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"The “way” is already paid by the hardware — but Apple uses their position of power to double-dip." I understand the optics of this don't look good, but is it

"The “way” is already paid by the hardware — but Apple uses their position of power to double-dip." I understand the optics of this don't look good, but is it wrong to have multiple sources of revenue derived from the "way"? 1. what happens if supply chain dynamics and smartphone market competition negatively impact the hardware margins? What happens when consumer appetite for innovation in the phone stagnates and margins collapse? This would happen because Apple couldn't leverage new hw+sw features to differentiate itself. 2. How do we know the price of the hardware today isn't offset by services revenue? service revenue disappearing might increase the upfront cost of the phone for everyone. In either of these scenarios, if Apple got to the point of _needing_ the app store fees to make the iPhone an attractive product to build and support, they couldn't start charging in the future. It needs to be set in advance and continue. They can always decrease the fees, but cannot make them go up. It would not be fair for developers to decide on making an app as a business venture only to find out in the future there is a 30% platform. This is something that has been known and transparent since day, yet developers continue to see the value of the platform. Just looking at it from their position

enos_feedler 5y ago
First law of Hacker News: taking the “pro app store fee” argument in any thread comment results in “k” karma points, where “k” <= 0.
- Apocryphon 5y ago
  As frustrating as it may be to receive downvotes for seemingly no reason, getting salty about it simply invites further downvotes.
  - enos_feedler 5y ago
    Yes i was going to write that was the second law as a follow up, but didn't want to go there ;) I couldn't resist the observation though. At least it was specific to something I noticed.
- bayindirh 5y ago
  What's wrong with having unpopular opinions? Like not being against Apple's App Store policies in any strong manner? We're humans after all, and having opposable thumbs is one of the driving pillars of our progress and civilization, if not the one pillar.
smoldesu 5y ago
If the optics of it don't look good, there's a very good chance that it isn't good.
- enos_feedler 5y ago
  If you read my argument I'm saying the optics don't look good because the margins on phones are high AND they are taking platform fees on top of that. As the margins on phones decrease in the future, the optics won't look as bad.
  - smoldesu 5y ago
    That's not an excuse for them to be driving such insane margins then. Plus, who's to say that the iPhone doesn't receive another overhaul in the next few years, driving the margins back down? Apple will continue to play this game of cat-and-mouse for as long as you let them, and that's ultimately how they accumulate wealth. It's a campaign almost entirely ran on deception.
    - jimbokun 5y ago
      It's a campaign ran on Apple making products that a lot of people like enough to buy them at the price Apple is selling them.
      - enos_feedler 5y ago
        Yes, and at some point it's possible consumers simply won't pay for some new technology down the road. Say for example, a very expensive health/bio sensor. However, Apple might feel that 1) it's good for the world to be able to monitor/improve health, 2) will give safe access to this sensor to 3rd party developers, so it's good Apple can draw on this revenue source from platform fees to make it happen, by killing margins to ship this sensor. I am not saying this is happening today at all. I just think it's good for the platform to have diverse revenue sources. It's good for Apple, but it might also be good for developers too
shkkmo 5y ago
IMHO, Apple can keep their 30% fee on their store if they open the platform to 3rd party stores. If Apple has to raise prices on their hardware to stay is business, that seems much fairer that using addicted mobile gamers to subsidize hardware for everyone else.
- newsclues 5y ago
  I’ve never paid for an app, and don’t want to pay more for an AppStore that I don’t use. Only app I use other than Apple stock apps is a bank app which I can use safari and Instagram. Which should work on web browsers but I don’t care about it enough to pay money for it
  - shkkmo 5y ago
    I don't get it, how would you be paying more for an AppStore?
    - enos_feedler 5y ago
      If Apple reduces platform fees the price of the phone could go up to compensate for that. Also, my experience aligns with this too. I dont game on my phone and basically use default apps. I use the United app to book flights but could easily use the mobile website. Same with Twitter
      - ntSean 5y ago
        The profit margin on the iPhone is 35%. The App Store currently runs at a large profit (estimated to be 70%) primarily from in app purchases in the gaming category. Your purchasing habits are not indicative of the mainstream; further, the iPhone isn't priced based on cost to the cost to design or manufacture.
        enos_feedler 5y ago
        I'm not sure how anything you've said here relates to anything Iv'e said
simonh 5y ago
