6 ms·

Interestingly (sort of), 5%-or-$1 wouldn't work out well for Apple. This is because credit card processing fees are generally structured as a flat fee plus a pe

by kemayo 6y ago

Interestingly (sort of), 5%-or-$1 wouldn't work out well for Apple. This is because credit card processing fees are generally structured as a flat fee plus a percentage of the transaction. Something like 5 cents + 1.3% would be a great deal on payment processing, generally. Apple is a behemoth, so let's assume they're getting a good deal. For a $1 purchase that'd be ~$0.07 to the transaction processor... which is more than the flat percentage already. Then Apple has some amount of costs involved (bandwidth, maintenance of systems, general overhead, etc) even if they started running the App Store at cost as they originally claimed they'd do. There's definitely room to lower the cut Apple takes... it's just that somewhere in the 10-20% range is still a reasonable fee to cover their costs. It's also worth considering how gift cards affect what Apple can charge. Apple sells gift cards through retailers, who are getting a cut of those sales. That cut comes directly out of Apple's portion of the sale, so they have to account for some percentage of transactions having that effective cost, which is probably higher than the aforementioned payment-processing cost. (There are some markets where gift cards are incredibly common. Kids get given them a lot. They're super common in Japan and other countries for everyone.) (The flat $1 fee wouldn't fall apart on processing costs until you reached really expensive in-app purchases... but it'd massively change the economics of the App Store, where $1 apps / in-app purchases are pretty common. I have no idea if that's a good idea or not.)

