Exclusive: Microsoft Pressing Apple to Take a Smaller Cut on Sales Inside Office for iOS

Apple has indeed rejected — not merely delayed — an update to Microsoft’s SkyDrive app for iOS following a disagreement over whether it is owed the 30 percent cut of in-app purchases it typically demands. But the spat over SkyDrive is just one small part of the larger argument between the two companies.

Sources familiar with the ongoing negotiations between Apple and Microsoft tell AllThingsD that the companies are at loggerheads not over the 30 percent commission Apple asks of storage upgrade sales made through SkyDrive, but over applying that same commission to Office 365 subscriptions sold through Microsoft Office for iOS, which is expected to launch sometime next year.

Office has long been a cash cow for Microsoft, and extending the platform to iOS will undoubtedly fatten it further. It will also bring significant benefits to Apple’s mobile platform, ones for which Microsoft feels it is owed a discount on that 30 percent cut that Apple would otherwise command on Office 365 subscriptions sold to iOS users through it. The apps are just part of a subscription that includes desktop access.

So the company has been pushing Apple to adjust the 70/30 revenue split in its developer license agreement. Predictably, Apple has refused to comply. It’s not yet clear what sort of concession Microsoft is seeking, but whatever it is, Apple’s evidently not willing to consider it. Indeed, I’m told it has taken a “the rules are the rules” stance, which would suggest it’s not at all willing to negotiate a different split. Apple’s position: If a customer comes through its gateway, it feels it is deserved the commission outlined in 11.12 of its developer license. (The irony of this is just astonishing. Recall that back in 1997 Apple co-founder Steve Jobs had to beg Microsoft to continue developing for the Mac simply to ensure that the company would remain in business.)

Apple declined comment on any discussions it has been having with Microsoft over Office for iOS, but it did provide a statement on its revenue-share rules.

“Apple provides customers and developers the largest selection and safest way to discover apps with our curated App Store,” company spokesman Tom Neumayr told AllThingsD. “We’ve designed our rules to be fair and consistent for every developer — free apps and services are distributed for free, paid apps and services provide a revenue share to Apple. We’ve paid out over 6.5 billion dollars to our developer community who have created over 700,000 apps.”

Microsoft has not yet responded to a request for comment.