Hmm, I generally take the pro-Apple stance on this. I don’t want side loading or third party stores. It’s Apples product and they get to decide what features it has, IMHO. I don’t want government committees dictating the security model and software architecture of my phone, thanks. However Marco’s argument is spot on. Apple is saying in Senate hearings that App developers are picking up crumbs from the App Store’s floor and should be grateful for what they get, while reassuring devs that they are what makes iPhone so great. Too many of Apples moves against devs on the store recently have bordered on the abusive. Yes they’re greatly trimmed charges for small dev shops, but the rules on that are awkward and are clearly about optics not substance. To your questions. 1. Then Apple would have failed to offer a compelling product. There are other phones and app stores out there. If Apple can’t compete with Samsung on the quality of their phones, then they’re not the Apple I know and love anymore. It’s up to them to add value, not leech it off others. They do deserve fair recompense for their services, but that’s all. 2. We know very well what their hardware margins are. From their own filings, their phone hardware margins are over 35%.
- smoldesu 5y ago
  This is definitely a case where our Senate is out of it's depths. Software licensing and the world of software distribution is still a remarkably new field in the political world, so it makes sense that our government is totally lost here. There is no precedent for what Apple is doing. This is the licensing nightmare scenario all of the BSD developers warned about when Sony sold the Playstation Linux Kit: we no longer own the hardware we buy, we simply lease it from someone who provisions us authority to it as they see fit. It's a harrowing paradigm.
- procombo 5y ago
  I also "don’t want government committees dictating the security model", but IMHO it's a big leap from that to advocating against consumer choice within a general purpose product.
  - cmorgan31 5y ago
    Why is it a big leap? Consumers also choose to buy Apple and the assumption is we're too stupid to know we can buy something else and do more with it. It's just as big an insult. If I can't get your app on iOS then I just won't use your app. I don't care if it's on Android because I didn't buy an iPhone to use your specific app. If you want to legislate for consumer choice do so but can we stop pretending this is some battle for choice when it's literally about two behemoth corporations arguing over how they split our money.
addicted 5y ago
Marco literally states that it’s not wrong pointing out that it’s their business prerogative and further they aren’t known for being very generous anyways. So you’re arguing a straw man. And if the service revenue was supporting hardware revenue Apple’s services wouldn’t largely be limited to Apple devices. Besides, Apple is a public company and we can see how those revenues break out. Further, we can guess that even the relatively minuscule service income would largely disappear, if, for example, I could download apps at a 15% discount using a non Apple App Store to an iPhone and not have to jailbreak the iPhone.
- enos_feedler 5y ago
  I was just arguing the quote "Apple uses their position of power to double-dip" Double dip has connotations that they are taking twice when they should only be taking once. I am simply saying that diverse revenue streams to capture value from a product is not wrong. Therefore, calling out "double dipping" behavior is unfair.
ksec 5y ago
>How do we know the price of the hardware today isn't offset by services revenue? Unless you want to some doggy NRE number into accounting. Apple's hardware are extremely profitable doesn't matter how you spin or slice it. But, yes. Today's price are subsidise by their services revenue. The keyword here is price. Apple still gets to keep their same margin. Basically Apple shifted the cost of macOS, cloud and other software expenses from Hardware / Product cost to Services revenue. This was stated in their 2018 investor notes. Again, Macro's point isn't just about 30%. There is an Anti-Competitive, Anti Trust play here. Of course those two words have difference definition to quite literally everyone, and especially different from a US and EU stand point.
- clusterfish 5y ago
  I don't think they shifted anything, they just added the new revenue on top and became more profitable.
  - ksec 5y ago
    Apple used to account their software development cost as part of their product COGS. Which is what Steve's way of saying you buy iPhone for iOS. Both are the same and one. I believe this was listed in their late 00s investor notes. We dont know how much they account for those development though. It was never listed, but in the case of 2018, $10 / devices were put to Services Revenue. Which is roughly $3B annual revenue to Services Revenue.
gigatexal 5y ago
I too don't see any issue with this. They built the phone and created a platform to build upon. They exact a 30% tax. So be it. I will not use, install, or tell my friends or family to use, install, or get software from any third party app on their phones as it would break one of the biggest selling points of the iPhone: it's appliance nature and how difficult it is to brick or screw up. I also don't want the podcasts I subscribe to to have my email. Podcasters claim to want to own the customer and the flow. They only want this for upselling or cross-selling. No. I will pay you through apple-pay without revealing my email, and you can talk about promotions and things in the podcast but otherwise let's leave it at that.
- enos_feedler 5y ago
  You are not alone. Consumer satisfaction of the iPhone as a product is through the roof. Android has been steadily losing customers who jump over to iPhone.