deleted 6y ago
[deleted]
cnst 6y ago
Wait a moment, how do you get from 5 cents + 1.3% to the 10-20% range all of a sudden?! Electricity and processing power aren't that expensive. They'd probably do just fine if they'd lower the fee to 10%, and stop enforcing that you don't have third-party payments.
- sebastien_bois 6y ago
  > They'd probably do just fine if they'd lower the fee to 10%, and stop enforcing that you don't have third-party payments. Especially considering they're a) charging a yearly fee and b) selling ads on the AppStore (which as someone else here pointed out is their aim to grow ad sales by clamping down on the ad identifier to make ads outside of the AppStore less useful).
- CharlesW 6y ago
  > Electricity and processing power aren't that expensive. Surely you don't do "cost plus" pricing for your own services. You do value based pricing for your services. I'd bet that you don't think at all about the electricity and processing costs that it takes to do what you do. Apple is no different.
  - readams 6y ago
    It's value that they created only by preventing business from servicing themselves. It's more like demanding payment for not torching your shop than by offering a unique value generating service. If the app store were really so incredibly great for app developers then Apple should have no trouble allowing alternate app stores.
    - baddox 6y ago
      > It's value that they created only by preventing business from servicing themselves. Well, and building a product and ecosystem nearly from scratch that arguably started an industry that’s now around half a trillion dollars a year.
- chipotle_coyote 6y ago
  10% seems reasonable. I don't think people would scream about 20%, even. (Well, if Apple had made that change a few years ago, they wouldn't; now that they're in an ever-expanding PR disaster of their own making, people might be less amenable to that.) And they could probably have also staved off a fair amount of complaints about in-app purchases with just a different structure. Off the top of my head: - Non-free apps sold on the app store take a 20% cut, up to a max of a $5 fee. (This would be a bit of encouragement for developers to price productivity apps higher than $25; the "race to the bottom" in app pricing has been a deterrent for some classes of apps, in my understanding.) - In-app purchases and subscriptions take a 15% cut, with a drop to 10% for subscriptions in their second year and beyond. - Links to external web payment forms are allowed (with no Apple cut or penalty) in apps that are clients for cross-platform services, e.g., Netflix, Kindle, and so on. There'd be a lot of details and nuance to work out with respect to those last two, but it doesn't seem like it'd be an impossible hurdle to figure out where to draw those lines.
  - danilocesar 6y ago
    10% is not reasonable, 1% is not reasonable. The problem is not how much Apple charges, that's up to them. The problem is Apple's heavy hand saying what a user can see, what they can install, and what the developer can say to their users. This is the problem. If they decide to charge zero, it won't fix anything. And don't get me wrong, I think Apple is a great company. But they are sitting in a monopoly today. Maybe some folks here are too young to remember but companies like microsoft got punished in the past for having too much control over people' choices and, in my opinion, it was way softer comparing to what Apple is doing today.
    - mdoms 6y ago
      Yep, the correct amount is the fee that the market dictates. That is, when other app stores and other payment processes are available and developers can be open about the fees on each purchase (eg, "Visa/Mastercard +3%, Apple payment +30%") then the market will soon determine what a fair fee is.
    - sebastien_b 6y ago
dlubarov 6y ago
That's a fair point, but Apple always has the option of changing their fee structure to a fixed amount plus a percentage, to reflect their actual costs plus some reasonable markup. If they charged a fee like $.50 + 5%, credit card fees should be less than half of that for any transaction size, so they'd have plenty left to cover any other costs like bandwidth. I don't know what discount retailers expect on gift cards, but I would guess that in the range of a couple percentage points, otherwise networks like Visa would lose money on those sales.
- lancepioch 6y ago
  Charging $.50 + 5% would mean that every $1 app would now give a 55% cut to apple and every $2 app would still give 30%. I believe the majority of the apps are $1. So I think this scheme simply increased the total Apple receives overall...
  - imtringued 6y ago
    Exactly. There is an opportunity for a volume discount for larger players but the 30% fee is pretty much in the sweet spot. Epic games has reduced their fees to 12% but it also has resulted in scenarios where it is possible to pay transaction fees and thereby pay more for the same game than on competing stores. No sane developer is going to reduce the pricing on their $0.99 app to $0.82 just because Apple has reduced their fees but the lower fees mean that you have to pay extra for low cost apps. $0.82 may become $1.12 after adding credit card fees but if the price stays the same you may even have to pay $1.29.
canes123456 6y ago
Apple batches credit card charges, so the per transaction fee will be much lower in practice. Also, nothing stops them from charging 10-15% for the first dollar and 5% after that.
SyneRyder 6y ago
> It's also worth considering how gift cards affect what Apple can charge. Apple sells gift cards through retailers, who are getting a cut of those sales. That's a particularly interesting example, because Gift Cards regularly go on sale (at least here in Australia). I would often wait until my local stores sold the $100 App Store gift cards for $85, and stock up so everything I bought on the App Store was 15% cheaper. So if Apple is able to sell retail gift cards at 15% discount, it suggests their 30% rate might be higher than it needs to be.
heavyset_go 6y ago
Bandcamp is able to keep their fees at 10% - 15% of the purchase price.

by kemayo 6y ago

deleted 6y ago

[deleted]

cnst 6y ago

Wait a moment, how do you get from 5 cents + 1.3% to the 10-20% range all of a sudden?! Electricity and processing power aren't that expensive. They'd probably do just fine if they'd lower the fee to 10%, and stop enforcing that you don't have third-party payments.

