Apple’s Latest Opens a Developers’ Playground

PALO ALTO, Calif. — When Apple opens its online App Store for iPhone software on Thursday, Steven P. Jobs will be making an attempt to dominate the next generation of computing as it moves toward Internet-connected mobile devices.

The store, which will offer more than 500 software applications, including games, educational programs, mobile commerce and business productivity tools, may be a far more important development than the iPhone 3G, which goes on sale at the same time. An abundance of software could make the iPhone’s operating system dominant among an abundance of competing phones.

“The reaction we have gotten so far has been really strong,” Mr. Jobs said in a telephone interview this week. “The quality and the sophistication of the applications you can write for the iPhone is in a different class.”

Mr. Jobs failed to make his personal computers dominant, in part because software developers did not write as many programs for Mac-based machines as they did for Microsoft Windows PCs. He did not make the same mistake when he developed the iPod music players. Apple’s iTunes stores, with easy and inexpensive downloads of music, gave the device an insurmountable lead, to date, over other players.

With the App Store, Apple simplified the process of adding software to the phone. Mr. Jobs contends that Apple does not plan to make much money on games and other applications; he has also said the company does not make much money selling music on iTunes. “We are not trying to be business partners,” Mr. Jobs said of the App Store. Instead, he said, the goal is to “sell more iPhones.” Apple gives developers a 70 percent cut of sales.

The enthusiasm among software developers is high, from San Jose to San Francisco. But, at the same time, some developers are approaching Apple with caution as they figure out what their relationship with the company will be. Many expect the dealings to be more lucrative than those with wireless carriers, which in large part control what programs end up on phones. But there are still many unknowns, especially for developers whose applications will compete with the popular iTunes music and video store.

Apple has a substantial way to go to catch its competitors. Palm, Microsoft, R.I.M., Nokia and Symbian have all enticed developers to write software for their smartphone operating systems. Palm, for example, says that it has 30,000 active software developers, and Microsoft said last month that it had more than 18,000 applications available for its Windows Mobile operating system, which is available from 160 cellular carriers around the world.

Still, Mr. Jobs is catching up quickly, and none of his rivals are dismissing him.

“Everybody wants to build an iPhone app,” said Gene Munster, a senior research analyst at Piper Jaffray in Minneapolis. “It’s pretty rare you hear things like this. The enthusiasm is surprising.”

Matt Murphy, a partner in a fund set up by Kleiner Perkins Caufield & Byers to invest in iPhone apps, ascribes the intense interest to the consumer demand for the iPhone, as well as the unfettered distribution promised by the App Store: it limits the phone company’s role as a gatekeeper.

“A lot of the best entrepreneurs haven’t wanted to start anything because the carriers had to bless you,” he said. “There were a lot of unknowns.” For instance, there was no standard deal for what carriers would be paid. Carriers also rejected some applications and, Mr. Murphy said, “No one wanted to fall on their face.”

One indication of how much the iPhone changes the scene is Mr. Murphy’s fund, the iFund, which plans to invest $100 million in new iPhone-related software firms. In the last four months, the Kleiner fund has received 2,000 financing requests from developers, 85 percent of them intended for consumers.

Mr. Murphy said that Kleiner was serious about 100 of those ideas. The fund expects games, health care, social networking, mobile commerce and location-based services to be the most popular types of software. An application that would allow Bay Area surfers to check tides and network with other surfers failed to past muster.

Instead, Kleiner is backing, among others, iControl Networks, which is creating an application to let homeowners turn off their lights and alarms at home, as well as monitor security cameras, via their iPhones.

Still, Apple could end up at odds with some developers — particularly creators or distributors of content and media — who offer applications that compete directly with iTunes. Rajeev Raman, chief executive of Mywaves, an ad-sponsored free mobile video service available on millions of handsets, including Nokia and BlackBerry smartphones, said he would like to offer Mywaves in the App Store.

But he has made little headway in his discussions with Apple, he said: “We have a reverse conflict because they are not providing video for free, but we are. We are interested, but we don’t want to jump into anything that will have our hands tied behind our backs.“

When asked about it, Mr. Jobs said: “He’s right. We will compete.” He added, “That’s a discussion to have.”

Twenty-five percent of the first 500 applications at the store will be free, Mr. Jobs said. Of the commercial applications, 90 percent will be sold for $9.99 or less, he said, adding that a third of the first wave of applications will be games.

Mr. Jobs insisted that the 30/70 split is a more generous deal for developers than what is common in the video game industry. And he said that Apple would provide distribution and marketing.

The question that remains unanswered is how Apple and Mr. Jobs will manage the relationship with software developers. When the iPod was released, music executives hailed him as a savior for their flagging business. But they later complained they were not paid enough. Hollywood studio executives were even more cautious, dragging their feet for months before allowing full-length movies on iTunes.

Mr. Jobs declined to elaborate on how he expected to foster a more positive relationship with software developers, but Mr. Murphy of the iFund said: “He can’t kill the golden goose. The promise of the iPhone is developers. If you choke them off, there are a lot of other platforms waiting.”