enos_feedler 5y ago

First law of Hacker News: taking the “pro app store fee” argument in any thread comment results in “k” karma points, where “k” <= 0.

Apocryphon 5y ago
As frustrating as it may be to receive downvotes for seemingly no reason, getting salty about it simply invites further downvotes.
- enos_feedler 5y ago
  Yes i was going to write that was the second law as a follow up, but didn't want to go there ;) I couldn't resist the observation though. At least it was specific to something I noticed.
bayindirh 5y ago
What's wrong with having unpopular opinions? Like not being against Apple's App Store policies in any strong manner? We're humans after all, and having opposable thumbs is one of the driving pillars of our progress and civilization, if not the one pillar.

smoldesu 5y ago

If the optics of it don't look good, there's a very good chance that it isn't good.

enos_feedler 5y ago
If you read my argument I'm saying the optics don't look good because the margins on phones are high AND they are taking platform fees on top of that. As the margins on phones decrease in the future, the optics won't look as bad.
- smoldesu 5y ago
  That's not an excuse for them to be driving such insane margins then. Plus, who's to say that the iPhone doesn't receive another overhaul in the next few years, driving the margins back down? Apple will continue to play this game of cat-and-mouse for as long as you let them, and that's ultimately how they accumulate wealth. It's a campaign almost entirely ran on deception.
  - jimbokun 5y ago
    It's a campaign ran on Apple making products that a lot of people like enough to buy them at the price Apple is selling them.
    - enos_feedler 5y ago
      Yes, and at some point it's possible consumers simply won't pay for some new technology down the road. Say for example, a very expensive health/bio sensor. However, Apple might feel that 1) it's good for the world to be able to monitor/improve health, 2) will give safe access to this sensor to 3rd party developers, so it's good Apple can draw on this revenue source from platform fees to make it happen, by killing margins to ship this sensor. I am not saying this is happening today at all. I just think it's good for the platform to have diverse revenue sources. It's good for Apple, but it might also be good for developers too

shkkmo 5y ago

IMHO, Apple can keep their 30% fee on their store if they open the platform to 3rd party stores. If Apple has to raise prices on their hardware to stay is business, that seems much fairer that using addicted mobile gamers to subsidize hardware for everyone else.

newsclues 5y ago
I’ve never paid for an app, and don’t want to pay more for an AppStore that I don’t use. Only app I use other than Apple stock apps is a bank app which I can use safari and Instagram. Which should work on web browsers but I don’t care about it enough to pay money for it
- shkkmo 5y ago
  I don't get it, how would you be paying more for an AppStore?
  - enos_feedler 5y ago
    If Apple reduces platform fees the price of the phone could go up to compensate for that. Also, my experience aligns with this too. I dont game on my phone and basically use default apps. I use the United app to book flights but could easily use the mobile website. Same with Twitter
    - ntSean 5y ago
      The profit margin on the iPhone is 35%. The App Store currently runs at a large profit (estimated to be 70%) primarily from in app purchases in the gaming category. Your purchasing habits are not indicative of the mainstream; further, the iPhone isn't priced based on cost to the cost to design or manufacture.
      - enos_feedler 5y ago
        I'm not sure how anything you've said here relates to anything Iv'e said

simonh 5y ago

Hmm, I generally take the pro-Apple stance on this. I don’t want side loading or third party stores. It’s Apples product and they get to decide what features it has, IMHO. I don’t want government committees dictating the security model and software architecture of my phone, thanks. However Marco’s argument is spot on. Apple is saying in Senate hearings that App developers are picking up crumbs from the App Store’s floor and should be grateful for what they get, while reassuring devs that they are what makes iPhone so great. Too many of Apples moves against devs on the store recently have bordered on the abusive. Yes they’re greatly trimmed charges for small dev shops, but the rules on that are awkward and are clearly about optics not substance. To your questions. 1. Then Apple would have failed to offer a compelling product. There are other phones and app stores out there. If Apple can’t compete with Samsung on the quality of their phones, then they’re not the Apple I know and love anymore. It’s up to them to add value, not leech it off others. They do deserve fair recompense for their services, but that’s all. 2. We know very well what their hardware margins are. From their own filings, their phone hardware margins are over 35%.

