
An Open Letter to Tim Cook Regarding the App Store 70/30 Revenue Split - dirtae
http://blog.anylistapp.com/2015/02/open-letter-to-tim-cook-regarding-app-store-revenue-split/
======
pseudometa
From a aspiring indie developer perspective, I've never worried about the
70/30 split.

I've been much more concerned with getting my apps visible to anyone. The app
store is so flawed when it comes to discoverability (even as a user it is
frustrating to find apps that solve a need) I would give up even more share if
people could find my app to begin with.

~~~
chubs
Agreed: The terrible discovery is the worse problem, it leads to a market of
hits, with no long tail.

Whereas if you open the play store on an android phone, it suggests apps your
friends have, and many other 'discoverable' things. It leads to a better long
tail, eg supports indies.

I know more indies making a living out of android, and i know _far_ more ios
developers, being one myself.

~~~
kamilszybalski
+1, completely agree. Might as well throw complete itunes connect overhaul
into this. It's an absolute nightmare working with itunes connect, managing
users, working with beta and internal testers.. the whole process is
completely disconnected and really demonstrates the launch of a rushed
product.

~~~
madeofpalk
> Might as well throw complete itunes connect overhaul into this.

Funny considering the current iTunes connect is a complete overhaul, which
only came out recently with iOS 8.

The new iTunes Connect acts like someone's first attempt at an Angular app
(which it is), with a complete disregard from doing things in a performant
way.

~~~
jfaat
> The new iTunes Connect acts like someone's first attempt at an Angular app

Huh, it sure is. Is that surprising to anyone else?

Also, while it may be Apple's first attempt as a company I'm sure they managed
to find a few devs who had shipped an angular app to work on Connect.

~~~
xgbi
Well, then they chose the wrong ones, or widely failed at defining something
that works. Working with this new website (which about 30% of the time still
uses old pages... Bug reports anyone?) is a huge chore.

I remember being locked out of an important project for an entire week because
their buttons for adding people to projects was broken. One day, it started
working again, no communication from Apple at all.

There's also this usability issue where you have to try to validate your new
version of an app and only then being welcomed by an error. No pre-validation
of the input fields, hello Apple?

There are myriads of small annoying issues like:

\- can't share 1 email with multiple teams in iTunesConnect and Developer
portal. You have to have a unique email in iTunes Connect for each of your
projects. This is just ridiculous, especially when you know that on the
Developer portal this works fine. I have now tens of
myname+theproject@mycompany.com accounts in iTunes connect, and managing
passwords is simply... damn.. \- can't delete a version of an app when you
have created it (but not yet uploaded a binary). WTF? I was trying to test the
"beta" service, and was forced to create a new version of the app. Once
created, you cannot remove it for any reason. I was stuck there with a version
that I deemed was "beta", and couldn't create a new one, or remove this one.
\- Seemingly random crypto export renewal. Sometimes, when issuing a new
version of our app, the website will ask for the crypto documents, whereas
they are in their database. Othertimes, they won't be asked. \- Once the
crypto export documents have been provided, you cannot submit another one.
This bit me once, because there was only _one_ "upload" button. So I sent the
US Gov. crypto document, and then the page moved on, not letting me upload the
French one. Afterwards, impossible to get back to this page, and Apple support
kindly told me I was to drop the deployment to the French store if I wanted to
continue using the App Store... The correct solution would have been to ZIP
the entire set of documents, then upload them as 1 file.. which is not
intuitive. Or the Apple team could have asked for the french document through
their support interface, which they never did. I got out of this by uploading
a dummy binary, then dropping the version entirely, and creating a new one.
Bizarrely, the export documents were not asked for the next submission.

This website really sucks. I usually brag about how the iOS distribution
system is superior to Android's in terms of security and separation of roles,
but last month I submitted an app to the Android Play store and I was baffled
by the web UI. Drag-and-drop the APK, AJAX-enhanced buttons, very quick, not
fiddling with two accounts (developer and iTunes connect), overall ease of
use.. Man, Apple seems to have been too busy shoveling the cash.

------
greggman
I kind of have the opposite opinion. It should start at 30% and go down with
success.

Apple is providing a service (yea there's no alternatives on iOS but still)...
for 30% they take care off all your payments from all countries, they take
care of refunds, dealing with credit card companies, and for the most part
dealing with customers in general.

They also provide the market, the installation system, the update/upgrade
system. Having tried to write some of those myself and the servers to maintain
them I can tell you I don't personally want to run them.

Compare to Steam. Steam is also 30% on a platform you can do it all yourself
if you want. Sure they provide the most exposure but similarly they also
provide most of the other services that make it worthwhile.

Assuming you could do that do you really want to do all that yourself? Think
about it. If you did it yourself you'd need to run a server to put your
software on. Keep it secure, updating it constantly with security patches.
Make a relationship with a payment processor. Handle refunds yourself. Figure
out an upgrade system. Figure out how to deal with failed installations. I'm
sure others could name many more things you'd have to do.

30% doesn't seem unreasonable to me given it would take more more than 30% of
my time (and therefore money) to do this myself. At least that's my
perspective.

