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Hmm, I don’t think the marginal analysis tells the whole story here. If you imagine a business that made revenue through sales through an App Store without a 30
by karatinversion 5y ago
Hmm, I don’t think the marginal analysis tells the whole story here. If you imagine a business that made revenue through sales through an App Store without a 30% tax, with a 20% profit margin, that’s a healthy business. With the 30% cut, they lose 10% and go under.
These missing smaller players are the deadweight loss from the cut. You either need the scale to cover your fixed costs from a reduced revenue stream, or a revenue stream which avoids the 30% (like ads).
- simondotau 5y agoYou're looking at it wrong. The 30% store fee was a known cost of doing business before anyone spent money building the product. That cost would have been built into a determination of whether they'll need to set a retail price of $9 or $7.
- karatinversion 5y agoBut the point is that you might have a viable business at a price point of $7 that you won’t have at $10 (with the extra $3 all going to Apple).
- simondotau 5y agoThis business also wouldn't be viable if Apple and Google had never opened their platforms to external developers in the first place. Or if they never existed and everyone still had really advanced Nokia phones with T9 and SMS. Or perhaps their business wouldn't be viable if iOS and Android were Windows-esque free-for-alls with rampant spyware and malware, making a good portion of their potential user base wary of installing apps. Or perhaps their business wouldn't be viable if people haven't become accustomed to spending money in App stores without worrying about credit card fraud, etc. Or perhaps their business wouldn't be viable if iOS and Android had no mechanisms to protect against app piracy, and 30% of their potential customers pirated the app.