sebastien_bois 6y ago
> They'd probably do just fine if they'd lower the fee to 10%, and stop enforcing that you don't have third-party payments. Especially considering they're a) charging a yearly fee and b) selling ads on the AppStore (which as someone else here pointed out is their aim to grow ad sales by clamping down on the ad identifier to make ads outside of the AppStore less useful).
CharlesW 6y ago
> Electricity and processing power aren't that expensive. Surely you don't do "cost plus" pricing for your own services. You do value based pricing for your services. I'd bet that you don't think at all about the electricity and processing costs that it takes to do what you do. Apple is no different.
- readams 6y ago
  It's value that they created only by preventing business from servicing themselves. It's more like demanding payment for not torching your shop than by offering a unique value generating service. If the app store were really so incredibly great for app developers then Apple should have no trouble allowing alternate app stores.
  - baddox 6y ago
    > It's value that they created only by preventing business from servicing themselves. Well, and building a product and ecosystem nearly from scratch that arguably started an industry that’s now around half a trillion dollars a year.
chipotle_coyote 6y ago
10% seems reasonable. I don't think people would scream about 20%, even. (Well, if Apple had made that change a few years ago, they wouldn't; now that they're in an ever-expanding PR disaster of their own making, people might be less amenable to that.) And they could probably have also staved off a fair amount of complaints about in-app purchases with just a different structure. Off the top of my head: - Non-free apps sold on the app store take a 20% cut, up to a max of a $5 fee. (This would be a bit of encouragement for developers to price productivity apps higher than $25; the "race to the bottom" in app pricing has been a deterrent for some classes of apps, in my understanding.) - In-app purchases and subscriptions take a 15% cut, with a drop to 10% for subscriptions in their second year and beyond. - Links to external web payment forms are allowed (with no Apple cut or penalty) in apps that are clients for cross-platform services, e.g., Netflix, Kindle, and so on. There'd be a lot of details and nuance to work out with respect to those last two, but it doesn't seem like it'd be an impossible hurdle to figure out where to draw those lines.
- danilocesar 6y ago
  10% is not reasonable, 1% is not reasonable. The problem is not how much Apple charges, that's up to them. The problem is Apple's heavy hand saying what a user can see, what they can install, and what the developer can say to their users. This is the problem. If they decide to charge zero, it won't fix anything. And don't get me wrong, I think Apple is a great company. But they are sitting in a monopoly today. Maybe some folks here are too young to remember but companies like microsoft got punished in the past for having too much control over people' choices and, in my opinion, it was way softer comparing to what Apple is doing today.
  - mdoms 6y ago
    Yep, the correct amount is the fee that the market dictates. That is, when other app stores and other payment processes are available and developers can be open about the fees on each purchase (eg, "Visa/Mastercard +3%, Apple payment +30%") then the market will soon determine what a fair fee is.
  - sebastien_b 6y ago

dlubarov 6y ago

That's a fair point, but Apple always has the option of changing their fee structure to a fixed amount plus a percentage, to reflect their actual costs plus some reasonable markup. If they charged a fee like $.50 + 5%, credit card fees should be less than half of that for any transaction size, so they'd have plenty left to cover any other costs like bandwidth. I don't know what discount retailers expect on gift cards, but I would guess that in the range of a couple percentage points, otherwise networks like Visa would lose money on those sales.

lancepioch 6y ago
Charging $.50 + 5% would mean that every $1 app would now give a 55% cut to apple and every $2 app would still give 30%. I believe the majority of the apps are $1. So I think this scheme simply increased the total Apple receives overall...
- imtringued 6y ago
  Exactly. There is an opportunity for a volume discount for larger players but the 30% fee is pretty much in the sweet spot. Epic games has reduced their fees to 12% but it also has resulted in scenarios where it is possible to pay transaction fees and thereby pay more for the same game than on competing stores. No sane developer is going to reduce the pricing on their $0.99 app to $0.82 just because Apple has reduced their fees but the lower fees mean that you have to pay extra for low cost apps. $0.82 may become $1.12 after adding credit card fees but if the price stays the same you may even have to pay $1.29.

canes123456 6y ago

Apple batches credit card charges, so the per transaction fee will be much lower in practice. Also, nothing stops them from charging 10-15% for the first dollar and 5% after that.

SyneRyder 6y ago

> It's also worth considering how gift cards affect what Apple can charge. Apple sells gift cards through retailers, who are getting a cut of those sales. That's a particularly interesting example, because Gift Cards regularly go on sale (at least here in Australia). I would often wait until my local stores sold the $100 App Store gift cards for $85, and stock up so everything I bought on the App Store was 15% cheaper. So if Apple is able to sell retail gift cards at 15% discount, it suggests their 30% rate might be higher than it needs to be.

heavyset_go 6y ago

Bandcamp is able to keep their fees at 10% - 15% of the purchase price.