~~~
tomp
All the services they provide don't justify the cost (30% of sales!) in any
way. The only reason Apple is able to charge a fee so high is because they are
the monopoly provider of apps for the most popular (or the richest) mobile
platform.

~~~
athenot
Admittedly, Apple probably has an excellent rate negotiated with the Credit
Card Processors. But if you were to sell something for $0.99 yourself, it'd be
hard to beat what Apple offers.

Taking Stripe as an example, you'd be charged 2.9% of 99¢ PLUS a fixed 30¢ per
transaction. That's about 32.9% you lose to the payment processor.

~~~
tomp
I never claimed I could get such a rate myself, I'm just saying that if there
was competition when it comes to app stores, the fee would likely be lower.
I'm absolutely certain that big companies can get amazing rates for
transactions, with no fixed fees. For instance, I can pay 1 penny (or whatever
the minimum cost of an item would be, maybe 20 pence) with my credit card in
Tesco or Sainsbury's, I'm pretty sure they're not loosing money by selling
stuff to me.

~~~
thaumasiotes
I wouldn't be at all surprised if Tesco lost money selling you a 20 pence item
by credit card. So few people make purchases like that that it will be easy to
absorb the losses rather than taking the PR hit that comes with rejecting
someone's attempt to pay you.

Think of it this way: for every 20p purchase, how many 100 pound+ purchases
are there? Can the one cover the other?

------
nostrademons
This letter - and the revenue numbers in it - are interesting from a strategy
perspective. The conventional wisdom I hear is that Android owns the overall
market for smartphones, but if you want to make money as an independent
developer, you're better off developing for iOS because iPhone users are more
likely to pay for things. There's all sorts of crap in the Android ecosystem,
a lot of it is free, but the users are largely the sorts of people who will
take what kind of freebies they can get and don't want to pay for a premium
product. By contrast, Apple actively encourages their developers to pay
attention to fit & polish.

Given this, I wonder if relaxing the 30% rev split might actually be in
Apple's interests. In order to build that premium ecosystem, they need
developers to be able to work full-time on apps. If they strangle that
ecosystem, then the only people building iPhone apps will be folks with other
day jobs to support them - which means either the quality bar will go down, or
their will be many fewer apps in the app store vs. Google Play.

Then again, perhaps that's Apple's plan anyway: focus on the few things that
many customers want, make sure the apps for those are really good, and it's
okay if there's not an app for the rest.

~~~
throwawaymsft
Re: "owning the market", people forget the difference between market share and
profit share. Profits are what keep your ecosystem alive and thriving. Raw
usage numbers, by themselves, don't. (Sure, usage can lead to profits... so
just measure profits!)

Yes, Android sells more devices. Apple has 93% of the profits in industry,
Samsung has 9%, and everyone else is fighting for that tiny slice and losing
money.

[http://www.macrumors.com/2015/02/09/apple-mobile-
profits-q4-...](http://www.macrumors.com/2015/02/09/apple-mobile-
profits-q4-2014/)

The more profitable ecosystem is where developers want to play. Apple doesn't
need to change their royalty rates, everyone is clamoring to be in that arena.

~~~
stormbrew
I'm pretty sure this is referring to the operating profits on hardware sales,
which would be a pretty silly factor in deciding what platform to write
software for. Third party software devs make precisely none of that profit.
Samsung also doesn't, afaik, make any of whatever Google's cut of Android
software sales are, so even if it does include app store cuts that just turns
it into an apples and oranges comparison.

This is not to say the conclusion is wrong, just that the data here is not
relevant to it.

~~~
throwawaymsft
Agreed, I'm using total hardware profits by ecosystem as a proxy for
willingness of consumers in those ecosystems to spend money. Actual revenue
from each store isn't easy to come by from what I've seen (esp. since the
various Android stores are fragmented).

But I think we already know the conclusion: the iOS store has more money spent
in it than the Android one.

------
patmcc
That 30% isn't for nothing - it's for payment processing, reach, marketing,
infrastructure, testing/approval (you may or may not like this, but users
probably do like it), app delivery, etc. Like it or not, those things all are
more valuable to smaller developers than bigger ones. Microsoft can do a lot
of that stuff themselves, if they really want to - Joe the ordinary developer
can't.

Apple is already being nice to small developers by giving them the same rates
as big developers - in any other business, doing 100x the sales of the little
guy would get you a better rate, not the same one.

~~~
dingaling
> it's for payment processing, reach, marketing, infrastructure,
> testing/approval,... app delivery, etc.

But if your app is free, then there is no charge for those services. How does
it make sense that theit provision only costs Apple money if your app costs >=
1 cent?

~~~
etchalon
Because Apple is willing to eat the cost for the benefit of having a free app?

Every free app in their store is one more reason for you to buy an iPhone.

Paid apps, while also adding to the ecosystem, do not offer the same value to
Apple.

It's also just plainly logical. You can't charge people to give something
away. You can charge money if you're helping them make it.

------
trevmckendrick
I've disclosed my App Store revenues before
([http://www.trevormckendrick.com/my-first-year-in-the-app-
sto...](http://www.trevormckendrick.com/my-first-year-in-the-app-store/) and
[http://www.trevormckendrick.com/My-2nd-Year-in-the-App-
Store...](http://www.trevormckendrick.com/My-2nd-Year-in-the-App-Store/)).

Apple can absolutely afford to do this financially, but the 70/30 split is
practically the only thing that hasn't changed in the App Store since it
launched. So why don't they?

