Apple Takes a Bite of Microsoft’s Office 365 In-App Sales

Source: Thinkstock

Source: Thinkstock

Apple (NASDAQ:AAPL) is benefitting from the software sales of one of its biggest historical rivals, thanks to its inflexible app revenue policy.  Microsoft (NASDAQ:MSFT) recently released its popular Office suite of software for Apple’s iPad. However, while Office for iPad is available as a “freemium” download from Apple’s App Store, buyers must still purchase a Microsoft Office 365 subscription if they want to edit or create new documents with the software.

According to an unnamed Apple representative that spoke with Recode, Apple confirmed that it is taking a 30 percent cut of Microsoft’s Office 365 subscription sales. Apple typically takes 30 percent of the revenue generated by any app sold in its App Store, while the rest goes to the app developer. The policy also covers any products or subscriptions sold through an app. Apple’s strict in-app purchase policy was previously rumored to be a point of contention between the two tech companies and may have been one of the reasons why Office for iPad wasn’t released until after former Microsoft CEO Steve Ballmer retired.

However, the companies have apparently come to an understanding and current Microsoft CEO Satya Nadella and Apple CEO Tim Cook recently shared Twitter pleasantries over the Office for iPad launch. “Welcome to the #iPad and @AppStore! @satyanadella and Office for iPad,” tweeted Cook on Thursday. “Thanks @tim_cook, excited to bring the magic of @Office to iPad customers,” responded Nadella.

According to Microsoft’s official Office blog, the Office for iPad apps “were created from the ground up for iPad” and take full advantage of the device’s touch-enabled display. Early reviews of the software from several prominent tech-focused media outlets have been largely positive.

However, some reviewers criticized the software for only being compatible with Microsoft’s OneDrive cloud storage service. Although OneDrive access is included with the necessary Office 365 subscription, some users who are accustomed to using rival cloud storage services like Dropbox or Google (NASDAQ:GOOG) Drive might find the restriction to be a minor annoyance.

Although Office for iPad will compete against Apple’s native productivity apps, the Cupertino-based company will still take a cut of any sales made through its App Store. Apple’s potential revenues from Microsoft’s Office 365 sales will vary depending on which type of subscription Office for iPad users choose. An Office 365 Home Premium subscription costs $99.99 per year and allows Office to be used on up to five PCs or Macs, plus five iPads or Windows tablets. An Office 365 Small Business Premium subscription allows up to twenty-five enterprise users and costs a $150.00 per year. Microsoft will also offer a lower cost Office 365 Personal subscription for one tablet and one desktop computer for $69.99 later this year, according to PCWorld.

Follow Nathanael on Twitter (@ArnoldEtan_WSCS)

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