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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

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.

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.