Rumor: China Unicom to share Apple’s China App Store expenses in return for slice of revenues?
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Yesterday (April 6, 2009) Trading Markets posted a story “Talks Between Apple and China Unicom Suspended.” The report stated that; “Talks between China Unicom and Apple to introduce iPhone into China came to a halt as Apple was said to have asked the Chinese telecoms carrier (China Unicom) to stand costs of building Apple special stores in this country after China Unicom agreed on a profit-sharing plan proposed by Apple.”
My reaction yesterday – Wrong! And exceptionally poor background research on the part of Trading Markets!
iPhonAsia believes that Apple and China Unicom are moving rapidly to conclusion of a formal agreement to launch official iPhone models (plural) in China. So what’s with the Trading Markets story? There may well have been conversations over China Unicom sharing some expenses associated with developing Apple’s soon to be unveiled China App Store (NOT Apple brick and mortar stores as the Trading Markets report implies). iPhonAsia believes this matter is now settled. It is possible that China Unicom will indeed share some of the China App Store expenses as they may in turn receive a generous share of Apple’s slice of China App Store revenues … slightly more than ½ of the 30% share that Apple receives on app sales.
We had a very important piece of news released via Cindy Geng at Interfax China TMT this morning…
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Beijing. April 7. INTERFAX-CHINA – Apple Inc. has agreed to grant China Unicom the majority share of revenues from its (China) App Store as part of ongoing discussions between the two parties regarding the introduction of the iPhone to China, a China Unicom source told Interfax on April 7.
The Interfax report (above) supports iPhonAsia’s theory for Trading Markets miss-reporting as outlined below in my e-mail response to a sharp-eyed iPhonAsia reader who asked about the April 6, 2009 Trading Markets article (name and e-mail address redacted):
iPhonAsia to reader:
Yes I did see it (Trading Markets article) … That is either totally bogus or a Mandarin-to-English translation goof-up. I sent two e-mails this morning to Trading Markets in an effort to set them straight. No reply, no edits made, and no surprise to me. Doing a bit more detective work … I went to Trading Market’s referenced source - ccidnet.com and translated the site to see if I could find the original article with references to “talks suspended.” Nothing close to that story anywhere on ccident.com … at least that I could find.
The best “iPhone deal” reporting I’ve seen coming from China has been from Interfax China and JLM Pacific Epoch. Both sites seem to have connections inside China’s telecom industry feeding them insider tidbits. Many Chinese media and tech sites pick up the scoop from Interfax and/or JLM Pacific Epoch and then rerun or re-edit their story.
Here is my take on this Trading Markets piece. I think a news service (possibly ccident.com) in China picked up on a sentence (“According to the source, the sticking point is the division of revenues from the online iPhone applications store”) in an article on Interfax TMT China’s weekly bulletin (subscriber only) and simply miss-read it. Any possible dispute would have NOTHING to do with Apple Stores in China (Sanlitun and soon in Qianmen). It could, however, have something to do with Apple’s China App Store.
What’s really going on here? China Unicom is purposefully leaking to the media that “all is not yet settled” and there remain some “discussion points,” including an issue over the amount of Apple’s China Application Store revenue sharing. Apple kicks 70% to developers and keeps 30% for App Store maintenance and other marketing and distribution expenses. I suspect China Unicom will be promoting many “for China” apps (within Apple’s soon to be unveiled China App Store) as part of their iPhone deal with Apple and they want more than a minority slice (more than ½ of Apple’s 30%) for select apps that China Uincom will be promoting. I’d bet this App Store revenue sharing issue has already been settled. I fully expect that senior Apple executives will be in Beijing very soon! Purpose will be to tie up any loose ends and –
- Meet with China Unicom
- Pay a courtesy call to China Mobile
- Meet with MIIT*
- Sign the deal
Much of the recent spin in the press (e.g. “deal not done” … “there are issues to resolve”) stems from China Unicom’s failure to control and contain their Shanghai subsidiary. As you no doubt heard and saw, the Shanghai Unicom subsidiary, without authorization, used images of iPhone 3G to promote their forthcoming WCDMA 3G services. This caused a major stir that reached all the way to Cupertino. China Unicom execs in Beijing had to do some fast footwork and backtracking so that they could preserve the “surprise element” (deal announcement). China Unicom also lost some face as a result of this incident. The loss of face was with
Apple and within China’s telecom industry. Many of China’s telecom pundits advised that China Unicom must immediately retract any suggestion that a deal was done. They further suggested that the only way for China Unicom to regain any leverage with Apple would be to put out stories suggesting that “issues remained to be negotiated.” Even if a deal was 100% done (and it’s technically not done until MIIT approval*), China Unicom would lose face if they did not put out some spin in the press. And that’s exactly what they did. But IMO the Trading Markets story goes way too far with the spin (intentionally miss-leading? Or a very poor translation?) and is total B.S.
Best bet for an announcement is May 17. Next best bet is WWDC in June. The May 17 date corresponds with World Telecom Day and China Unicom’s target date for trial launch of its WCDMA 3G network in 55 cities. I’m beginning to question whether May 17 will be the “announcement” day, as any such news would beg questions
over new model iPhones. It appears likely that new models won’t be unveiled until WWDC – June 8th – 12th. There won’t be any official iPhone in China launch before July 1. Could be August or Sept.
There remains an outside chance for WiFi on an iPhone in China and that could possibly delay matters. I recently wrote about WiFi in China here > http://idannyb.wordpress.com/2009/04/01/wifi-on-an-official-iphone-in-china/
*NOTE: Ministry of Industry and Information Technology (MIIT) approval of iPhone and WVAS (e.g. App Store, iTunes) is mission critical to a formal iPhone launch. Regardless of whether Apple and China Unicom are in 100% agreement and have inked a deal, MIIT must approve.
