
Apple releases study defending App Store's 30% cut ahead of testimony - xoxoy
https://www.cnbc.com/2020/07/22/apple-defends-app-stores-30percent-cut-ahead-of-tim-cook-testimony.html
======
mthoms
The four major findings of the study can be condensed down to two:

1) Our competitors do it too (Google, Amazon)

2) It's cheaper than brick and mortal distribution

Notably absent: How the high fees, and payment restrictions benefit consumers
and developers. I guess they couldn't find any solid consumer/developer
benefits that would stand up to scrutiny? Not a good look.

~~~
poorman
This one made me laugh.

> The Apple-backed study has four major findings:

> * Most app stores charge the same 30% cut on digital goods.

Fairly certain that if another company tires to create an "app store" they get
sued by Apple. i.e. why Google is called the "Play Store". So when they say
"Most app stores", are they are talking about the only "app store"?

------
bigpumpkin
"Most app stores charge the same 30% cut on digital goods. Retailers, travel
booking services and other marketplaces can charge more than 30% for their
services.

Distributing software through an app store is less expensive than distributing
through brick-and-mortar retailers.

Other app stores and digital marketplaces often require users to use their in-
app payment mechanism and forbid sellers from redirecting buyers to finish the
transaction in another venue."

\-- Apple's main findings.

The test should be whether Apple is charging a rate that is higher than it
would charge under perfect competition. Not whether it's higher than
traditional brick and mortar stores that obviously have higher distribution
costs.

Indeed, the fact that both Apple and Google charge 30% could suggest
collusion.

~~~
KMnO4
I don't think the rates are based on competition. If I make an app, I can
publish it on:

\- App Store, and get 70% cut of X users

\- Play Store, and get 70% cut of Y users

\- Both, and get 70% cut of (X+Y) users

So as long as I can cover my development costs for both platforms, it makes
sense to publish to both stores.

Let's say Google charged only 10%. Would that change which platforms I publish
to? I would say no: I would still want to get 0.7X + 0.9Y.

~~~
hinkley
If your company had decided it wasn't worth the extra effort to port to
Google, that extra 20% might potentially cover the cost of the extra employees
and overhead, or at least lessen the sting.

~~~
AnthonyMouse
But most relevantly, it doesn't impact the decision of whether to port to iOS
at all. If iOS was profitable before it still is, if it wasn't it still isn't.
You can't use the Play Store _instead of_ the App Store because the customer
sets are completely disjoint.

~~~
hinkley
> if it wasn't it still isn't

[citation needed]

A 10% change is not a 10% increase in profits, it's a 10% increase in margins.
I could be going from 20% to 30%. I'd be making 50% more by porting my code to
iOS than we previously forecast. Which also means I might invest more
resources in doing it _well_ which will also increase my profits. Because
there is less risk involved with starting the project.

When you're trying to get a company to change directions, you need one really
great reason or a lot of pretty good reasons. Sometimes one more reason is all
you need.

~~~
AnthonyMouse
You don't get _any_ increase in margins for porting to iOS if the percentage
changes for the Play Store because you can't sell to iOS customers via the
Play Store.

~~~
hinkley
You started with “most relevantly” and my initial reaction to this follow up
is “how is that relevant at all”?

The costs of porting are relevant to value of the new audience. The value to
the old audience is negative (what are we losing while they are focused in
something else). The value to the team is complicated, has to be weighed, and
big changes like new APIs or new revenue structures tip that balance.

~~~
AnthonyMouse
> You started with “most relevantly” and my initial reaction to this follow up
> is “how is that relevant at all”?

It's relevant to whether the rates are based on competition, or to put it the
other way, whether competition affects the rate they can charge.

If Google charged a lower rate, would it change the calculation for porting to
iOS, so that Apple might have to lower their rate too? No, because you can't
reach iOS customers via Google Play, so if you want to sell to them you still
have to pay whatever Apple demands:

> If iOS was profitable before it still is, if it wasn't it still isn't.

------
CraftThatBlock
The "everyone does it too" argument quickly breaks down if there's no
alternative for you platform. On Android, you can easily sideload others
stores, on PC you can use Epic Store or one of many others, but iOS has no
other options.

~~~
jmpman
How about Xbox or PlayStation? Those have both virtual as well as physical app
stores in the form of game disks. There’s no way to avoid the lic fees in
these platforms either.

