4 ms·

> 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 6y ago
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 6y ago
  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.
athms 6y ago
For physical sales, the developer got pennies on the dollar. You needed to find a publisher. Not only would they help with packaging, marketing, localization, and QA, but they also brought access to the wholesale channel. Ingram and MicroD (before they merged) would not touch you unless you could guarantee a certain volume. And like the book business, there were buy backs for unsold product. I was involved in an Amiga game development deal from 1989-1990 that eventually fell apart and our cut was 18%.

hinkley 6y ago

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 6y ago
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.

athms 6y ago

For physical sales, the developer got pennies on the dollar. You needed to find a publisher. Not only would they help with packaging, marketing, localization, and QA, but they also brought access to the wholesale channel. Ingram and MicroD (before they merged) would not touch you unless you could guarantee a certain volume. And like the book business, there were buy backs for unsold product. I was involved in an Amiga game development deal from 1989-1990 that eventually fell apart and our cut was 18%.