4 ms·

Not only that, "we charge 10% to the big monster and 30% to the little guy" is terrible PR against the amount of money they would generate from just the little

by zrm 5y ago

Not only that, "we charge 10% to the big monster and 30% to the little guy" is terrible PR against the amount of money they would generate from just the little guy. It's so bad that by that point they might as well just charge the lower rate to everybody. Especially when they're trying to stave off legislation.

ece 5y ago
Steam is doing this 30%-20%, and it seems to be working fine of them.. so far. I generally think volume discounts come a bit too close to price fixing, if proven in court. Granted, it's tough to prove, as we've seen in Intel vs. AMD which settled out of court AFAICR.
- Closi 5y ago
  Yes - although I think Steam is in a different market position where there are substitutes (e.g. developers/publishers can choose to submit via GOG, Epic store, Microsoft Store or sell direct so there is no monopsony), so providing a lower revenue split to encourage big developers to the platform is a good/valid strategy. The strategy is different for Apple (where there are no perfect(ish) substitutes, and they can exploit this to have higher margins).
- zrm 5y ago
  The unusual thing about Steam is that their high fees discourage developers from using it. If they charged 3% then everyone would use it, there would be a million games there and being in the store wouldn't cause you to stand out at all. If they charge 30%, most small developers don't use it and then if you choose to pay, you get to be featured on a list without that many of your competitors. You're paying for exclusivity. Then you reach an equilibrium where small developers pay to be listed next to Valve's first party AAA titles, until there are enough of them that the exclusivity is sufficiently diluted to stop attracting more developers. That doesn't apply to Apple because anyone who wants to reach iOS customers doesn't have any reasonable alternative way to do it, so there are millions rather than thousands of apps in the store and the exclusivity of being listed is already diluted to nothing. But they still charge the same rate.
  - ece 5y ago
    I do think Steam can charge more because it offers more good services for users than any other app/game store: search/discovery features that have gotten better over time, per game communities/mods, tons of social features including a marketplace, multiple platform support, and their customer service. Sure their fee might discourage some developers, but if there is a case to be made for 30%, this is it. It all works because there is competition between Steam/GOG/Itch/Epic/etc.. on multiple open platforms in a pretty well differentiated way.
cletus 5y ago
Paying lower unit price for higher volume customers is literally how the entire economy works. People deal with this every day. It's why jumbo packs in the supermarket are cheaper. It's how Costco exists. It's the one capitalist principle almost nobody has a huge problem with.
- Closi 5y ago
  > Paying lower unit price for higher volume customers is literally how the entire economy works. That's not how the economy works - it's a very simplified view which IMO is incorrect in this instance. Companies in theory only offer volume discounts when it makes commercial sense to do (i.e. 'second degree price discrimination'). Price discrimination opportunities happen when you believe that you will sell more to a customer by changing the price for a particular segment / volume target (companies in theory always try to sell at the maximum price that the buyer will accept, and price discrimination is just strategy to help sell at a higher price to certain segments if the market will accept it). Companies will also only do deals which are profitable (sometimes higher volume deals are profitable while lower volume deals aren't, for instance it might be practical to sell 1 million cans of beans to a large supermarket chain for 20 cents, while it's only practical to sell 10 cans of beans for 50 cents each to a smaller shop). In the AppStore in reality this would mean you would need to believe that the reduction in fees would encourage enough big developers to the platform to offset the change in fees (at the moment I'm assuming the profitability threshold is met - as Apple is clearly already making money on the bigger apps here). Now in order to pay for the 30% to 10% swap, you would need to bring c5 times the number of big developers to the platform to offset the reduced margin, which is very unlikely to happen, particularly as Apple have the dominant platform (i.e. most developers are already probably on iOS that are going to be on iOS). Now if the industry was heavily competitive, and mobile developers could leave and go to another platform with lower fees and reach the same audience, then the competitive pressure would exist to do what you are describing and volume discounts may become a thing - but because Apple can block any competition in this space they don't need to offer any discount to encourage these big developers to use their platform - the developers have to keep using them (which is what the lawsuit is about). i.e. Apple's market position allows them to act as a market-making monopsony, which means it's not in their interest to provide a discount as they can exploit the situation to generate super-normal profits. Economics & business strategy 101.

by zrm 5y ago

ece 5y ago

Steam is doing this 30%-20%, and it seems to be working fine of them.. so far. I generally think volume discounts come a bit too close to price fixing, if proven in court. Granted, it's tough to prove, as we've seen in Intel vs. AMD which settled out of court AFAICR.