~~~
CraftThatBlock
The "everyone does it" is true in console gaming though, so the argument
actually could apply them. Apple is the only mobile platform that it doesn't
do the same as others (Android)

------
makecheck
It’s not just the 30% cut, it’s the “loan” that stores get by withholding
payments to developers for arbitrary amounts of time.

If you have a poorly-performing app, it may take _months_ for a few
“purchases” to even reach you! Meanwhile, all expenses (web hosting, $99/year
developer fees, etc.) don’t stop, and any downsides (e.g. supporting
“customers”, or reviews from “customers”) still affect you.

Apple loves to boast about its thousands of “developers” but imagine the size
of the slush fund Apple can maintain if there are tons of poorly-selling apps
not being paid out for awhile? It’s a large, interest-free loan to Apple.
Meanwhile, discoverability and other features that could actually improve
sales are entirely up to Apple (and most of these suck).

So if you devote most of your time to a poorly-discovered app that no one
buys, you can’t make money. Thus, it isn’t surprising at all that lots of apps
start to be “shoveled” into the store, in the hopes that the poor sales of all
of them combined will be sustainable. Rinse and repeat.

Apple is directly responsible for huge problems with the app economy, and
there is really no defense of their tactics at this point.

------
hinkley
As I said in an earlier thread:

Apple pioneered the 30% cut, and it was a massive improvement over the status
quo. But they haven't ramped down at all since and that's why these
conversations and cases are happening.

Also for game theoretic reasons, they should charge a higher % for in-game
purchases and lower their cut for outright purchases.

~~~
mikewhy
> Apple pioneered the 30% cut

How so? Wasn't it the standard brick-and-mortar rate, and Steam had already
been taking 30% for a few years at that point.

~~~
hinkley
Before you had to sell your mobile applications through the carriers, who
would take up to 70%. When I heard this at a mobile meetup I asked them to
repeat it because I was sure I hadn't heard it right. I mean I knew the
carriers were insane but that was just beyond the pale. They had a habit of
charging extra for featured content, so I suspect that 70% was for content
that you actually wanted to advertise.

The mobile app community was all aflutter when Apple Store debuted - margins
more than doubled? Popular apps get placements for no additional charges? Yes
please. The hype about mobile apps at that time wasn't just about the iPhone,
or the app store. Steve Jobs somehow convinced the carriers to let him break
the walled garden. Loosen their tight-fisted monopoly. That was a huge
watershed moment.

But you can only sit on those laurels so long and I agree that the time has
passed. What have you done for us lately?

ETA:

I suspect that 'somehow' was the long exclusivity deal with AT&T. I think
people were still wiping away the saliva from the unreasonably popular RAZR
phone and getting the next RAZR locked in made them consider things they might
not have otherwise. He also got Intel to sell him a bin of mobile CPUs for the
original Intel Macbook Pro that was not (yet) available to anyone else. Which
makes a weird sense because volume was low, and you can't sell a rare bin to
IBM or Dell, but still pissed a lot of people off.

