4 ms·

Of course Rhapsody can't sell their stuff for a 30% margin. It's not their own stuff! They're trying to be the last link in a chain of 90/10 (or more) splits.

by zach 16y ago

Of course Rhapsody can't sell their stuff for a 30% margin. It's not their own stuff! They're trying to be the last link in a chain of 90/10 (or more) splits. They repackage record labels' repackaging of artists' content. Do you think the artists would find 30% economically untenable? The App Store is 70/30 because Apple can take things straight from content producer to customer. When the Apple takes the place of publishing, distribution, inventory, sales, payments and shipping, there's real value for that 30%. When all someone wants out of Apple is merely to process the payment and send things down the pipe, gee, who do they think they are? But that's not what Apple is actually holding themselves out as. Apple doesn't want to be in that kind of commodity market anyway. Seems reasonable to me.

potatolicious 16y ago
It's not always this way. Think about, say, a Pandora subscription - thin margins, but provides a real value added service that is well above and beyond that of a mere distributor. Can they afford to give Apple a 30% cut of all revenue? It's completely misguided to characterize all payment through a mobile app as cutting out the middleman. In a great number of cases (i.e. subscriptions) Apple role is nothing more than a payments gateway + lead generation. Does that make them deserving of 30% of your entire revenue stream?
- zach 16y ago
  My point is that Apple doesn't see in-app payments as merely payment processing. They see them as App Store purchases which are delayed in time. Everyone keeps anticipating Apple becoming a payment processor, but it hasn't happened yet. They're still a platform provider. This kind of reminds me of some of the TripAdvisor reviews you see on resorts with a championship golf course and all kinds of amenities. There are always people annoyed that because just wanted a simple room and don't want to have to pay for the amenities. They argue they should be able to pay a lower rate. But they just stayed at the wrong place. A 30% rent is a great rate for what the App Store provides, but if all you want to pay for is a better payment processor, yeah, it does seem outrageous.
  - jaaron 16y ago
    No, a payment processor is exactly what they are in this case. Consider what Apple is attempting to do to Amazon's Kindle service: users can purchase Kindle ebooks directly in-app but Apple takes a 30% cut of the payment. Amazon still hosts and provides the content, all Apple does is act like a payment processor like Visa or Paypal. Clearly Apple wants to shove out competition to it's own iBooks, iTunes and movie services.
    - zach 16y ago
      And yet there seem to be a lot of books as apps on the App Store considering there's this 30% cut. What kind of inside track should Amazon have on the poor shlubs who sell their books as apps?
      - potatolicious 16y ago
        The poor schlubs who sell their books as apps haven't cut out the middleman. With Kindle (or iBooks), the author simply uploads his/her work in a commonly exchanged format. Everything else is handled - distribution, payment, formatting, device compatibility. The works. As an author who wants to publish their book as a discrete app, suddenly you're engaging with a different middleman - the inevitable app vendor. The vast majority of book authors aren't coders and wouldn't know how to publish an app to save their lives, much less on multiple platforms (Android, iOS, webOS, WP7, along with their phone and tablet variants). Inevitably they will buy this solution (which, in essence, is largely of the same nature as Amazon/Apple) from someone else. And what will we, as consumers, have seen from this situation? More confusion and a worse experience overall, as every single little piece of content now floods the app store, obliterating any sense of discoverability while making the UX much, much worse (downloading a discrete app, along with all of its code and media, every time you want to read a book?!)
        zach 16y ago
        Bookbaby makes it pretty easy, but I don't see how that even matters. You're just arguing that there should be more middlemen, sub-platform-providers who get a special deal with Apple compared to original app authors. We can all foresee what happens when providing a hammer factory is favored over providing a hammer. It's not good UX or good for consumers.
jerf 16y ago
"Of course Rhapsody can't sell their stuff for a 30% margin. It's not their own stuff!" Yeah. The original article talks about "calling Apple's bluff" as if this is some sort of choice on Rhapsody's part, but anybody who literally can't make a profit with a 30% cut off the top from Apple isn't "calling a bluff". There's no volition involved.
akashs 16y ago
Apple's argument is that they deserve 30% of all revenue streams for getting a customer on board. For 30% of revenues, you could hire a true sales force that goes out and actively sells stuff, rather than just sitting back and hoping someone signs up. In the App store model, you still need to sell on your own, Apple just centralizes payment and distribution. Thus, I'm not sure I follow your logic. Payments: Visa, Paypal, Amex, MasterCard, and many others would gladly handle the payments for ~2%. Not sure where you're getting anything about inventory and shipping given it's digital content. Sales: when did actually do any selling for anyone's product other than when it was mutually beneficial? You still need to sell it to people to actually use your product. Publishing: again, what is apple doing here? Distribution and a little bit of marketing, sure - but that's certainly not worth the other 28% of revenues. Also don't see why Rhapsody repackaging stuff makes it any different. Shouldn't a true app store model work for any type of business?
- jfb 16y ago
  I think you overstate the willingness of existing payment processors to deal with, say, .99$ purchases (they likely won't bother). I'm not arguing that Apple's providing a service that's worth 30% to everybody, but building a payment processing system to handle sub-$1 charges cost-effictively isn't trivial -- and if you're not in the business of building payment processing systems, you might just pay the rent. Amazon could handle rolling their own; Packt probably can't.
  - timmaah 16y ago
    They would bother if they could get 30 cents on the dollar instead of their measly 2
- zach 16y ago
  I'm comparing it to a retail model. So I included sales but not advertising. Every retail outlet is different, and App Store purchasing has a very particular set of advantages. If you don't need those advantages, the App Store still provides a great value by letting consumers access your service through a free app. If neither of those work with a particular economic model, then I guess it's just not App Store compatible. So yeah, there's definitely room for a better model of app store that suits more developers. But I think Apple is more concerned with getting a broad selection of content than making the economics work.

