Don’t call it Revenue Sharing
One of the apparent sticking points in the ongoing (or not) iPhone negotiations in China and greater Asia is the notion of “revenue sharing.” Carriers typically do not share their monthly subscriber revenues with handset manufacturers and many pundits seem eager to criticize Apple for making such a request. I think they are missing the point.
The iPhone is not a prisoner to fixed buttons. Software upgrades allow iPhone to evolve. It will only get cooler. China Mobile (or carrier to be named later) does not need to spend a dime (.7179 Yuan Renminbi) or lift a finger for subscribers to benefit from upgrades. Apple plans to cover all costs and handle delivery of these upgrades … quick and simple via iTunes. Apple wants to do the right thing and make these upgrades free to all iPhone owners. Software updates will improve user experience and encourage data use (which is better for TBA carrier/partner’s bottom line).
iPhone software upgrades provide value but they do not come without cost to Apple. Hence Apple is asking for a small share of carrier monthly subscriber revenues to compensate for this value and expense. A happy iPhone owner is a retained “on contract” w. data-plan customer!
There is one more important value-add that comes with iPhone … The amazing developer community! The soon to be unveiled iPhone software development kit (SDK) will bring a whole slew of new apps to iPhone. All Apple and developer community apps will be delivered via iTunes. Again, no cost to Apple’s TBA China carrier/partner.
Apple to TBA China partner: “Calling it ‘revenue sharing’ is actually a misnomer” … When a deal is eventually done, I expect the terms might describe ongoing “service fees” paid to compensate Apple for supporting initial carrier activation, and for providing technical support and ongoing iPhone software upgrades via iTunes. These service fees will essentially be revenue sharing by another name. Semantics will be important given the public proclamations (“we don’t share revenue”) by China telecommunications execs. Calling revenue sharing by a more appropriate name, and clearing explaining the rationale for said payments, might be an important means to allow all parties to save face.