Apple's iPhone has been wildly successful at selling application software, and more importantly Apple has been successful at inserting themselves into the revenue stream for applications. Up until the iPhone, the common model for PDAPhone users was to buy the device and then buy their applications from an independent reseller (like PDAPhoneHome's store) or directly from the application developers. This model offered a great deal of flexibility for the device owner, and has been great for the third party software stores. But the problem with this model was that the most powerful entities in the development of new devices (carriers and device/platform developers) were left out of the revenue stream. The carriers cared because they were missing out on revenue that they get from other lower function phones which they sell lots of content for (games, ringtones, etc.). With support costs higher on PDAPhones, and revenue streams decreased... carriers haven't had a lot to cheer about there, but they do know that almost all PDAPhone owners are willing to pay a premium for unlimited data access. The platform developer had nothing to cheer about because they had to keep selling new devices to make any money at all.

Then enters Apple to the PDAPhone space a couple of years ago, turning the industry on its head. Apple came in with a restricted model that all applications running on the iPhone had to come through their Apple Application Store where they were able to get a cut of the revenue stream. On the surface, this appears bad for the device owner because it has put restrictions on what applications they can get. I'll come back to that point because in the long term it could be an advantage. It is really bad for independent software resellers because it effectively cuts them out of the model entirely. Such is life... the independent software store may go the way of the buggy whip maker.

Apple's grand plan is simple... sell lots of iPhones and iPod Touchs which will incent developers to make applications for them. Then plug into the revenue stream of the applications and thus have an ongoing revenue stream after the sale of the device... just like with an iPod and iTunes music sales. And, as Apple has always done... make the process "brain dead simple" so that its painless and addicting to keep buying stuff.

So like anything popular and electronic, it didn't take long for the innovative crowd to come up with ways around Apple's restrictions on their use of their favorite toys. This is not anything new... practically everything you buy that has internal software running it... someone has figured out how to crack it and modify it to their liking. In most cases, the device makers silently protest the hacks to their products, but realize that it doesn't really hurt them as long as they can detect it and refuse service and warranty support when its been done. If anything, it may cause more sales when rookie hackers "brick" their devices and have to buy replacements. But with Apple, the hack is directly cutting into Apple's revenue stream for ongoing software sales. So Apple has been putting on the war paint and posturing for a fight if anyone wants to challenge their model.

Since shortly after the introduction of the iPhone, the device was successfully opened up through a process called "jailbreaking". And then with Cydia, 3rd party applications can be installed... applications that in most cases have been rejected by Apple for their store. This has been the crux of much debate between the iPhone user community and Apple. The users want the freedom to run whatever they want... but Apple has an interest in keeping certain applications away. But unfortunately, applications that are made available through Cydia have mostly been free, or not seamless to buy and get money back to the developer. The developer of Cydia, Jay Freeman, now appears to be planning their own application store, which would compete with Apple's. Apple has previously stated that "jailbreaking" an iPhone is a copyright violation and that they would defend this position, so an introduction of a Cydia Application Store would almost certainly guarantee a legal fight with Apple. I'm not sure I'd step into such a fight intentionally.

Back to my point above about what's best for the users... is a Cydia Application Store good for the users? On the surface it would appear that it would be. More choice and the freedom to buy any application you wish has to be good, right? I'm not going to say that it is or isn't, but just ponder another position for thought. One of the big advantages to the current Apple model is that Apple benefits from it. This incents Apple to continue development of the platform and provide updates to current platform owners. One of the big frustrations with Windows Mobile over the years has been that in order to get updates to the platform, you had to keep buying new hardware. Microsoft had no incentive to enhance the platform, and thus after years of market leadership there isn't a lot different in it from years ago. But remember that Microsoft gets a small license fee when the device is sold... and then nothing else. Apple's model gets them a license fee and hardware fee when the device is sold, but then a continual revenue stream for the life of the device. If they roll out enhancements to the platform, it can foster new applications which result in more sales through their Application Store.

So what do you think... will the Cydia Store make it past the legal battle to actual come into existence? Is it going to help or hurt the iPhone user community? And then... will this help or hurt other platform producers in their efforts to copy Apple's model?

Cupertino will be none too happy to hear the news but Cydia creator Jay Freeman is looking to turn Cydia into an all-out application store. Cydia, for those unaware, is one of two hubs iPhone and iPod Touch owners use to obtain unauthorized apps on jailbroken handsets. Think of it as a cross between the App Store and the Linux repository system. Currently, the overwhelming majority of apps that can be obtained via Cydia are free but there are some paid options. Payments mechanisms used however, are at the discretion of the developer. Freeman is looking to change all that by implementing a centralized payment system and offering developers an equal or better revenue split in comparison to Apple’s App Store. With a lawyer in tow, Freeman appears to welcome a response from Apple though when real money gets involved you can bank on the fact that Apple will begin to take jailbreaking much, MUCH more seriously. Beyond any legal action the company will inevitably take, expect anti-jailbreaking measures from Apple’s software developers to kick into overdrive. Forget all that though — the most important question of course, is what will Freeman name his new shop? Let’s see… Store, World and Market are all taken; Our vote is for App Shack.