A few possibilities:

\- They have a similar split with music labels, so giving more to developers
could hurt their music industry relationships

\- They have more interest in helping the big app companies like Supercell,
simply because of the revenues and brands they create

\- They don't want to give additional incentives to creators of crappy apps
who never make much money anyway

Whatever Apple's reasons, they haven't changed iTunes music revenue splits in
over a decade. So I don't expect them to update developer splits anytime soon
either.

~~~
rhino369
Why would someone with a monopoly over the software on millions of devices
ever reduce prices?

~~~
sparaker
To gain more development support. More developers = more apps = more users =
more revenue.

It makes sense.

~~~
EpicEng
There's certainly a tipping point though. Having the store flooded with more
low quality apps doesn't help them, and they seem to be doing pretty well
currently.

------
1123581321
This is the opposite of what I was expecting to read. The developers with the
lowest income receive the most benefit from Apple as they presumably do not
have a large, existing marketing list to convert to sales and so rely on App
Store discovery (what exists of it.) If anyone should pay different rates, it
should be the more successful developers who convert to an expensive premium
developer account subscription. This is the model used by Ebay, Etsy, Shopify,
and a lot of other markets.

------
filmgirlcw
It's a good thought but I think adding this kind of complexity , even with
good intent, is exactly the sort of thing the 70/30 split was created to
avoid.

There is something nice about just knowing, this is my split. I don't have to
worry about it switching and my profit formulas being altered once I hit a
certain sales threshold, My take is $.70x, with x being downloads. Period.

Beyond that, I'd have to ask what happens when we take this to its logical
conclusion:

Say you start with an 85% split for the first 10,000 sales or something --
what happens if the split then eventually goes below 70/30, say 65/35 or 60/40
or worse, the more copies you sell? How do people react then.

I suppose the counter-argument is that that's how the tax system works -- and
that's fair -- but I still don't see developers being happy to have to give up
more of their take down the road, just because they have reached "success."

I mean, if you're going to go to tiers, then the next argument becomes about
what defines one tier from the next.

Again, it introduces all kinds of complexities that having a straight 70/30
system avoids. And to me, that simplicity ultimately trumps the other
arguments, as sympathetic to indie developers as I might be.

~~~
hackbinary
The point of having tapered rates is well established as being progressive and
fair. Governments do this with income tax. The basic premise is that $1 means
more to a person with an income of $10,000 per year, compared to a person with
an income of $100,000, or a $1,000,000. It therefore follows that developers
earning less money are not as able to pay as those earning higher incomes. A
flat rate favours bigger developers.

If Apple wants to promote diversity, then they should have a progressive
system, and lower the barrier to smaller developers.

This actually may prove to increase Apple revenues ultimately by helping
smaller developers stay in the game over the long term because their business
would not have been otherwise viable.

Adding income tiers is not that more complex.

~~~
thesimpsons1022
yeah but apple isn't a charity or government. they aren't in the industry of
solving income inequality. imagine if you went to a restaurant and they
checked your income and set the price of your meal based on that. it doesn't
make any sense.

~~~
zaroth
Completely OT, but, if you file a Schedule C and are deducting 50% of the cost
as a business expense, then effectively the meal actually costs less the
higher your tax rate. In CA and at the highest marginal rates the
state+federal deduction is worth around 20% the cost of the meal!

------
dchuk
"I think it would be a big win for independent developers targeting Apple
platforms, and by extension a big win for Apple, if the App Store revenue
split used a tiered rate."

It's interesting to see someone give Apple advice on how to make a "big win"
financially. They're literally the biggest winners financially of any company
in the world right now.

~~~
bsaul
Well, maybe Apple became that successful by also listening to their customers.

~~~
ceejayoz
Apple's history has a lot of successes stemming from them ignoring stated
preferences from customers. Ditching the floppy, a phone without a hardware
keyboard, refusing to build netbooks, etc.

As the probably apocryphal Henry Ford quote goes, "if I'd asked people what
they wanted, they'd have said a faster horse".

~~~
bsaul
I know those stories, and yet they switched from motorola to intel back in the
days, they created a larger screen iphone which proved to be a best seller,
and they've recently announced that ios 9 would be a "hardening" release with
no major new breakthrough features.

I think we shouldn't confuse marketing studies ( which they may not like),
with customer feedback.

------
alttab
Interesting perspective, however bargaining with Apple like a peasant to his
king about the tax regime seems like such a powerless way to approach the
problem.

Apple's Appstore is flawed in many ways. All Appstores leave something to be
desired.

I'll take all the long breath out of my philosophy[1], but it boils down to an
inherit weakness in the business model of pushing downloads for cash flow.

Many of the most successful apps have completely decoupled their revenue from
downloads, or the 70/30 split. The "Big Players" like King.com and the rest
sell in game items that cost $100! Do you think they care about the 70/30
split?

Then you have other utility apps. Like "Fixify" for $1 that let's me see the
title of my Spotify Music on my Pebble. Seems like Spotify should just do it,
but they don't. This dude got my dollar. That app had to be like 200 lines of
Java, most of which was probably boilerplate.

If you are concerned about 70% or 80%, or 85%, you are thinking _too small_.
If Tim had balls he could say "fine, here is 95%" and then somehow prove it
didn't change the economics of the Appstore.

TLDR - If you are worried about the split, you are "gripping the bat wrong."

[1] [http://www.connersc.com/blog/lets-face-it-folks-ios-is-
not-a...](http://www.connersc.com/blog/lets-face-it-folks-ios-is-not-a-
strategy/)

~~~
21echoes
> it boils down to an inherit weakness in the business model of pushing
> downloads for cash flow. Many of the most successful apps have completely
> decoupled their revenue from downloads, or the 70/30 split. The "Big
> Players" like King.com and the rest sell in game items that cost $100! Do
> you think they care about the 70/30 split?

