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It feels like quite a lot of your points here are either highly subjective or coming from a bad faith position. It's not a criticism -- you're super articulate

It feels like quite a lot of your points here are either highly subjective or coming from a bad faith position. It's not a criticism -- you're super articulate and you are being generous with your time and in explaining things to me, so thank you. But for example: > Apple could be honest brokers There is nothing dishonest about what Apple is doing, as far as I can see. > superficially entitled to I went to some lengths to imagine the infrastructure costs Apple experiences for the App Store here.[1] People seem to quite quickly move from a position of "Apple does nothing to merit a cut of revenue from their marketplace" to "Apple doesn't deserve that much revenue" which again feels subjective. > neither will take them since there is so much money involved And because neither side has done anything materially wrong in my opinion. Epic is, I guess, within its rights to openly try to break the rules of the app store and then file a law suit when their game is pulled. It's tough for me to imagine that they're coming at this from "above the line" because they released a fucking video about it minutes after the suit was filed, but whatever. Apple is within its rights to pull the game, contest the law suit, win, and continue charging 30%. > OK, then the demonstrably best policy for Apple is to both provide a safe platform for consumers which somehow doesn't involve price gouging the people that provide software for their platform. This is not price gouging as far as I can tell. That would be opportunistic pricing which the developer or consumer has no option but to pay. (In the US the term has been in the media a lot lately because of toilet paper pricing after quarantine started.) For more than a decade, Apple has had the same policy of a 30% cut from IAP in its marketplace. Epic has been on Apple's platform for a while and accepted these charges, and (just checked) charged more for V-Bucks on iOS than PC. I think they were aware of the situation, and again they've earned hundreds of millions of dollars from the arrangement. > Removing the skimming policies is far superior, clearly, for the reasons you mention. Again this is not skimming. It is totally fair for Apple to charge a fee for an app to appear in its marketplace. I don't think even you believe that they should charge nothing at all, I think you just disagree with the cut that they take, right? > The idea, though, that "massive profits" didn't enter into the minds of of those who set these policies, whether as a first or last reason, is not realistic. The genesis of the App Store is pretty well known: Steve resisted it, hated the idea, wanted people to build web apps (which Epic still can, and can charge as much as they like for with Apple making nothing from). He was eventually persuaded by his exec team and at the announcement he said: "We don’t intend to make any money off the App Store. We’re basically giving all the money to the developers and the 30 percent that pays for running the store, that’ll be great." So: the policy was set pre-launch. I think it's clear that nobody at Apple expected it to get this big ("Maybe it'll be a billion dollar marketplace some day" sounds so quaint now, looking at $50bn of payouts to developers in 2019). What you could accuse Apple of is sizing their 30% fee proportionately to their expected transaction volume (e.g. "We think it'll do $1bn in transactions at maturity, so we'll get $300m a year. That's enough to pay for all the infrastructure and give us a margin for error.") and then not changing that fee even after the proceeds from the store becamse so great that they outstripped the increase in costs ("We do $50bn of business a year and now make $15bn in revenue from our cut. Our infrastructure costs are far higher than we initially anticipated, but we're making way more money than we ever thought we would."). But what's clear is that the policy was not incepted in bad faith, has not been changed to reflect the massive growth in the store (other than reducing Y2 subscription rake), and is totally consistent with the prices other marketplaces charge. > Apple literally makes hundreds of millions of dollars off of a product they had 0 to do with developmentally Which is exactly how marketplaces work. If you want to sell your product to the folks in this store, you pay the fee that the market sets. The great news is that if you don't want to pay Apple's 30% fee, you can distribute your app in other people's stores on other platforms (PS4, Xbox, Switch Store), allow people to install it directly where the computing device is open (Android phones, Windows), or through your own store (Epic Store). Reverse the situation and pretend for a sec that Apple can't get any revenue from the App Store. Their arguments would be that Epic uses them for distribution, updates, tech support, app review, and that Apple incurs all of the cost of acquiring iPhone customers. Epic is making hundreds of millions of dollars from the success of a platform and store that they had 0 to do with developmentally. Neither is true: Apple has helped Epic, and Epic has helped Apple. Everyone has a different interpretation of the value derived from both sides of the arrangement, but the only job the courts have is determining whether Apple has either created and then abused monopoly power (very unlikely I think) or is guilty of some other antitrust breach. > don't try to tell me they do this in the name of not having shitty apps, viruses, or malware. They do it to profit off of it. They really do. Imagine a fictional regulator gives Apple two choices: 1. Be the only App Store on the platform, exactly the same as today, but the store must be a proper not-for-profit (so Apple doesn't lose money in any area -- even things like the apportionment of App Store revenue which contributes to marketing) -- let's say $500m of revenue, or 2. Be one of many App Stores on the platform, and make exactly the same revenue as they do today ($15bn revenue per year) with the same margins, and let developers distribute apps any way they please, Apple will absolutely pick option 1 every day of the week, and twice on Sundays. The moment the iPhone becomes complex, more susceptible to viruses, or less secure in the eyes of its users, it becomes much less valuable and they lose money hand over fist in hardware sales. [1] https://news.ycombinator.com/item?id=24151913 https://news.ycombinator.com/item?id=24151913

