Apple has announced ( "Apple demands 30% slice of subscriptions sold via apps", FT 16 February 2011) any subscription-based content available for the iPad must also be sold via the Apple App Store. This means Apple will earn 30% commission from all sales via the App Store.

This clearly makes sense for Apple. They after all created a new content market with the iTunes store, and have now created another market for content via the iPhone and the iPad, including subscriptions to newspapers and books. To create and manage a content market is something Microsoft never achieved. There is no justice in this world, but for companies that create a content market, it is reasonable that they benefit from that market. Companies with a smaller market share, such as Google, can only charge lower royalties – in the case of Google, nothing at all. But Google’s long-term goal is most likely to be advertising revenue rather than royalties on content sales.

For content owners, it is good too. Sales of apps via Apple are higher than on other platforms; if an app is developed for a smartphone or tablet, it is typically developed for the Apple platform first. Longer term, the rise of Android will provide a competing platform and Apple will have to scale back the royalties they charge. For the moment, however, they have first mover advantage.

Franco Bernabè, head of Telecom Italia, claimed Apple’s content market was “perhaps the first real example of a very successful walled garden.” On the contrary: it is the latest in a long line of technological innovation creating a short-term monopoly, which usually tends over time to revert to a more competitive situation. Content owners, and mobile users, should all be pleased that Microsoft and Google are very active in the smartphone market.