Rise of the Planet of the Apps

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Well, it's official. Microsoft (NAS: MSFT) has revealed that Windows 8 will have its own app store, joining rivals Apple (NAS: AAPL) and Google (NAS: GOOG) in an operating system app-vendor trinity. This shift will greatly improve users' access of software on PCs, the dominant worldwide mode of computing. The long-awaited sea change promises great things for some developers, but could also threaten the success of software retailers, especially those that distribute a wide variety of top-tier games.

There's an app for that
The Apple App Store has more than 15 billion downloads to its credit, and will likely surpass 20 billion soon after Apple fans everywhere get their mitts on the iPhone 5. Android Market, released around the same time, has racked up 4.5 billion downloads. These downloads have come from Apple's 200 million and Android's 100 million users, who have almost exclusively downloaded their programs to mobile devices. Apple also has a Mac-specific App Store, but few statistics on its sales exist, since it's a relative newbie.

By comparison, Microsoft's Windows commands roughly 85% of the computing market, with the majority of those users on Windows XP or Windows 7. With billions of PCs and laptops across the world, Microsoft has a massive user familiarity advantage over its UI rivals. You may not own an iPhone or an Android smartphone, but it's pretty likely that you use a Windows computer. And (don't worry, I won't tell anyone) there's a slight chance that you're using a pirated copy -- one estimate surmises that about 30% of all Windows XP systems are pirated.

Microsoft has tried to deal with that huge loss for years. The connectivity that an app store demands should hamstring any pirates' efforts to get their grubby hooks into most Windows 8 programs without providing a unique and verifiable login. It might even work to combat software piracy in general. I'm not a programmer, but I can see plenty of software developers (Adobe Systems (NAS: ADBE) and its pricey Creative Suite come immediately to mind) sending thank-you gift baskets to Steve Ballmer.

There's a gap for that, too
For the few major software retailers left, this move represents a shot across their bows. The Windows app store probably won't hurt Best Buy (NYS: BBY) too much, since software sales are a miniscule part of its revenue. However, it could wind up slamming game retailer GameStop (NYS: GME) on both the in-store and digital download fronts. The company hastily patched over its dwindling sales of new software with the acquisition of Impulse, a leading digital downloader for games. But now, the Windows app store could precipitously erode Impulse's market share.

Microsoft's twin barrels of content-delivery pain have to be pointed squarely at Amazon.com (NAS: AMZN) and its huge sales list of Windows-based software. Given the choice between cutting pirates off at the knees, or cutting off their own profits from retail middlemen, most developers would choose the former. Amazon offers thousands of downloadable titles, many of which are games, but these titles must currently utilize their own proprietary piracy protections. If Microsoft can wrap software developers in a more comforting security blanket, they'll say goodbye to Amazon faster than you can say "BitTorrent."

Let's all clap for that
I, for one, welcome our new app store overlords. And why not? A Microsoft-designed app store may never be as blithely elegant as Apple's interface, or as eagerly precise as Google's, but it should change the way legions of smaller Windows software developers think about the way they design, produce, and market their wares. There's currently no unified way for users to find out what Windows programs and games are the most popular or the best-loved -- but that will be a key feature of the Windows 8 app store. The best developers should gain market share by virtue of their superior software, and smaller players can sell more without necessarily spending more on marketing. Say so long to the middlemen!

There's still plenty of time before Windows 8 comes out. Add these companies to your Watchlist so you can find out how they're reacting to Microsoft's big update:

At the time this article was published Fool contributor Alex Planes holds no financial stake in any company mentioned here. 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.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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