turndown 6y ago
I agree that what we are arguing here is subjective, if only because in this portion of business there is little that is clear cut. Ideally, Apple would charge a fee proportional to what it costs to hosts the apps on their store, software vetting, etc. I do not think that having no charge is realisitc, in that expecting Apple to pay for all of that is not sustainable, or fair. That said, a 30% fee approaches price gouging when other stores charge around %3, if the Epic filing papers are accurate in this regard. If you, as a developer, pay ~$200M to Apple for the simple right of access to a market, along with other niceties the App Store may provide, it is hard to say that you help Apple out and they help you out, since the disparity in gain is so large. I don't disagree that Apple has other incentives for their App Store, only that in this case, and in many others like it, the overwhelming focus is on the revenue stream. $15B is nothing to sniff at.
- georgespencer 6y ago
  > Ideally, Apple would charge a fee proportional to what it costs to host the apps on their store, software vetting, etc. Presumably Apple believes it's proportional, but doesn't share their cost base, and many people think it's disproportional, without seeing the cost base. We get into shaky ground here IMO. Imagine it's possible to distil the app store into a single P&L (it's not because it touches so many aspects of Apple's revenue halo), and it ends up as an endeavour which looks something like this for Apple: Revenue: GMV $50bn Net revenue $15bn Costs: People ($100m) Hosting & IT ($450m) Overheads ($75m) -- Net profit $14.375bn Net margin 95.8% A 95.8% net margin is presumably something you consider to be usury. If you change Apple's cut to 3%: Revenue: GMV $50bn Net revenue $1.5bn Costs: People ($100m) Hosting & IT ($450m) Overheads ($75m) -- Net profit $875m Net margin 58% Is that now too much? What if Apple is able to reduce its overheads by a factor of ten, and they move to c. $65m which pushes margin to 99%? What if Apple isn't willing to make concessions on healthcare plans or working conditions which 3% marketplaces are? How do you -- and how does anyone -- make determinations about what is appropriate here? For me the nail in the coffin for this line of argument is: we've done the exercise of supposing that we can distil one specific aspect of Apple's business into an isolated P&L. Now do the same thing for Fortnite. What margin do Epic make on IAPs? We know it's 70% on the app store + whatever the tiny, tiny cost is of the few people making the texture packs and models which kids buy in droves (billions of dollars). I'd imagine that if you consider the revenue they take before their payment to Apple as "GMV" and then do a margin analysis on their net revenue, you end up with % margin getting towards Apple's levels for the App Store. So: can I sue Epic and force my own content, using my own payment infrastructure, into their game? They have a 100% monopoly on loot sold in-game in Fortnite right? They're charging users predatory prices when you look at the margins they make. Nobody seems to be able to specifically quantify what's unfair here. I'm not criticising you but I don't see in any argument a clear articulation of what Apple does which is unfair in a way that is easily remedied throughout the software world (i.e. what % rake are Epic paying on Xbox store?) > If you, as a developer, pay $200m to Apple for the simple right of access to a market From the interaction we've had I have found you to be really articulate and bright, and this seems like a very basic misrepresentation: it's not paying for right of access to a market. Fortnite made $2m USD per day on the day it launched to Apple's customers on the app store. They also became Epic's customers, but when we talk about a "disparity in gain", Epic is making $1.4m USD per day that they weren't making before. > the overwhelming focus is on the revenue stream I think we agree on this but on slightly different terms: Apple prioritises its overall revenue, and I would imagine that if regulators tell it to either reduce their cut or face adding other app stores or alternative payment methods into the existing app store if they want to keep their 30% cut, they will preserve the user experience and reduce their cut.