Apple charges a 70/30 split on in-app purchases as well.

~~~
lucaspiller
The company I work for has a mobile payment platform which sells a lot of
adult content. Why people pay £3 for a 30 second video I have no idea, but of
that £3 the merchant only gets £1.50 (if they are lucky) after the operator
has taken their cut.

The thing is, it costs them practically nothing to sell that content, so even
though they only get 50% it's still a win for them - that £1.50 is pure
profit.

------
peterjancelis
If Apple would do this, they'd have even more incentive to promote the highest
grossing apps in their app store.

Look at the 30% fee as a marketing cost. Surely you want the owner of your
only marketing channel to be well compensated?

~~~
mcintyre1994
Is Apple necessarily the only marketing channel? Ie is there no way to deep
link into the app store? I've seen links to iTunes app pages online - and
while last I heard you can't download to your device from that page, will it
not open in the app store if you open it on an iOS device? Also on Android
Facebook for instance advertise apps a lot with a link to the store, is that
not possible on iOS? Or do you have to use an Apple ad network on iOS for all
advertising?

Sorry for the confused reply, I'm just curious whether they've actually taken
steps to force themselves as your only marketing channel or why that would be
the case.

~~~
tjl
Anyone can share an app link. So, you can tweet a link, you can post a link on
your own web site (and even use an appropriate app store graphic from Apple)
or any way you want to share the link. Plus, you get a set of promo codes you
can share to give to reviewers. So, there's many ways one can advertise an
app.

Now, Apple has started a deal with Pinterest as well so people can pin apps so
that's another avenue.

Relying on Apple promotion generally means that you'll end up in the long
tail. Occasionally, apps break out (then they often get Apple promotion after
this happens) like Flappy Bird, but that's uncommon.

------
siglesias
Developers won't actually absorb the full discount. A decrease in the fee will
force a drop in prices (if that's possible) as developers attempt to find new
customers with their newfound margin. If you have a more price-elastic
customer base, those customers will reap most of the value of the shift as
many will come to enjoy their lower prices.

Secondly, wouldn't this create the perverse incentive for developers of
multiple apps to release apps under multiple accounts--some might call them
shell accounts--in order to minimize their app taxes?

~~~
TheCowboy
Mind explaining your perspective on why a decrease in this fee will result in
a 1-to-1 drop in prices?

As far as point two, given that Apple is the 'benevolent dictator' of this app
store, releasing apps under multiple accounts is a risky venture since
developers and companies run the risk of getting banned completely. The
overheard of wasting the time to actually do that also has to be small enough
to make the potential gain worth while. Apps also seem to benefit from network
effects, so it could hurt developers to spread their popularity for the same
app across different apps in a discreet enough way that Apple wouldn't notice.

------
jrochkind1
I understand where he's coming from, but in almost any analagous case I can
think of, the tiers go the opposite way -- you pay less percentage on a
$million in revenues than you do on $1000.

When you have only $1000 in revenues, you're actually paying very little for
what Apple is providing. When you have a million, you're paying an awful lot,
and are probably wondering if you can find a way to keep more of it.

------
drawkbox
To this day I still have not understood why 70/30 became such a rock.

Android, Amazon and Windows could play with this number to attract more
developers. Samsung started with a ramp up but it happened in 6 months or so
0%, 10%, 20% then 30% at the launch of their store. I thought for sure when
Microsoft came in later they would also go 25% or even 20%. Everyone followed
right behind Apple in line rather than challenged that number through
competition. Almost seems like price fixing.

I think the tiered system would be a great way to help but I worry Apple may
not care as much about indie titles or smaller apps since they already gain
less total. It could be an awesome gift from Apple to developers though.

In games IP royalties are usually 17%, with 30% on that and maybe 5% is using
Unreal or other sales based cost. Over 50% cut off the top. At that level the
30% starts to look massive. If you have a publisher then another 20-30%.
What's the point at that level with that budget. You can say Apple primarily
squeezed the publishers out which is good but the rent is too damn high.

------
desireco42
I see a lot of idealism in this post. Apple is for profit company that is very
aggressive in pursuing it. While I agree with poster rationale and I think
tiered pricing would be other way around, lower as you sell more.

Anyhow, I don't think it's going to happen, it looks to me that as far as
Apple is concerned, he have you/us where it wants and don't want to change
anything.

------
jblow
Proposal made without any thought as to how scummy app developers are going to
game the system.

First thing that happens is opening a new development account per app in an
attempt to squeak under the $100k as much as possible.

------
calcsam
This would basically turn Apple from a payment processor (relatively
straightforward) into a global tax collector (extremely complex).

Think about how you would handle corporate entities. Do you handle pass-
through entities like LLCs differently than S-Corps?

Now imagine designing a split structure that would make sense for a developer
in Vietnam / Mexico / Spain. It would have to be different for each country.
$5K for Vietnam? $20K for Mexico? $50K for Spain? Good luck.

Oh, what if you have multiple people writing one app? With a 60/40 split
between them?

