4 ms·

I tend to agree that most people wouldn't care about Google's cut. The only way to bring the fee down is to create more 'stores' where developers can sell their

by pcurve 5y ago

I tend to agree that most people wouldn't care about Google's cut. The only way to bring the fee down is to create more 'stores' where developers can sell their apps. Then the margin will completely collapse from 30% to near 0.

jollybean 5y ago
All in the credit processing and transactional costs and overhead (i.e. charge-backs) will be pushing 5%. If there is remotely any manual intervention for support, or even validating apps, that's going to be real money for any entity, then there's cost there. Then business overhead, marketing support, campaigns etc.. And then profit margins. I suggest a normal markup is going to look something like 8-12% for digital distribution. That's where I think the fee would sit if there were no Google Play and maybe 4 or 5 major competitors all specializing a little bit differently.
- simondotau 5y ago
  Precisely. Epic hasn't even demonstrated that they can run their own digital store profitably with a 12% commission—and the Epic Store isn't exactly the most sophisticated bit of infrastructure. Barely more than a half-baked Windows downloader with DRM. Google and Apple now offer a 15% rate to the overwhelming majority of developers. Whether you call it a response to the market or a cynical ploy to stave off Government intervention, it means small and medium developers can no longer be seen as a profit centre for these mega corporations. Apple actually has an additional compelling argument, which is the near-total elimination of software piracy on the iOS platform. I don't know what the real-world numbers are, but I honestly wouldn't be surprised if iOS developers ended up earning substantially more from the absence of piracy than they lost paying a 30% commission to Apple.
  - jollybean 5y ago
    They are losing more to Apple than they would in piracy.
    - simondotau 5y ago
      Almost certainly not. Firstly, you're assuming that app store sales number would have been equally successful if iOS was a fully open platform. Apple did a damn good job of converting iPhone customers into iOS software customers when compared to Android. Without the App Store, rates of conversion wouldn't be as high. Secondly, you're assuming that Apple would have put nearly as much effort into the iOS platform, developer tools, software support and encouraging its customers to buy apps, if Apple wasn't seeing a revenue stream from it. No revenue stream, no incentive to build that marketplace, fewer sales. Third, you cannot make assumptions about how prevalent piracy would be on iOS if the platform was open like macOS, and how many sales would have been lost as a result of piracy being widespread. Historically, levels of piracy in PC games have been in the order of 85 and 95 percent.[1] On Android, piracy has been estimated anywhere between 50 and 90 percent.[2] Of course we know that the vast majority of pirates wouldn't have paid if that was the only option. But assuming a piracy rate of 85%, it doesn't take many pirates being turned into paying customers to net more revenue than Apple takes in App Store fees. Scenario one, "fully open iOS": 85% Pirated 15% Purchased Scenario two, "zero piracy iOS": 80% Didn't purchase 20% Purchased Notice how only 5% of the user base had to shift from being a pirate to a purchaser, yet developer revenues go up by 33%, enough to fully offset the entire "cost" of Apple's margin and then some. [1] https://www.youtube.com/watch?v=2MIEVvv1QP0 https://www.youtube.com/watch?v=2MIEVvv1QP0 [2] https://www.makeuseof.com/tag/piracy-android-how-bad-is-it-really/ https://www.makeuseof.com/tag/piracy-android-how-bad-is-it-r...
      - jollybean 5y ago
        So the first premise isn't true because iPhone sales depends on Apps as a 'pillar' of the offer. No great app-platform, no fat iPhone revenue. So a 1/2 decent platform would still exist. Second, we have Java based, side-loadable Android universe as a reference point to determine rates of piracy. We also have desktop. While piracy is always some kind of problem, it's generally not a problem that has wiped out companies. Adobe does just fine, in fact, the piracy threshold might be a reasonable 'valve' for people who don't actually have the ability to pay, to use the app. Adobe benefits from this. So long as people are truly 'not going to be customers' then people using the software is mostly good. 30% is nowhere near approaching a reasonable fee to 'defend from piracy'. It's not really even part of the equation frankly.
simondotau 5y ago
You're assuming that if Apple and Google forcibly lost the ability to profit off app sales through the stores, they would continue to offer access to their commercially licensed software development platforms for free. If Google and Apple are forced to give away what they used to sell, they will simply change the mechanism by which they extract payment and developers will need to prepare for e.g. licence fees to access platform features. And to some extent, controversially, I ask why not? If Epic can take a percentage of revenues if you use Unreal Engine, Apple can rejigger the way they structure their libraries and demand a percentage of revenues from apps which use Metal. I realise that there are intellectually satisfying arguments for why UE and Metal shouldn't be treated the same, but I'm not so sure it's so easy to disentangle them in a legally satisfying way.
- CubsFan1060 5y ago
  My prediction is that Apple will lower their fee to 5% at some point. However, using ANY of their IP will cost 25% of your revenue. Want to access Healthkit? ARKit? Etc.. 25% of revenue from both the app and in-app purchases.
  - simondotau 5y ago
    Apple won't do that unless they're forced to by regulators. But if the regulators force it, that's certainly an option available to them. (Though there's no way Apple would ever go below 10%. I would eat my hat if Apple could even cover hard costs of running the store at 10%. Even at 15% they'd already be subsidising purchases made using gift cards purchased at retail.)
    - CubsFan1060 5y ago
      Well, I think the idea would be that their API's are so necessary that everyone would have to pay the 25% anyway.

