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5/23/2014
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Osmo iPad Game System Dodges Apple Tax

Osmo sells physical game pieces directly to consumers, bypassing Apple's efforts to grab a slice of the revenue.

8 Gadgets For The High-Tech Home
8 Gadgets For The High-Tech Home
(Click image for larger view and slideshow.)

At a time when indie game developers lament the improbability of being able to produce a profitable video game, a startup called Tangible Play may have found an answer.

The company, co-founded by Pramod Sharma, a veteran of Google, and Jérôme Scholler, formerly with LucasArts, has launched its own crowdfunding campaign to produce an iPad game system called Osmo that requires physical components.

Good luck getting anyone to buy your mobile game among the million-plus free apps that are your competition. Gartner in January predicted that by 2018, "less than 0.01% of consumer mobile apps will be considered a financial success by their developers." But people will pay for physical goods, particularly when the product encourages kids to look beyond the mobile devices to interact with the real world.

Osmo consists of three components: a mirror that snaps over an iPad's front-facing camera and directs its view down to the surface supporting the tablet, a stand to keep the iPad upright, and two sets of game pieces -- alphabet tiles and shapes. When it ships later this year, it will support three apps -- Newton, Words, and Tangram -- that will be available as free downloads from Apple's App Store.

These apps are designed around interaction between physical game pieces and the virtual game environment. Move a block and it moves on the screen. Spell a word with tiles, and Osmo will see it.

The genius of Tangible Play's approach is that it keeps Apple's fingers out of its potential revenue. Apple asks companies interested in creating certain hardware components that connect to iOS devices to do so through its MiFi hardware licensing program. Companies that comply must pay a confidential royalty to Apple and must abide by a non-disclosure agreement.

Companies that wish to create iOS peripherals without paying Apple have a few options. They can make certain audio products that connect through the headphone jack. Apple does not attempt to control the analog audio stream to or from iOS devices. They can also make Bluetooth hardware. Apple stopped seeking MiFi certification for Bluetooth peripherals back in 2011.

Osmo's interface is optical -- a mirror to redirect the iPad camera -- and it too is outside of Apple's gatekeeping.

Osmo is available for a pre-order price of $49 during the company's crowdfunding campaign and for $99 thereafter. It's supposed to ship this summer. When it does, Apple won't see a dime. But Tangible Play, unlike the majority of struggling mobile developers, will have already taken many orders at a price point that's orders of magnitude above the 99 cents that fewer and fewer app buyers will pay. That's what permissionless innovation looks like.

Could the growing movement toward open source hardware rewrite the rules for computer and networking hardware the way Linux, Apache, and Android have for software? Also in the Open Source Hardware issue of InformationWeek: Mark Hurd explains his "once-in-a-career opportunity" at Oracle.

Thomas Claburn has been writing about business and technology since 1996, for publications such as New Architect, PC Computing, InformationWeek, Salon, Wired, and Ziff Davis Smart Business. Before that, he worked in film and television, having earned a not particularly useful ... View Full Bio

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RogerWilliams
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RogerWilliams,
User Rank: Apprentice
5/23/2014 | 11:59:20 PM
Re: Games potential?
You know Windows operated for more than two decades without taking a 30% cut of ALL software revenue, they did quite well with profits from OEMs buying the OS.  Opposite to that is Google, which can at least justify they don't sell android so they operate more on a business model more similar to video game consoles.  Apple on the other hand wants their cake and get to eat it too by taking profits from both consumers and developers.  They have the most popular tech product in the world and they milk it at both ends.  This is the point!!!!!  If you can't understand that, then you're not as smart as you think you are.  Comparing to brick and mortar stores and tangible goods makes not sense since their business models are not comparible.  Durrrrr Doy.
Thomas Claburn
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Thomas Claburn,
User Rank: Author
5/23/2014 | 12:51:30 PM
Re: Games potential?
There are many devices that work with iOS and have a free app, but these apps communicate over an unrestricted channel like WiFi or Bluetooth. 

There are also a few games that rely on physical objects and use the iPhone or iPad as a remote (Sphero and Anki Drive come to mind), but again, these apps don't have a hardware interface component.

Osmo is noteworthy because it uses a custom hardware interface -- something Apple tries to limit through its MiFi program -- and weds it to a game (and not a remote control interface like Sphero or Anki Drive).

It is noteworthy particularly in the context of games, which have come under so much pressure to be free and present such a profit challenge to game developers. The existing business models for game apps -- paid, ads, and in-app purchases -- all are problematic and few game companies but the largest can manage this challenge. GE doesn't face this issue with a $500,000 medical scanner.

And Apple's 30% fee for iOS apps qualifies as a tax more than Google's 30% fee because it's mandatory if you want to sell iOS apps (or in-app items). Google's fee is optional, just as Apple's Mac App Store fee is for OS X apps. If you don't want to sell through Google Play, you can distribute your .apk file through other stores (which may not offer a better deal) or via your own website. There is no legal way to sell iOS apps without that fee, just as there's no legal way to sell taxable goods and not pay tax.

As for the Google tax, that's a different article, related to advertising and websites.
DavidJ014
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DavidJ014,
User Rank: Apprentice
5/23/2014 | 11:45:59 AM
Re: Games potential?
So I play 99 dollars for a mirror and a couple of crappy apps? This is not even an innovative way around the Apple Tax.  There are many companies not paying royalties for myfi.  Lets up the game here IW.
Laurianne
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Laurianne,
User Rank: Author
5/23/2014 | 10:06:37 AM
Re: Games potential?
Thanks for weighing in. I made no comment here on what % would be mild, appropriate, or inappropriate. Of course stores must reap profits. I am always interested in people who push the limits of existing business models in new ways. Tom Claburn has explained this as one example of innovation in that regard.
melgross
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melgross,
User Rank: Ninja
5/23/2014 | 9:57:13 AM
Re: Games potential?
I do t understand the big deal about this. There are many devices that are designed to work with iOS that are sold from the manufacturer's website, or even in a store, but have a free app in Apple's App Store. This is nothing to write an article about. Apple tax, Microsoft tax, Google tax and Blackberry tax. It's not a tax. What's with you people? Don't you think that every store out there is entitled to make a profit on what they sell? Laurianne, from your position here, you shouldn't have it thought that you are naive enough to not understand that. And brick and mortar stores can get as much as a 45% cut of sales. 30% is quite mild. Just understand that Apple's App Store has never sold hardware, and so this is the only way to do it. When GE sells a $500,000 medical scanner, and gives the app that interacts with it away for free on Apple's App Store, are they trying to avoid Apple's "tax" by not selling the hardware there too? Silly. Do you talk about the Google tax, or is anything that sounds even faintly critical of Google off limits, as it seems to be for most publications, while Apple is eager game for them.
Laurianne
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Laurianne,
User Rank: Author
5/23/2014 | 9:43:17 AM
Games potential?
Why not just play word games that let you move tiles around on screen by swiping? Maybe there are other game scenarios yet to come that I'm not visualizing. Interesting way to work around the Apple tax.
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