Okay, let's say you ignore all the previous points. Just imagine the kind of
infrastructure you'd have to build out to verify identity globally, to ensure
that people aren't using frontmen -- having their friend register an account
and passing the money through their account.

No thanks.

~~~
xenadu02
I don't think you've thought this through very well.

Apple already sets pricing tiers per country, based on exchange rates and
other factors. Just apply the same adjustment to the $100k figure.

There is no need to be concerned with the entity type. The first $100k per
year for all developers accounts gets charged 0%, everything thereafter gets
charged the standard rate. If you're building an app with a partner, oh well.
The vast majority of people this would help are individual devs.

And registering other accounts is pointless; the app belongs to one dev
account and that's the account that accrues revenue. There's no way to share
it, other than by transferring the app to someone else's account. A simple fix
for that is to require 30% after X numbers of transfers for the same app, or
just require the 30% cut if you do a transfer. Again, the target for this is
individual indie developers working on their own.

------
bsaul
As an independant iOS dev, that post is so right it shouldn't even be an
issue.

Not only would it let more devs work full time on their project, but it will
also make new niche markets interesting.

------
newobj
Will I get downvoted if I propose a meta conversation on the horribly weasly
rhetorical device of the "open letter"? I suppose etymologically, this used to
actually mean something, but I don't remember anymore. Now all it signals to
me is that someone wrote a blog post, prefixed it with "Dear <High Clout
Person Of Interest>" to essentially work up some minor amounts of linkbait.
Double reader rage points if it's signed "Love, <Author>"

------
bobbles
People would game the shit out of a system like this.

Oh, our 'freemium' game just hit the 10% threshold. Better re-release it under
a new dev account as shitquest-2 and rake in the moolah!

~~~
toastking
It probably wouldn't be too hard for Apple to check this though. Just make
sure the account isn't under the name or address of someone who already has a
developer account.

------
coryl
Would be nice, but I can't see any upside for Apple aside from good PR and
generosity.

~~~
djcapelis
More independent developers more excited about their platform results in
increased app quality and quantity, as well as increased platform migration
and retention resulting from a stronger ecosystem. All of which results in
increased sales of both apps and hardware which means increased profit.

Plus the good PR and generosity you mentioned.

I actually think it's harder to find the downside to the proposal than it is
to find upside. This is a good letter and a good suggestion.

~~~
s73v3r
You're acting like they don't already have that.

------
jorjordandan
Hey guys, Fake Tim Cook here. Just thought I'd chime in.

Here at Apple we pride ourselves on our developer friendly ecosystem. Apple
has led the way in creating more value for developers. Plus, we have a
monopoly on the developing for iOS, so it looks like you pretty much have to
do whatever we say. Between you and me, we could change the split to 50/50 and
it wouldn't really hurt us any.

It may not seem like a lot of money is at stake to you guys, but we didn't
build a collosal mountain of cash by participating in race-to-the-bottom
economics. Our pricing scheme was built to get developers to our platform. It
was probably too generous, but we can't go back now, until we finish going
thermonuclear on android.

Pretty soon we will have enough money to buy Earth. The new earth will be the
best earth yet, redesigned from the literal ground up. Till then, we have to
deal with pesky problems like robot, er android, or whatever. Anyways, keep
cranking out those golden apps.

My benevolent smile be upon you,

Fake Time Cook

------
yeukhon
If you think about it, Apple is like government. They "tax" you. An
independent app developer is basically running a startup as the developer has
to cover marketing, production development, customer support, finance
reporting, and even human resource management (hey he/she has to sleep and get
away from the computer!). Very curious: what kind of benefits do small app
developers get from Apple?

The difference is you don't really "elect" how Apple decide what to do, unless
you start a mass campaign and challenge Apple's authority. AWS and Google are
always cutting their cloud price to attract customer. But as app developer you
probably should let Apple know exactly what works and what doesn't work for
you. I read all the comments below like how App Store's discovery sucks (+1).
I think Apple is obligated to improve how apps are discovered, used, and
marketed.

------
jamesrom
People forget that Apple pay for hosting and downloads.

The cost of hosting the 0% rate apps (99.3% of all apps[1]) would not be a
small cost at all.

