Have Apple's revenue demands endangered the App Store?

For a few minutes Tuesday afternoon, Apple (NASDAQ:AAPL) reigned as the most valuable company in the U.S., briefly edging past Exxon as its shares rose to $369.89, translating to a market cap of $342.8 billion, Barron's reports. Exxon reclaimed the throne later in the day, but no matter--the moment symbolically completed the extraordinary financial turnaround masterminded by Apple CEO Steve Jobs when he came back to the company in mid-1997, at which time shares were trading at about $19 each, and Apple's market capitalization hovered around $2.4 billion. Credit Jobs' technological vision, business savvy and ruthless negotiating skills for vaulting Apple to its current heights, but he's made mistakes along the way as well. And now it seems that Jobs' insatiable quest for more power and more money could threaten the future of the App Store ecosystem by driving out some of the partners most directly responsible for galvanizing consumer interest in iOS applications.

Blame section 11.14 of Apple's revised App Store Subscriptions agreement, which states "Apps can read or play approved content (specifically magazines, newspapers, books, audio, music and video) that is subscribed to or purchased outside of the app, as long as there is no button or external link in the app to purchase the approved content." Combine that with Apple's demands for 30 percent of all revenues generated from sales of App Store subscriptions, and it is no surprise that some publishers and media providers are effectively abandoning in-app sales on iOS in favor of HTML5-based, platform-agnostic mobile web experiences--a move that enables companies to continue to market their content to consumers on iPhones and iPads while entirely bypassing the App Store and its restrictions.

Leading the App Store exodus: Retail giants Amazon.com and Walmart, which both launched significant HTML5 efforts Wednesday. Amazon unveiled Kindle Cloud Reader, an e-reader application enabling consumers to read digital books instantly via the web browser, with no software download or installation required. Optimized for the Safari browser on Apple's iPad and Mac desktop units, as well as Google's (NASDAQ:GOOG) Chrome browser, Kindle Cloud Reader supports both online and offline e-book access, and arrives less than a month after both Amazon and rival bookseller Barnes & Noble removed e-book purchase options from their respective iOS applications. Another e-book retailer, Kobo, took the same step and has already announced it is at work on its own HTML5-based mobile app extending its read-across-any-device strategy to platforms including Android, BlackBerry and webOS.

As for Walmart, the big-box behemoth extended its Vudu on-demand streaming movie service to the iPad browser as well. Apple tablet owners may now access more than 20,000 Vudu feature films and television episodes, available to either rent or buy--and with all revenues going directly to Walmart. It's not just retailers sidestepping the App Store, either: Earlier this summer, The Financial Times rolled out an HTML5 news application, and Facebook is reportedly poised to introduce an HTML5 mobile platform for iOS giving the social network far greater control over the user experience. (The initiative is also expected to integrate Facebook's Credits virtual currency solution, enabling developers and publishers to monetize their efforts via premium application sales and in-app purchases.) No less significant, independent developers are gravitating to HTML5 as well: Sixty-six percent of developers say they're "very interested" in writing HTML5 apps according to Appcelerator and IDC's new Q3 Mobile Developer Report, far ahead of Windows Phone, BlackBerry and webOS (albeit some distance behind enthusiasm for iOS and Android).   

Time will tell if others follow Amazon and Walmart's flight to freedom from the App Store's clutches, but it seems inevitable. The irony is that no one has more vocally championed HTML5's revolutionary possibilities than Steve Jobs himself. In his infamous "Thoughts on Flash" screed published in April 2010 to explain Apple's decision to block support for Adobe Systems' Flash multimedia platform across devices running iOS, Jobs wrote "HTML5, the new web standard that has been adopted by Apple, Google and many others, lets web developers create advanced graphics, typography, animations and transitions without relying on third party browser plug-ins (like Flash)... New open standards created in the mobile era, such as HTML5, will win on mobile devices (and PCs too)." Looks like Jobs will be right again--and HTML5's victory will be the App Store's loss.--Jason