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The problem with in-app purchases was always that Apple HAS to use the same 30% fee. If they use another percentage, developers just create free apps and make '

by pieter 15y ago

The problem with in-app purchases was always that Apple HAS to use the same 30% fee. If they use another percentage, developers just create free apps and make 'premium' features available for the same price as their paid app would otherwise be, thereby handing over less money to Apple. Because Apple's in-app purchases don't distinguish between features and content, Apple can't use different pricing schemes. I think Apple may try to change this situation with their News Stand system in iOS5. The content appearing there are still normal apps, they're just grouped together in a special folder and feature automatic downloads. My guess is that content purchased in those News Stand apps will be less taxed than other in-app purchases, for example just 10%. That way Apple will keep some of their most important 'partners' happy.

ashearer 15y ago
Aren't iTunes gift cards Apple's big constraint? They pose a more difficult problem than developers abandoning paid apps in favor of in-app purchases (which could, as you say, be solved by Apple keeping in-app purchases at 30% outside a narrow app category). Gift card retailers get most or all of the standard 30% cut, as I understand it, leaving Apple with nothing. If that's true there's no way for Apple to withhold less than 30% without either breaking their unified payment system or losing money on each sale. Taking the loss would expose them to massive fraud from collusion between app vendors and retailers. Charging a lower rate for some categories (like News Stand content) without risking losses from gift card arbitrage would mean creating another payment tier where gift card balances didn't work, complicating the model. Can someone with knowledge of the situation confirm whether this is accurate?
- alanfalcon 15y ago
  I'd also like to see someone with knowledge weigh in. I find it unthinkable that Apple would give more than a 5-10% margin on those gift cards. Retail stores love them despite the small cut because they're pure profit on the books: there's no inventory since they have no value until sold. I think they also get favorable terms on the transfer of cash from the sale of the gift card. This also shows where retailers can be confusing (to me): it takes labor to ship, display, and activate those cards (activation can be a huge pain) but that's all considered fixed overhead I suppose.
  - cubicle67 15y ago
    Unless Apple regularly sell giftcards to retailers at significant discount, there's more than 50-10% markup. My sole means of paying for iTunes purchases is via giftcards because they can always be obtained for a discount of between 20-25% if you look. A retailer here was recently offering them at buy 2 get 1 free, or 33% discount.
dstein 15y ago
I still don't buy any argument that Apple is entitled to any subscription fee at all. If I use my own subscription system, own payment system, own user system, and my own bandwidth to supply the content, then I shouldn't have to give anything to Apple. I don't need to send a fee to Microsoft if I have software that delivers content in the same way. That Apple thinks they are entitled to anything in this regard is absurd.
- recoiledsnake 15y ago
  This is quite similar to Comcast wanting to tax Youtube for using it's pipes.
- binarycrusader 15y ago
  Apple brought you the customers, Apple adevertised your application, Apple provided you with the bandwidth to distribute your software and updates, Apple provided you with the SDK/APIs to write the application, Apple provided you with support for that SDK and the OS it runs on, and Apple takes on some legal liability for selling it. How are they not entitled to something? You wouldn't have the customers if they hadn't provided the market place.
  - Steko 15y ago
    This (and don't forget apple made the device itself). Basically Apple is like a giant cruise ship company that can stop at any of thousands of islands along it's way. The islands that don't want to follow their rules (give us 30% of your bananas, don't use our private radio channel, wear some pants for god's sake, etc.) well that's their prerogative but they won't be able to sell their wares to Apple's thousands of well heeled tourists.
    - jodrellblank 15y ago
      wear some pants for god's sake As if you could offend The Creator, who made humans[1] pantsless, by not wearing pants. [1] source: a creation story
    - deleted 15y ago

by pieter 15y ago

ashearer 15y ago

Aren't iTunes gift cards Apple's big constraint? They pose a more difficult problem than developers abandoning paid apps in favor of in-app purchases (which could, as you say, be solved by Apple keeping in-app purchases at 30% outside a narrow app category). Gift card retailers get most or all of the standard 30% cut, as I understand it, leaving Apple with nothing. If that's true there's no way for Apple to withhold less than 30% without either breaking their unified payment system or losing money on each sale. Taking the loss would expose them to massive fraud from collusion between app vendors and retailers. Charging a lower rate for some categories (like News Stand content) without risking losses from gift card arbitrage would mean creating another payment tier where gift card balances didn't work, complicating the model. Can someone with knowledge of the situation confirm whether this is accurate?

alanfalcon 15y ago
I'd also like to see someone with knowledge weigh in. I find it unthinkable that Apple would give more than a 5-10% margin on those gift cards. Retail stores love them despite the small cut because they're pure profit on the books: there's no inventory since they have no value until sold. I think they also get favorable terms on the transfer of cash from the sale of the gift card. This also shows where retailers can be confusing (to me): it takes labor to ship, display, and activate those cards (activation can be a huge pain) but that's all considered fixed overhead I suppose.
- cubicle67 15y ago
  Unless Apple regularly sell giftcards to retailers at significant discount, there's more than 50-10% markup. My sole means of paying for iTunes purchases is via giftcards because they can always be obtained for a discount of between 20-25% if you look. A retailer here was recently offering them at buy 2 get 1 free, or 33% discount.

dstein 15y ago

I still don't buy any argument that Apple is entitled to any subscription fee at all. If I use my own subscription system, own payment system, own user system, and my own bandwidth to supply the content, then I shouldn't have to give anything to Apple. I don't need to send a fee to Microsoft if I have software that delivers content in the same way. That Apple thinks they are entitled to anything in this regard is absurd.

recoiledsnake 15y ago
This is quite similar to Comcast wanting to tax Youtube for using it's pipes.
binarycrusader 15y ago
Apple brought you the customers, Apple adevertised your application, Apple provided you with the bandwidth to distribute your software and updates, Apple provided you with the SDK/APIs to write the application, Apple provided you with support for that SDK and the OS it runs on, and Apple takes on some legal liability for selling it. How are they not entitled to something? You wouldn't have the customers if they hadn't provided the market place.
- Steko 15y ago
  This (and don't forget apple made the device itself). Basically Apple is like a giant cruise ship company that can stop at any of thousands of islands along it's way. The islands that don't want to follow their rules (give us 30% of your bananas, don't use our private radio channel, wear some pants for god's sake, etc.) well that's their prerogative but they won't be able to sell their wares to Apple's thousands of well heeled tourists.
  - jodrellblank 15y ago
    wear some pants for god's sake As if you could offend The Creator, who made humans[1] pantsless, by not wearing pants. [1] source: a creation story
  - deleted 15y ago