[1]: [http://metakite.com/blog/2015/01/the-shape-of-the-app-
store/](http://metakite.com/blog/2015/01/the-shape-of-the-app-store/)

~~~
SwellJoe
I don't forget that they pay for it, I just think it's so tiny as to not
matter in this discussion.

Downloads are such an infinitesimally small cost, relatively speaking. I don't
have comparable download numbers to the Apple store, but I do help maintain
software that has 3+ million downloads a year (and it's a quite large
download, too, compared to mobile apps, at 15MB). The cost of hosting those
downloads and the bandwidth for them wouldn't even really be a blip on our
radar in terms of costs of running our business and projects. Bandwidth is
_cheap_ these days. Hardware is _cheap_ these days. And, it takes almost no
hardware to serve file downloads. We've had people offer to provide mirrors
for us for free, but we don't take them up on it (though we can't stop people,
either, being Open Source) because we'd rather have the data about downloads
than the tiny savings in bandwidth and hardware.

What's a few hundred terabytes a year of transfer and storage for apps to an
organization like Apple, that also serves out millions of HD movies? It is
closer to "nothing" than it is to "something".

------
lnanek2
Honestly, Apple reached the point a long time ago where they are trying to set
the bar higher to make an app, not lower. They even flat out said, "no more
fart apps". So I think they consider themselves to be at the app saturation
point. More apps will not help them, only higher quality apps will. Helping
indie developers generally won't encourage high quality apps.

The current situation is indie developers make apps, most completely
disappear, and very few make it to the top of the charts. The rest of the apps
on the charts are there because a big company dropped 70k ad spend to put it
there or because it was cross promoted from other apps or already had a high
place. Encouraging small time development is encouraging a part of the app
store hardly any users see anyway.

------
rebootthesystem
Discoverability and the closed nature of the ecosystem asre problems. If I
create a web version of an app I own the relationship with my customers, not
Apple. I can charge, monetize in a dozen different ways and even manage
enterprise relationships as I see fit. This is what we are doing
witheducational software. I got sick and tired of having Apple as gatekeepers.

Bug fixes are a nightmare because you are on their schedule, not yours. You
can't deploy fixes or new features overnight or over a weekend. Your customers
suffer because Apple is in the middle wanting to micro manage it all.

So we've shifted our strategy to web based apps done wih Python, jQuery, etc.
and, you know, it feels good.

The 30% isn't the issue, Apple is the issue.

------
warmfuzzykitten
It's a good idea. It would give small developers a chance to get on their feet
financially. But the author assumes most of the revenues come from big-selling
apps. I don't think we actually know how long a tail the app sales
distribution has or what effect it would have on Apple's revenues.

And, unfortunately, it wouldn't have any effect on, e.g., Amazon being unable
to sell books on Apple products because Amazon's margins are too low to allow
them to eat the 30% and jacking up their prices 43% to cover the Apple tax
would make them uncompetitive with Apple's book store. Apple's plan, maybe,
but damned inconvenient for users.

------
ares2012
I remember the days when app revenue splits were 30/70 (driven by mobile
carriers) so I find it hard to complain about Apple's revenue split policy.
While onerous, it at least makes it possible to be profitable.

------
thoman23
"Hopefully you agree that a thriving ecosystem of independent developers is an
important competitive advantage for Apple."

If Apple cared about a thriving ecosystem of independent developers, they
would make it easy for developers on non-Apple hardware to build and test iOS
apps. For the Windows/Linux-based developer who is just interested in kicking
the tires on iOS development, the walled Apple ecosystem is very unfriendly to
experimentation. I know I focused early on Android development for mobile apps
because of the lower barrier to entry.

------
itschaffey
I think discoverability is a much bigger problem with the App Store than the
70/30 revenue split. Whilst the revenue split is too high, I would much rather
see improvements in the discoverability of apps created by indie developers/
entrepreneurs than the constant flooding of apps from big developer studios.
Of course, the app needs to be good enough that when it is discovered, people
actually want to use. Perhaps a vetting/ recommendation system should be
implemented to highlight apps that would not have been found before.

------
clarky07
All the comments here saying the services Apple provides are worth the 30% are
missing the point. The point isn't that it's unfair or that they aren't
providing value, it's that the ecosystem would be better off if it was easier
for indies to make money.

Indie devs are good for Apple, and many of them are quitting because it's not
financially viable. They aren't going to Android, they are getting 9-5's

Sure improving discovery would also help, this isn't the only thing that can
be changed. It is just one thing that could be changed.

~~~
s73v3r
The 30% cut is not what is stopping them from making money. It's the sad fact
that their apps are not that popular.

~~~
clarky07
I beg to differ. Unread is a good example. Making 42k on 1 app in a year is
pretty popular. 42k isn't really enough though. Maybe 60k (which is what it
would be without the 30%) isn't enough either, but it's much closer.

[http://blog.jaredsinclair.com/post/93118460565/a-candid-
look...](http://blog.jaredsinclair.com/post/93118460565/a-candid-look-at-
unreads-first-year)

Personally I'll pass 100k paid out to apple this year. That is the difference
between me making slightly below market rates for the last few years to being
able to hire another developer or designer.

------
blahedo
I don't really have any dog in this fight, but I found this comment completely
bizarre:

> _At $70K in net revenues per year, your spouse could be telling you to get a
> day job._

For real? $70K income is pretty darn good pay and more than enough to support
a family even if nobody else is working outside the home. In the US the median
_household_ income is only $53K.

I can't decide if this misstep weakens the author's actual argument or not,
but either way it simply drips with elitism and privilege and probably serves
to undermine the presentation.

~~~
s73v3r
Whether that $70k is enough to support a family largely depends on where you
live. Midwest? Yeah, it's great. San Francisco or NYC? Not really.