turndown 6y ago

I agree that what we are arguing here is subjective, if only because in this portion of business there is little that is clear cut. Ideally, Apple would charge a fee proportional to what it costs to hosts the apps on their store, software vetting, etc. I do not think that having no charge is realisitc, in that expecting Apple to pay for all of that is not sustainable, or fair. That said, a 30% fee approaches price gouging when other stores charge around %3, if the Epic filing papers are accurate in this regard. If you, as a developer, pay ~$200M to Apple for the simple right of access to a market, along with other niceties the App Store may provide, it is hard to say that you help Apple out and they help you out, since the disparity in gain is so large. I don't disagree that Apple has other incentives for their App Store, only that in this case, and in many others like it, the overwhelming focus is on the revenue stream. $15B is nothing to sniff at.

georgespencer 6y ago
> Ideally, Apple would charge a fee proportional to what it costs to host the apps on their store, software vetting, etc. Presumably Apple believes it's proportional, but doesn't share their cost base, and many people think it's disproportional, without seeing the cost base. We get into shaky ground here IMO. Imagine it's possible to distil the app store into a single P&L (it's not because it touches so many aspects of Apple's revenue halo), and it ends up as an endeavour which looks something like this for Apple: Revenue: GMV $50bn Net revenue $15bn Costs: People ($100m) Hosting & IT ($450m) Overheads ($75m) -- Net profit $14.375bn Net margin 95.8% A 95.8% net margin is presumably something you consider to be usury. If you change Apple's cut to 3%: Revenue: GMV $50bn Net revenue $1.5bn Costs: People ($100m) Hosting & IT ($450m) Overheads ($75m) -- Net profit $875m Net margin 58% Is that now too much? What if Apple is able to reduce its overheads by a factor of ten, and they move to c. $65m which pushes margin to 99%? What if Apple isn't willing to make concessions on healthcare plans or working conditions which 3% marketplaces are? How do you -- and how does anyone -- make determinations about what is appropriate here? For me the nail in the coffin for this line of argument is: we've done the exercise of supposing that we can distil one specific aspect of Apple's business into an isolated P&L. Now do the same thing for Fortnite. What margin do Epic make on IAPs? We know it's 70% on the app store + whatever the tiny, tiny cost is of the few people making the texture packs and models which kids buy in droves (billions of dollars). I'd imagine that if you consider the revenue they take before their payment to Apple as "GMV" and then do a margin analysis on their net revenue, you end up with % margin getting towards Apple's levels for the App Store. So: can I sue Epic and force my own content, using my own payment infrastructure, into their game? They have a 100% monopoly on loot sold in-game in Fortnite right? They're charging users predatory prices when you look at the margins they make. Nobody seems to be able to specifically quantify what's unfair here. I'm not criticising you but I don't see in any argument a clear articulation of what Apple does which is unfair in a way that is easily remedied throughout the software world (i.e. what % rake are Epic paying on Xbox store?) > If you, as a developer, pay $200m to Apple for the simple right of access to a market From the interaction we've had I have found you to be really articulate and bright, and this seems like a very basic misrepresentation: it's not paying for right of access to a market. Fortnite made $2m USD per day on the day it launched to Apple's customers on the app store. They also became Epic's customers, but when we talk about a "disparity in gain", Epic is making $1.4m USD per day that they weren't making before. > the overwhelming focus is on the revenue stream I think we agree on this but on slightly different terms: Apple prioritises its overall revenue, and I would imagine that if regulators tell it to either reduce their cut or face adding other app stores or alternative payment methods into the existing app store if they want to keep their 30% cut, they will preserve the user experience and reduce their cut.