want to give Apple any money," said Wes Miller of Directions on Microsoft, a research firm that only tracks the Redmond, Wash. developer. "And I can't say I blame them."

SkyDrive 3.0 for the iPhone and iPad hit the App Store Wednesday, the first upgrade since April 2012's version 2.0, with added support for the iPhone 5 and iPad Mini, products Apple shipped between the two editions, and several feature improvements.

The 12-month lag was reportedly due to disagreements over what, if anything, Apple was owed by Microsoft for revenue generated by additional storage plans for the cloud-bases storage service. Apple takes 30% of all app revenue, including in-app purchases, and likely argued that it was due that percentage of all SkyDrive storage sales credited to iOS users.

SkyDrive 3.0 for the iPhone and iPad hit the App Store Wednesday.

At the time, Microsoft confirmed the delay, couching it as nothing unusual. But company developers said different, claiming that the SkyDrive app upgrade had been rejected over an Apple rule that bars apps from circumventing in-app purchases by linking to outside mechanisms.

Although Microsoft declined today to answer specific questions about how the logjam had been broken, its official line spoke volumes. "We worked with Apple to create a solution that benefited our mutual customers," a spokeswoman said in an email. "The SkyDrive app for iOS is slightly different than other SkyDrive apps in that people interested in buying additional storage will do so via the Web versus in the app."

In other words, customers who want more than SkyDrive's standard 7GB of free storage space cannot buy more from within the app -- an in-app purchase -- but instead must purchase it after accessing their SkyDrive account using a browser.

Microsoft charges $10 annually for an additional 10GB, $25 for 50GB and $50 for 100GB. If it had bowed to Apple's rules, Microsoft would have had to fork over between $3 and $15 for each customer order.

But SkyDrive's neither circumventing the App Store rules or doing anything new.

Former CEO Steve Jobs, for example, explained the in-app rule and revenue sharing in early 2011 by saying, "When Apple brings a new subscriber to the app, Apple earns a 30% share. When the publisher brings an existing or new subscriber to the app, the publisher keeps 100% and Apple earns nothing."


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