Further, given that we're software developers, the median income for everyone
in the nation is completely irrelevant. It only matters what the median income
for software developers is.

~~~
blahedo
I disagree. It only matters what you're willing to be happy with, and what is
"enough". The fact that literally millions of families live on way less than
that amount is, at least, a proof-of-concept of the sufficiency of the money.

As for the actual number: San Francisco and New York may be expensive, but
median household income is still only in the 60-80K range [0][1], and with
fully half the population living on less than the median, I'm going to stand
by my claim that $70K is possible to support a family on, even before
considering the earning potential of the spouse who wants more money coming
in.

[0] [http://www.deptofnumbers.com/income/california/san-
francisco...](http://www.deptofnumbers.com/income/california/san-francisco/)
[1] [http://www.deptofnumbers.com/income/new-york/new-
york/](http://www.deptofnumbers.com/income/new-york/new-york/)

------
mingabunga
Devs probably wouldn't find the split so bad if the general fee charged for
apps was higher. It must be pretty hard to make a living on 99 cent apps
unless you're wildly successful.

------
rahimnathwani
This same argument could be made for supermarkets. If Costco or Tesco wants a
healthy ecosystem of groceries, they should sell my newly-launched coffee
brand at cost (i.e. I keep 100% of the revenue) whilst selling established
brands at a mark-up over wholesale cost.

However, in reality, the reverse is the case. Supermarkets must stock major
products (e.g. Coke) and, if you have a less popular product with many
substitutes, _you_ will _pay_ the supermarket for shelf space, just to get
your brand known.

------
dusing
This reasoning seems weak

"At $100K in net revenues per year, you may be a successful independent
developer. At $70K in net revenues per year, your spouse could be telling you
to get a day job.

Therefore,..."

~~~
yeukhon
Maybe. Depends where one lives. In silicon valley a developer making $70K
probably should look for a day job. In some awesome midwest $70K and a working
spouse is very good.

~~~
dirtae
True. But keep in mind that we're talking about net revenue here, not net
profit. That $70K is after Apple's cut, then you need to deduct all of your
expenses, like marketing and hosting, on top of that.

------
geobmx540
"I think it’s safe to say that most independent developers are generating
annual revenue in the tens of thousands to low hundreds of thousands of
dollars range."

Most?!

------
ksec
"Looking at the numbers reported by independent developers, I think it’s safe
to say that Apple’s 30% cut of App Store revenues can have a big impact on
their success or failure."

But what if, Apple hugely improve App Store's app discoverability, searching,
tagging and sharing? Therefore opening up a bigger potential market? ( And
hence making more money )

------
bnolsen
The short of it is: Apple wants their record breaking profits and they get
those profits by telling you little guys "to hell with you". People keep
buying Apple, people keep developing for Apple. They're massively profitable.
Tell me what they're doing wrong and why they should cut you a break?

------
matheweis
A key point that many developers miss is that IF you are marketing your own
apps, the split is not 70/30, but 77/23.

In explanation, you join the iTunes affiliate program, which gives you a 7%
cut on sales in the app store. I really don't understand why this isn't more
widely known.

~~~
SwellJoe
If I could sell it directly from my website the cut would be 100/0\. I hate
the indentured servitude imposed by the Apple App Store, and have opted out of
mobile development thus far because of it.

It's like shooting off my nose to spite my face, I guess, given the growth of
the mobile market, but I truly hate the shape of our industry these days, when
it comes to how indie developers are able to connect to their users...yes,
it's better than it's ever been, but not because of Apple. It's better because
of the open web, and Apple and Google are using their near-monopoly powers to
impose the old gatekeeper model long past when it should be relevant.

~~~
matheweis
Not likely... I actually do sell direct on my site, and even there the cut for
the ecommerce provider (fastspring) is 8.9%. Also, I have to manage the
distribution chain myself, which is a surprising amount of overhead.

~~~
SwellJoe
I sell software for servers directly on my site, as well. I do pay merchant
service fees (which I'm also somewhat grumpy about how high they are), but the
total amount of "fees" I pay is remarkably lower than 30%. If I factor in
colocation costs, server costs, etc. I end up with ~11% total. (But, we're
also supporting Open Source projects with a million+ users, so we have a lot
higher infrastructure costs than we would if we only had to serve our few
thousand paying customers.)

Even if I add advertising costs (because some people allege the app stores
provide a customer base), it's still less than 20%. But, I could distribute
dozens of times the amount of software I'm selling with the same hardware and
colo (if the market wanted to buy dozens of times the amount of our software
currently sold).

So, it's true that there are costs no matter how you sell your software to
customers. And, I might be willing to pay more for things that would make my
customers lives easier. But, 30% is...it's just outrageous, to me. Apple and
Google are among the richest companies in the world. Their margins on running
these stores is obscene.

------
z3t4
You also need to take into account that most of the western countries have 20%
or more in VAT taxes. So the split is more like 90/10\. And they have to pay
the credit card companies and for the bandwidth. I don't think Apple makes any
money from the app store ...

~~~
bboreham
Tax comes off before Apple take their 30%. So on a £10 spend, the government
get £2, Apple get £2.40 and the developer gets £5.60.

------
Glyptodon
Maybe Apple views the revenue split as a desirable barrier to entry for the
sake of quality control?

~~~
pseudometa
The barrier to entry is the annual $100 developer fee, not the percentage of
sales. I honestly wouldn't mind this fee being much much higher if the
eliminated a lot of the crummy apps from the store.

~~~
bottled_poe
Yeah, that and the $1500 computer to write the software.

~~~
AmVess
$499 Mac Mini is good enough for writing apps.

------
balls187
> I think it’s safe to say that most independent developers are generating
> annual revenue in the tens of thousands to low hundreds of thousands of
> dollars range.

I don't believe this is the case at all. From the linked study, most are
making substantially less than that.

------
username3
Apple doesn't take 30% when apps are bought using iTunes gift cards that are
sometimes discounted 20% by retailers. If retailers split the last 10% with
Apple, that's only 5%. Developers can get a piece of that 30% by selling gift
cards.

