Is BlackBerry Ltd CEO John Chen Grasping at Straws With "App Neutrality"?

By Markets Fool.com

BlackBerry CEO John Chen recently urged the U.S. government to force iOS and Android developers to bring their apps to less popular platforms like BB10 and Windows Phone.

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In a bafflingblog post, Chen proposes that the idea of net neutrality -- which bans ISPs from throttling speeds of certain websites -- should also be applied to mobile apps with "application/content neutrality." Chen points out that Apple keeps iMessage on iOS and OS X, but BlackBerry now offers BlackBerry Messenger (BBM) on iOS, Android, and Windows Phone. He also criticizes Netflix, a big proponent of net neutrality, for not launching a native app for BB10.

BlackBerry CEO John Chen. Source: company website

Although I doubt Congress will take Chen's demands seriously, they highlight how starved BlackBerry is for developer support.

Why "app neutrality" is absurd
First and foremost, Chen's "app neutrality" proposition neglects the extra work developers must do to port apps between platforms. There are certainly tools to streamline the process, but they often require developers to clean up the code and optimize it for new hardware.

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Second, no major hardware manufacturer has ever pleaded for the government to force developers to launch cross-platform software. Apple, which only controls about 5% of the world's PC market, doesn't demand that all Windows developers, which serve 90% of the market, develop OS X software. Likewise, Microsoft doesn't beg the government to force iOS and Android app developers to save its tiny 3% share of the global smartphone market. Instead, Apple and Microsoft court developers from opposing platforms by offering them better incentives.

Lastly, Chen's core argument is based on BlackBerry "allowing" iOS and Android users to install BBM. But no one asked BlackBerry to do so -- it only did so to grow the messaging app's user base.

How starved is BlackBerry for apps?
BlackBerry also isn't as starved for apps as Chen's proposal suggests. On its own, BlackBerry only had about 130,000 apps last June, but it also signed a partnership with Amazon's App Store, which added another 240,000 Android apps.

With 370,000 apps, BlackBerry remains slightly ahead of Windows Phone, which had 340,000 apps as of last November. Of course, both app stores are still dwarfed by Apple's iOS App Store and Google Play, which both have over 1.3 million apps.

BlackBerry users have essential apps like Facebook, Twitter, and Instagram. Through Amazon, they can play popular (albeit dated) games like Candy Crush Saga. With BB 10.2.1, users can also "sideload" other Android files to their phones. Sideloading is cumbersome compared to one-click installations, but it lets BlackBerryusers install a large number of Google Play apps.

Therefore, BlackBerry users can currently access many more apps than Windows Phone users. However, BlackBerry can't monetize those apps as effectively. Apps purchased from Amazon's App Storeare monetized by Amazon, which pockets 30% of that revenue. BlackBerry also can't monetize sideloaded Google Play files. The only revenue BlackBerry generates directly from apps is through itspaid BlackBerry World apps, from which it keeps 30%.

How to attract more developers and boost software revenue
At this point, BlackBerry's app ecosystem has become a cluttered mess of its original apps, Amazon apps, and sideloaded Play apps. To clean that mess up, BlackBerry should aggressively court more developers to BlackBerry World by reducing its 30% cut, since developers aren't going to gravitate toward a platform that accounts for less than 1% of the global smartphone market.

John Chen has a lofty goal for BlackBerry's software division -- to double its revenue from $250 million this year (fiscal 2015) to $500 million by the end of fiscal 2016. BlackBerry Enterprise Service (BES), QNX, and BBM are expected to drive that growth, but app revenue could become more significant if the company wins over more developers.

Unfortunately, software only accounted for 7% of the company's top line last quarter. Hardware and services revenue -- which together accounted for 92% of its top line -- respectively plunged 24% and 42% year over year.

Big problems ahead
Since demand for BlackBerry smartphones is nearly nonexistent, developers have shunned BlackBerry World, which in turn keeps consumers away. That spiral has fueled rampant speculation that Samsung could buy out the company for around $7.5 billion.

To stay afloat, BlackBerry is desperately clinging to Amazon's and Google's app ecosystems, but consumers in those ecosystems will likely buy Amazon or Android devices instead of BlackBerry ones. This means that BlackBerry is only delivering its cluttered app ecosystem to a rapidly shrinking base of BlackBerry loyalists.

Therefore, complaining to the government about "app neutrality" doesn't do anything to help BlackBerry break out of its negative feedback loop.

The article Is BlackBerry Ltd CEO John Chen Grasping at Straws With "App Neutrality"? originally appeared on Fool.com.

Leo Sun owns shares of Apple and Facebook. The Motley Fool recommends Amazon.com, Apple, Facebook, Google (A shares), Google (C shares), Netflix, and Twitter. The Motley Fool owns shares of Amazon.com, Apple, Facebook, Google (A shares), Google (C shares), Microsoft, Netflix, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.