Apple's IPhone Software Sales Take Off

Apple's bet on cellphone software seems to be paying off.

In the month since Apple opened an online software clearinghouse called the App Store, users have downloaded more than 60 million programs for the iPhone, Chief Executive Steve Jobs said in an interview at Apple's headquarters. While most of those applications were free, Apple sold an average of $1 million a day in applications for a total of about $30 million in sales over the month.

If sales stay at the current pace, Apple stands to reap at least $360 million a year in new revenue from the App Store, Mr. Jobs said.

Apple has hit a few problems along the way, in part because it has set itself up as a powerful intermediary for the distribution of software to iPhones. For instance, it has frustrated some software developers by removing their programs from its App Store without explanation. 

Apple isn't likely to earn much in direct profit from the business as it is keeping only 30% of the proceeds from application sales. That's about enough to cover expenses from credit-card transactions and other costs of running the online store -- while the programs' creators keep 70%.

But while phone differentiation used to be about radios and antennas and things like that, Mr. Jobs said, We think, going forward, the phone of the future will be differentiated by software.

That view is shared by competitors such as Microsoft Corp. and Google Inc., which are working to popularize their own software platforms for cellphones. Apple has caught them off guard.

Software developers also say they've been surprised by the popularity of their iPhone applications. Videogame specialist Sega Corp. says it sold more than 300,000 copies in 20 days of its $9.99 Super Monkeyball game, in which players guide an orb around mazes by tilting their iPhones.

Another hit comes from Epocrates Inc., which has developed a free drug encyclopedia for the iPhone. More than 125,000 people have downloaded the software, among who, 25,000 are doctors.

Mr. Jobs said developers' share of iPhone application sales in the first month was about $21 million, of which the top 10 developers earned around $9 million.

Some developers, however, have tested Apple's limits on software it will distribute through the App Store. The company recently removed an application called I Am Rich that did nothing but display a glowing red gem, for the sum of $999.99.

An independent engineer discovered code inside the iPhone that suggested iPhones routinely check an Apple Web site that could, in theory trigger the removal of the undesirable software from the devices. In responce, Mr. Jobs confirmed such a capability exists, but argued that Apple needs it in case it inadvertently allows a malicious program.