------
benologist
This would be a great win for the top developers, a little extra rope for the
borderline-sustainable developers, and nothing for everybody else. I'd rather
they do something to lift the average.

------
wesnerm2
The proposal is flawed from a financial perspective to Apple.

Credit card fees are higher as a percentage of the price, the lower the price.
Apple pays close to 30% to credit card companies for a one dollar transaction,
whereas a hundred dollar transaction costs just a few percentage points. (I
think this is due to a fixed per-transaction fee added to a percentage-based
fee.) This is why retailers often place transaction minimums for credit-card
purchases.

It's to Apple's benefit to consolidate multiple app and music purchases into
one transaction to reduce the total percentage paid out. They do this by
offering iTunes gift cards for sale at stores and by consolidating multiple
purchases from the same day or two into one transaction.

~~~
glurgh
Apple does not pay 30% on dollar transactions - they don't pay stripe-like
processing fees. They are a high-volume seller with a great deal of
negotiating leverage and financial savvy, they've been selling $1 digital
goods since 2003. They probably pay some sort of per-transaction fee and
percentage fees but it wouldn't add up to 30%. Take a look at the range of
fees here -

[http://www.cardfellow.com/blog/credit-card-processing-
fees/](http://www.cardfellow.com/blog/credit-card-processing-fees/)

------
pbreit
30% is practically standard for zero-marginal-cost, digital goods.

------
bonn1
Worrying about the 70/30 share is premature optimization—first build an app
and get downloads on a large scale without buying installs, good luck man.

------
spiritomb
yeh, this system is so dysfunctional . . that app devs are clamoring to make
more apps than ever before.

no incentive to change a thing, and that's the straight dope.

------
happywolf
Will I be labelled a troll if I say after reading this, the first thing come
to my mind is to fix the US income tax system instead of Apple's?

------
jtwebman
When you are the king you get to decide. It is still a way better split then
say ads on YouTube videos. I just don't see them changing this.

------
0x0
So what happens if you've sold the first $100k, can you just re-release the
app on a new account to stay on the highest paying tier?

~~~
andrewguenther
Sure, but you lose your position in the rankings, all of your ratings,
everything. You also wouldn't be able to update the original any more. I think
you would lose a hell of a lot more in revenue that way than a 10% bump in
profit split.

------
malkia
I'm afraid that loopholes are bound to be found this way (my first thought
while reading this) - possibly I'm wrong...

------
dreamdu5t
LoL! I'm sure one of the most successful companies of the last century needs
your advice. Oh yeah... the company that has 90%+ of mobile profits needs
_you_ telling Tim Cook how to run Apple.

~~~
PSeitz
I actually image that's how apple thinks

------
TomGullen
I'm afraid this post just comes off as hugely naive. They are a corporation,
they will milk you and everyone else for as much as they can get in every way
possible.

------
chj
apple has a real cost in maintaining the review team, which to me is more of a
burden than help, we have beta testers, they are far more responsive.

------
findjashua
completely agree, they should follow a tax bracket model.

------
s73v3r
If anything is done to improve the App Store, it should be on the fronts of
discovery, as others have pointed out, and being able to connect with
customers. I know several longtime developers who'd love to distribute their
software on the Mac App Store, but they wouldn't be able to do stuff like
offer discounts to their existing customers for upgrades to the new version.

------
s73v3r
Seems someone doesn't recall the bad old days of cell phone software, where
there was still a 70/30 split; only YOU got the 30.

------
beastburn
Economically, this makes absolutely zero sense.

~~~
srhngpr
Just out of curiosity, could you elaborate?

~~~
ProAm
The first issues I see are:

1) Apple is the most profitable company in the world, deals like this are why.
It wouldn't behoove them to take less money than what is available on the
table.

2) It would leverage Apple to promote only high grossing, high selling apps.
This would change the way developers market and sell their apps. And provide
disincentive to work on it more after it reached a threshold (maybe).

~~~
andy_ppp
In answer to your points you can argue them to mean the opposite too:

1) No skin really off Apple's nose then is there, minimal change on bottom
line and a win for small devs, their ecosystem and they look like a cool
company who listens.

2) They only do this now anyway, that's why the App store is so shit and has
had so few new features (especially around discoverability) since its
inception. No incentive to push smaller indy devs apps (and also because Apple
wants to maintain a feel of high quality as opposed to long tail).

It's not a terrible idea, no reason for Apple not to play nice really as it
barely affects them.

~~~
ProAm
You might be correct, it can be seen from both sides.

> No skin really off Apple's nose then is there

Ive never known Apple not to care about every penny it can make and keep, I
just dont see them giving up on this, but rather push the devs to make
software that is better and sells better so the 70% they earn can mean more to
everyone's bottom line. Maybe... but I that's not how Ive ever seen Apple
operate. The fact that they make developers pay $99/per just to develop apps
is indication they dont care about this.

> no reason for Apple not to play nice

They never play nice, they are cutthroat, just like Amazon. It's how they
manage to stay on top. They realized that not only are customers a profit
center but also content producers they can make money on both ends.

------
bakhy
Free market triumphs again ;) It seems obvious that the only way to prevent
Apple lining its pockets with cash earned by other developers' hard work (not
to say that they don't deserve some on their own - they certainly do) would be
to: regulate the app stores!

Neo-libertarian downvotes away!