by zach 16y ago

potatolicious 16y ago

It's not always this way. Think about, say, a Pandora subscription - thin margins, but provides a real value added service that is well above and beyond that of a mere distributor. Can they afford to give Apple a 30% cut of all revenue? It's completely misguided to characterize all payment through a mobile app as cutting out the middleman. In a great number of cases (i.e. subscriptions) Apple role is nothing more than a payments gateway + lead generation. Does that make them deserving of 30% of your entire revenue stream?

zach 16y ago
My point is that Apple doesn't see in-app payments as merely payment processing. They see them as App Store purchases which are delayed in time. Everyone keeps anticipating Apple becoming a payment processor, but it hasn't happened yet. They're still a platform provider. This kind of reminds me of some of the TripAdvisor reviews you see on resorts with a championship golf course and all kinds of amenities. There are always people annoyed that because just wanted a simple room and don't want to have to pay for the amenities. They argue they should be able to pay a lower rate. But they just stayed at the wrong place. A 30% rent is a great rate for what the App Store provides, but if all you want to pay for is a better payment processor, yeah, it does seem outrageous.
- jaaron 16y ago
  No, a payment processor is exactly what they are in this case. Consider what Apple is attempting to do to Amazon's Kindle service: users can purchase Kindle ebooks directly in-app but Apple takes a 30% cut of the payment. Amazon still hosts and provides the content, all Apple does is act like a payment processor like Visa or Paypal. Clearly Apple wants to shove out competition to it's own iBooks, iTunes and movie services.
  - zach 16y ago
    And yet there seem to be a lot of books as apps on the App Store considering there's this 30% cut. What kind of inside track should Amazon have on the poor shlubs who sell their books as apps?
    - potatolicious 16y ago
      The poor schlubs who sell their books as apps haven't cut out the middleman. With Kindle (or iBooks), the author simply uploads his/her work in a commonly exchanged format. Everything else is handled - distribution, payment, formatting, device compatibility. The works. As an author who wants to publish their book as a discrete app, suddenly you're engaging with a different middleman - the inevitable app vendor. The vast majority of book authors aren't coders and wouldn't know how to publish an app to save their lives, much less on multiple platforms (Android, iOS, webOS, WP7, along with their phone and tablet variants). Inevitably they will buy this solution (which, in essence, is largely of the same nature as Amazon/Apple) from someone else. And what will we, as consumers, have seen from this situation? More confusion and a worse experience overall, as every single little piece of content now floods the app store, obliterating any sense of discoverability while making the UX much, much worse (downloading a discrete app, along with all of its code and media, every time you want to read a book?!)
      - zach 16y ago
        Bookbaby makes it pretty easy, but I don't see how that even matters. You're just arguing that there should be more middlemen, sub-platform-providers who get a special deal with Apple compared to original app authors. We can all foresee what happens when providing a hammer factory is favored over providing a hammer. It's not good UX or good for consumers.

jerf 16y ago

"Of course Rhapsody can't sell their stuff for a 30% margin. It's not their own stuff!" Yeah. The original article talks about "calling Apple's bluff" as if this is some sort of choice on Rhapsody's part, but anybody who literally can't make a profit with a 30% cut off the top from Apple isn't "calling a bluff". There's no volition involved.

akashs 16y ago

Apple's argument is that they deserve 30% of all revenue streams for getting a customer on board. For 30% of revenues, you could hire a true sales force that goes out and actively sells stuff, rather than just sitting back and hoping someone signs up. In the App store model, you still need to sell on your own, Apple just centralizes payment and distribution. Thus, I'm not sure I follow your logic. Payments: Visa, Paypal, Amex, MasterCard, and many others would gladly handle the payments for ~2%. Not sure where you're getting anything about inventory and shipping given it's digital content. Sales: when did actually do any selling for anyone's product other than when it was mutually beneficial? You still need to sell it to people to actually use your product. Publishing: again, what is apple doing here? Distribution and a little bit of marketing, sure - but that's certainly not worth the other 28% of revenues. Also don't see why Rhapsody repackaging stuff makes it any different. Shouldn't a true app store model work for any type of business?

jfb 16y ago
I think you overstate the willingness of existing payment processors to deal with, say, .99$ purchases (they likely won't bother). I'm not arguing that Apple's providing a service that's worth 30% to everybody, but building a payment processing system to handle sub-$1 charges cost-effictively isn't trivial -- and if you're not in the business of building payment processing systems, you might just pay the rent. Amazon could handle rolling their own; Packt probably can't.
- timmaah 16y ago
  They would bother if they could get 30 cents on the dollar instead of their measly 2
zach 16y ago
I'm comparing it to a retail model. So I included sales but not advertising. Every retail outlet is different, and App Store purchasing has a very particular set of advantages. If you don't need those advantages, the App Store still provides a great value by letting consumers access your service through a free app. If neither of those work with a particular economic model, then I guess it's just not App Store compatible. So yeah, there's definitely room for a better model of app store that suits more developers. But I think Apple is more concerned with getting a broad selection of content than making the economics work.