But it seems like that gambit is spent. I haven't heard of anyone recently
using these sorts of tricks outside of manufacturing (does Apple still pay for
factories to upgrade but then they have to give Apple a permanent discount and
right of first refusal?)

~~~
AnthonyMouse
The obvious fallacy in the comparison to carriers is that they were extracting
monopoly rents too, and (counter-intuitively) they charged more because they
had _less_ of a monopoly than Apple does.

A monopolist wants to maximize profits, so they choose the maximal trade off
between margins and volumes. If they charged 100%, nobody would make apps and
they would get 100% of nothing. For the carriers, if they charged 30%, more
people would make apps than if they charged 70%, but then the competing
carriers would benefit from that as much as they do even if they're still
charging 70% (which they still can because they each have a monopoly over
their own users), so they all charge 70%. Apple gets 100% of the increase in
app production rather than ~25%, so their profit-maximizing monopoly rent is a
lower percentage (but a much larger absolute dollar amount).

But that 30% is still dramatically more than the ~5% it would take to cover
their costs and provide a reasonable profit in a competitive distribution
market. Which is what Microsoft now charges in their store, for example.

------
hellotomyrars
“Everyone else does it” is an interesting defense.

Personally I don’t think they charge too much, but i still dream of a world
where you can sideload apps on iOS with 0 fuss.

I think the bigger argument against the App Store isn’t about the cut Apple
takes but the process. The human review process is nice because it helps
control the amount of abject garbage on the App Store compared to the Play
Store but Apple plays fast and loose with letting certain apps/companies use
Private APIs that they’re not supposed to.

Unequal enforcement of their policies is a bigger argument for abuse of their
monopoly position than that it’s too expensive.

I assume that they know very little of the arguments against it is centered
around the 30% cut but this is a bit strange to see.

------
mthoms
@dang can we possibly merge this thread with
[https://news.ycombinator.com/item?id=23919089](https://news.ycombinator.com/item?id=23919089)
please?

------
Apocryphon
The big controversy about this disappeared because of WWDC. Has it picked up
again, or were devs mollified by the new APIs and improvements?

------
robomartin
One can have a range of perspectives on this.

30% of nothing is nothing. Seriously, for a large number of developers the App
Store is a big pile of nothingness.

Apple accelerated a race to the unprofitable bottom rather than to create a
bottom that could actually deliver a financial return for developers. I mean,
they could have established a $1 minimum price for apps, rather than $0. They
could have created minimum business models that would deliver benefits to both
developers and users. They chose to got to zero because a bunch of developers
killing themselves to fill the app store with apps is good for Apple and users
and developers are a dime a dozen (or at least that's the level of importance
Apple seems to assign to them).

App discovery has sucked for years, which means that having an app found and
noticed requires either luck, a tremendous amount of external marketing, a
very large pile of cash or all of the above.

We've had apps on the App Store, about a dozen of them, it was a big waste of
time and resources. Still, I am not holding that against Apple, they provided
everyone with opportunities and many benefited from this greatly.

That said, I think they could have done a far better job of preventing the
ecosystem from becoming a race to the bottom. This is where the optimization
of the hardware sales vs. number of apps for free curve likely drove a
decision that was not favorable for developers and entrepreneurs.

Early in the day we worked on an app for a client. Before they came to use
they had already invested hundreds of thousands of dollars on the app. They
needed a large rewrite due to Apple forcing code updates on everyone. This
cost them a pile of cash. They made nothing with the app before engaging with
us and still made nothing after we got done. They were in a segment dominated
by the likes of Disney, who put millions of dollars into apps, gave them away
for market share and, if that wasn't enough, poured real money into marketing.

This is where app discovery challenges and the race to the bottom truly hurt a
lot of entrepreneurs. We abandoned all of our apps eventually. It just didn't
make any sense to expend resources update code for zero return on investment.

I do think that 30% is high, yet that never really bothered me. I'd be glad to
pay 30% if there was a real shot at app discovery and the entire ecosystem
wasn't --using the term for dramatic emphasis-- tantamount to voluntary
slavery for the benefit of Apple hardware sales. Sorry to be so negative, I
imagine a wide deep path of entrepreneurial destruction created by Apple as a
result of what the App Store devolved into. Apple sure made billions of
dollars and lots of entrepreneurs did well. However, nobody ever gets a peek
at what lies beneath the portion of the iceberg that protrudes through the
surface. That portion, I am certain, is deep, wide and full of sad stories.

Put a different way: You can go sell products on Amazon for about the same 30%
cut and have a FAR better chance of your products being found and making a
profit.

~~~
switch11
There is a very interesting article on how App stores lead to the prostitution
of developers

I can't find it at the moment. If you can then do read it

He speaks to points very similar to what you are saying

Every free market with infinite/near infinite competition goes the same way

It's happening in games and books also

~~~
robomartin
That should be an interesting article.

One of the things that happens is that a lot of these ecosystems attract young
entrepreneurs who, devoid of business experience, jump in head first and give
it all they got. They see accidental success stories like Flappy Bird and
think "If I can do 1/10 of that I'm set". Three years later they are alive to
regret the opportunity cost they wasted on that decision.

I am going to say that in business you have to be quite sanguine. Not always,
of course, but the world and your competitors want to eat you alive, and if
you walk into one of these arenas unprepared you are going to get used, abused
and tossed out.

I don't want to be negative on Apple but I would sure like to know the numbers
on the millions of developers who contributed massive amounts of time to the
growth of this platform with free apps of all kinds that didn't even buy a
daily loaf of bread for them. While developers were enjoying their get-rich-
quick scheme, Apple piled billions of dollars (I lost track, $100 BN, $200 BN,
more?) by selling hardware on the strength of a platform made useful by
millions of free apps that nobody made any money on.

In a nutshell, I don't really like it when folks get used and discarded
--which is precisely how I see what Apple did. They controlled the platform.
They could have setup a win-win. They did not.