Closi 5y ago
Yes - although I think Steam is in a different market position where there are substitutes (e.g. developers/publishers can choose to submit via GOG, Epic store, Microsoft Store or sell direct so there is no monopsony), so providing a lower revenue split to encourage big developers to the platform is a good/valid strategy. The strategy is different for Apple (where there are no perfect(ish) substitutes, and they can exploit this to have higher margins).
zrm 5y ago
The unusual thing about Steam is that their high fees discourage developers from using it. If they charged 3% then everyone would use it, there would be a million games there and being in the store wouldn't cause you to stand out at all. If they charge 30%, most small developers don't use it and then if you choose to pay, you get to be featured on a list without that many of your competitors. You're paying for exclusivity. Then you reach an equilibrium where small developers pay to be listed next to Valve's first party AAA titles, until there are enough of them that the exclusivity is sufficiently diluted to stop attracting more developers. That doesn't apply to Apple because anyone who wants to reach iOS customers doesn't have any reasonable alternative way to do it, so there are millions rather than thousands of apps in the store and the exclusivity of being listed is already diluted to nothing. But they still charge the same rate.
- ece 5y ago
  I do think Steam can charge more because it offers more good services for users than any other app/game store: search/discovery features that have gotten better over time, per game communities/mods, tons of social features including a marketplace, multiple platform support, and their customer service. Sure their fee might discourage some developers, but if there is a case to be made for 30%, this is it. It all works because there is competition between Steam/GOG/Itch/Epic/etc.. on multiple open platforms in a pretty well differentiated way.

cletus 5y ago

Paying lower unit price for higher volume customers is literally how the entire economy works. People deal with this every day. It's why jumbo packs in the supermarket are cheaper. It's how Costco exists. It's the one capitalist principle almost nobody has a huge problem with.

Closi 5y ago
> Paying lower unit price for higher volume customers is literally how the entire economy works. That's not how the economy works - it's a very simplified view which IMO is incorrect in this instance. Companies in theory only offer volume discounts when it makes commercial sense to do (i.e. 'second degree price discrimination'). Price discrimination opportunities happen when you believe that you will sell more to a customer by changing the price for a particular segment / volume target (companies in theory always try to sell at the maximum price that the buyer will accept, and price discrimination is just strategy to help sell at a higher price to certain segments if the market will accept it). Companies will also only do deals which are profitable (sometimes higher volume deals are profitable while lower volume deals aren't, for instance it might be practical to sell 1 million cans of beans to a large supermarket chain for 20 cents, while it's only practical to sell 10 cans of beans for 50 cents each to a smaller shop). In the AppStore in reality this would mean you would need to believe that the reduction in fees would encourage enough big developers to the platform to offset the change in fees (at the moment I'm assuming the profitability threshold is met - as Apple is clearly already making money on the bigger apps here). Now in order to pay for the 30% to 10% swap, you would need to bring c5 times the number of big developers to the platform to offset the reduced margin, which is very unlikely to happen, particularly as Apple have the dominant platform (i.e. most developers are already probably on iOS that are going to be on iOS). Now if the industry was heavily competitive, and mobile developers could leave and go to another platform with lower fees and reach the same audience, then the competitive pressure would exist to do what you are describing and volume discounts may become a thing - but because Apple can block any competition in this space they don't need to offer any discount to encourage these big developers to use their platform - the developers have to keep using them (which is what the lawsuit is about). i.e. Apple's market position allows them to act as a market-making monopsony, which means it's not in their interest to provide a discount as they can exploit the situation to generate super-normal profits. Economics & business strategy 101.