by pcurve 5y ago

jollybean 5y ago

All in the credit processing and transactional costs and overhead (i.e. charge-backs) will be pushing 5%. If there is remotely any manual intervention for support, or even validating apps, that's going to be real money for any entity, then there's cost there. Then business overhead, marketing support, campaigns etc.. And then profit margins. I suggest a normal markup is going to look something like 8-12% for digital distribution. That's where I think the fee would sit if there were no Google Play and maybe 4 or 5 major competitors all specializing a little bit differently.

simondotau 5y ago
Precisely. Epic hasn't even demonstrated that they can run their own digital store profitably with a 12% commission—and the Epic Store isn't exactly the most sophisticated bit of infrastructure. Barely more than a half-baked Windows downloader with DRM. Google and Apple now offer a 15% rate to the overwhelming majority of developers. Whether you call it a response to the market or a cynical ploy to stave off Government intervention, it means small and medium developers can no longer be seen as a profit centre for these mega corporations. Apple actually has an additional compelling argument, which is the near-total elimination of software piracy on the iOS platform. I don't know what the real-world numbers are, but I honestly wouldn't be surprised if iOS developers ended up earning substantially more from the absence of piracy than they lost paying a 30% commission to Apple.
- jollybean 5y ago
  They are losing more to Apple than they would in piracy.
  - simondotau 5y ago
    Almost certainly not. Firstly, you're assuming that app store sales number would have been equally successful if iOS was a fully open platform. Apple did a damn good job of converting iPhone customers into iOS software customers when compared to Android. Without the App Store, rates of conversion wouldn't be as high. Secondly, you're assuming that Apple would have put nearly as much effort into the iOS platform, developer tools, software support and encouraging its customers to buy apps, if Apple wasn't seeing a revenue stream from it. No revenue stream, no incentive to build that marketplace, fewer sales. Third, you cannot make assumptions about how prevalent piracy would be on iOS if the platform was open like macOS, and how many sales would have been lost as a result of piracy being widespread. Historically, levels of piracy in PC games have been in the order of 85 and 95 percent.[1] On Android, piracy has been estimated anywhere between 50 and 90 percent.[2] Of course we know that the vast majority of pirates wouldn't have paid if that was the only option. But assuming a piracy rate of 85%, it doesn't take many pirates being turned into paying customers to net more revenue than Apple takes in App Store fees. Scenario one, "fully open iOS": 85% Pirated 15% Purchased Scenario two, "zero piracy iOS": 80% Didn't purchase 20% Purchased Notice how only 5% of the user base had to shift from being a pirate to a purchaser, yet developer revenues go up by 33%, enough to fully offset the entire "cost" of Apple's margin and then some. [1] https://www.youtube.com/watch?v=2MIEVvv1QP0 https://www.youtube.com/watch?v=2MIEVvv1QP0 [2] https://www.makeuseof.com/tag/piracy-android-how-bad-is-it-really/ https://www.makeuseof.com/tag/piracy-android-how-bad-is-it-r...
    - jollybean 5y ago
      So the first premise isn't true because iPhone sales depends on Apps as a 'pillar' of the offer. No great app-platform, no fat iPhone revenue. So a 1/2 decent platform would still exist. Second, we have Java based, side-loadable Android universe as a reference point to determine rates of piracy. We also have desktop. While piracy is always some kind of problem, it's generally not a problem that has wiped out companies. Adobe does just fine, in fact, the piracy threshold might be a reasonable 'valve' for people who don't actually have the ability to pay, to use the app. Adobe benefits from this. So long as people are truly 'not going to be customers' then people using the software is mostly good. 30% is nowhere near approaching a reasonable fee to 'defend from piracy'. It's not really even part of the equation frankly.

simondotau 5y ago

You're assuming that if Apple and Google forcibly lost the ability to profit off app sales through the stores, they would continue to offer access to their commercially licensed software development platforms for free. If Google and Apple are forced to give away what they used to sell, they will simply change the mechanism by which they extract payment and developers will need to prepare for e.g. licence fees to access platform features. And to some extent, controversially, I ask why not? If Epic can take a percentage of revenues if you use Unreal Engine, Apple can rejigger the way they structure their libraries and demand a percentage of revenues from apps which use Metal. I realise that there are intellectually satisfying arguments for why UE and Metal shouldn't be treated the same, but I'm not so sure it's so easy to disentangle them in a legally satisfying way.

CubsFan1060 5y ago
My prediction is that Apple will lower their fee to 5% at some point. However, using ANY of their IP will cost 25% of your revenue. Want to access Healthkit? ARKit? Etc.. 25% of revenue from both the app and in-app purchases.
- simondotau 5y ago
  Apple won't do that unless they're forced to by regulators. But if the regulators force it, that's certainly an option available to them. (Though there's no way Apple would ever go below 10%. I would eat my hat if Apple could even cover hard costs of running the store at 10%. Even at 15% they'd already be subsidising purchases made using gift cards purchased at retail.)
  - CubsFan1060 5y ago
    Well, I think the idea would be that their API's are so necessary that everyone would have to pay the 25% anyway.