smoldesu 5y ago
This is definitely a case where our Senate is out of it's depths. Software licensing and the world of software distribution is still a remarkably new field in the political world, so it makes sense that our government is totally lost here. There is no precedent for what Apple is doing. This is the licensing nightmare scenario all of the BSD developers warned about when Sony sold the Playstation Linux Kit: we no longer own the hardware we buy, we simply lease it from someone who provisions us authority to it as they see fit. It's a harrowing paradigm.
procombo 5y ago
I also "don’t want government committees dictating the security model", but IMHO it's a big leap from that to advocating against consumer choice within a general purpose product.
- cmorgan31 5y ago
  Why is it a big leap? Consumers also choose to buy Apple and the assumption is we're too stupid to know we can buy something else and do more with it. It's just as big an insult. If I can't get your app on iOS then I just won't use your app. I don't care if it's on Android because I didn't buy an iPhone to use your specific app. If you want to legislate for consumer choice do so but can we stop pretending this is some battle for choice when it's literally about two behemoth corporations arguing over how they split our money.

addicted 5y ago

Marco literally states that it’s not wrong pointing out that it’s their business prerogative and further they aren’t known for being very generous anyways. So you’re arguing a straw man. And if the service revenue was supporting hardware revenue Apple’s services wouldn’t largely be limited to Apple devices. Besides, Apple is a public company and we can see how those revenues break out. Further, we can guess that even the relatively minuscule service income would largely disappear, if, for example, I could download apps at a 15% discount using a non Apple App Store to an iPhone and not have to jailbreak the iPhone.

enos_feedler 5y ago
I was just arguing the quote "Apple uses their position of power to double-dip" Double dip has connotations that they are taking twice when they should only be taking once. I am simply saying that diverse revenue streams to capture value from a product is not wrong. Therefore, calling out "double dipping" behavior is unfair.

ksec 5y ago

>How do we know the price of the hardware today isn't offset by services revenue? Unless you want to some doggy NRE number into accounting. Apple's hardware are extremely profitable doesn't matter how you spin or slice it. But, yes. Today's price are subsidise by their services revenue. The keyword here is price. Apple still gets to keep their same margin. Basically Apple shifted the cost of macOS, cloud and other software expenses from Hardware / Product cost to Services revenue. This was stated in their 2018 investor notes. Again, Macro's point isn't just about 30%. There is an Anti-Competitive, Anti Trust play here. Of course those two words have difference definition to quite literally everyone, and especially different from a US and EU stand point.

clusterfish 5y ago
I don't think they shifted anything, they just added the new revenue on top and became more profitable.
- ksec 5y ago
  Apple used to account their software development cost as part of their product COGS. Which is what Steve's way of saying you buy iPhone for iOS. Both are the same and one. I believe this was listed in their late 00s investor notes. We dont know how much they account for those development though. It was never listed, but in the case of 2018, $10 / devices were put to Services Revenue. Which is roughly $3B annual revenue to Services Revenue.

gigatexal 5y ago

I too don't see any issue with this. They built the phone and created a platform to build upon. They exact a 30% tax. So be it. I will not use, install, or tell my friends or family to use, install, or get software from any third party app on their phones as it would break one of the biggest selling points of the iPhone: it's appliance nature and how difficult it is to brick or screw up. I also don't want the podcasts I subscribe to to have my email. Podcasters claim to want to own the customer and the flow. They only want this for upselling or cross-selling. No. I will pay you through apple-pay without revealing my email, and you can talk about promotions and things in the podcast but otherwise let's leave it at that.

enos_feedler 5y ago
You are not alone. Consumer satisfaction of the iPhone as a product is through the roof. Android has been steadily losing customers who jump over to iPhone.