Let's look at the approximate economics of this venture. I'll use UK pounds, but multiply by approximately 1.1 for Euros or 1.6 for USD.

Form a limited company. The government fees are low, but realistically most people will use an accountant. I did this in 2008 and it cost £450.

Annual accountancy charges. This includes filing all the statutory returns as well as the tax returns. This costs me around £1000 per year, and my company is not even VAT-registered as it's trading below the threshold.

Other direct costs. These appear out of nowhere and soon mount up. Business bank accounts attract fees, and, for example, you might need to register under the Data Protection Act (£75) if you're keeping customer support details on a database on your computer. I won't try to itemise these costs, but I can't imagine any way that they will come in under £350 per year.

Then there's the liability insurance, let's say £200 per year.

So we're looking at maybe £2000 expenses in the first year.

Now let's say you put two applications on the Ovi store: a widget for £1 and a more substantial app for £5. (Yes I know Ovi uses Euros, but that's just details.) Ovi's headline rate is 70% to the application author, but that's after various costs. First they deduct returns (where the buyer "returns" the app). Next is refunds (where the buyer demands a refund for some reason). Next is bad debts. Ovi doesn't accept that risk on behalf of the app author, so if for any reason Ovi doesn't get the money, then you don't either. I actually think this is fair enough, by the way, because any other policy would be so expensive to administer that it would be impractical.

Next, Ovi deducts the transaction fees. Obviously I don't know Ovi's credit card fees, but I'm guessing they'd be around 2% on big transactions but proportionately much more on tiny transactions. I'm going to say 5% here, but I'm just pulling this figure out of nowhere and it might be lower or it might be much higher.

But if the app is sold through the phone company, with payment taken from the user's phone balance, the charges are much higher. From my reading of the Ovi Publisher Terms and Conditions the charge here is 50% for apps priced at £1 and 40% for apps priced at £5. And I presume you only get 70% of what's left. So from a £1 app you might get 35 pence, and from a £5 app you might get £2.10.

Now let's suppose you sell 100 of each app per month. In a year that will get you £2940 for a net profit of £940 (under £20 per week), in return for which you must maintain and operate your support website. Not to mention the time it takes to develop the software. Oh, and I forgot the 50 Euros to register as an Ovi Publisher (or 300 Euros if you want to sign the NDA and get early notification of API changes). And don't forget that Ovi's minimum accumulated earnings for a quarterly payout is 500 Euros.

And VAT? The rules for the international sale of electronically-delivered intangible goods are quite different from the VAT rules for regular physical goods. I find the rules quite unintelligible and wouldn't venture an opinion without consulting an accountant. But potentially you will have to hand over a chunk of your income to the taxman as VAT.

So I don't think it's an easy road. I fear those who do well will be the ones who churn out a lot of banal fart-apps and the like. And Ovi's stringent rules are less of a barrier to those people than they are to the individual who passionately develops one great application.

These are just some rough thoughts. I'm sure some of the details are wrong, but nevertheless I would be surprised if more than 1% of app developers could make a profit through Ovi.

Regards,
Roger