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I don't see the point. Spotify's not willing to give up 10% of their Android revenue, they'll still use their own payment. Epic won't give up 15%. South Korea m

I don't see the point. Spotify's not willing to give up 10% of their Android revenue, they'll still use their own payment. Epic won't give up 15%. South Korea mandated that apps be allowed to have custom payment methods within apps. Why would any big company, whether Netflix, Epic or Spotify, still give Android 10%? It just seems that the "app store pay toll" is getting less and less justifiable; and it seems outrageous that mobile-first startups should give 15% of their revenues to rent-seeking by the #1 biggest company in the world and #5 biggest company in the world. BTW, this regulatory pushback may really harm Android, because according to Sundar, Google Play constitutes most of Android revenue. With those revenues gone, that's a big chunk of money gone for Google. App Store revenue is also 37% of Apple's profits, so obviously they're fighting tooth and nail, but it's easy to see where things are going. Apple/Google are going to be pretty desperate to prevent a total exodus.

kumarvvr 5y ago
Not everyone is as big as Spotify and the likes. A lot of smaller developers would benefit from this. Hopefully, some of the savings are passed on to users.
thetrb 5y ago
My view is that it's an effort to avoid regulation. It's easier to justify a fee of 10-15% to regulators than a flat 30% fee.
- leucineleprec0n 5y ago
  Of course.
joenathanone 5y ago
Agreed, personally I think 3-5% would be fair anything more is rent seeking.
- kfprt 5y ago
  The percentage should be set by the market. The problem is that there exists a rent seeking monopoly at present.
  - cvlasdkv 5y ago
    Markets naturally lead towards monopolies.
    - WkmYq 5y ago
      Citation needed. Can you name a monopoly that lasted 10 years or more without government help?
      - deleted 5y ago
        [deleted]
      - rnjesus 5y ago
        de beers?
        WkmYq 5y ago
        De Beers certainly had government help. The paper used by Wikipedia to support the claim that they are considered a monopoly[1] acknowledges this: > In addition to the structure of the De Beers cartel, the main force behind this dominance for many years has been the role played by governments. It is possible for a cartel to continue if there is a governing body above that can enforce agreement. Through continuously changing its stance toward corporations, the South African government and other governments essentially protected the companies that were providing them with easily and centrally collected tax revenues. Governments have frequently imposed output quotas and have used legislation, such as the Illicit Diamond Buying laws (IDB), to protect these companies from black markets and their effects on pricing. (As a comparison, one of the weaknesses of OPEC is that it is a cartel of governments over which no other actor can impose control, whereas De Beers has formed a cartel of companies and has often successfully lobbied governments to enforce cooperation on its behalf). > This argument of government-forced cooperation held while Africa was the dominant supplier of diamonds, but it no longer has the complete stranglehold that it once did. As the cartel has not yet disintegrated, however, other reasons must also exist. Researchers believe that De Beers exists as a monopoly to maximize profits, not just to maintain them. Hence, it is in the members’ interest to stay within the cartel rather than go it alone. It's however conceivable that a monopoly like De Beers could survive even in a free market because they seem to be the optimal solution to a coordination problem where everyone's (including the consumer's and the prospective competitor's) incentives are aligned. The paper explains: > Second, the demand for diamonds is not typical and must be analyzed using Veblen’s theory of conspicuous consumption. This theory replaces the traditional downward-sloping demand curve with one that is upward-sloping, suggesting that the higher the price of an item, the higher the demand. This phenomenon would imply that higher prices have a dual effect on the profits of a company, first, through higher margins and, second, through increased sales. Therefore, it is in a company’s best interest to maintain high prices. For diamonds in particular, this means that the perception of desirability associated with diamonds is critical to the life of the industry as a whole and that if the price of diamonds falls, the overall demand for them will follow. Therefore, it is again in the interest of the individual players in this industry to “play nice” and cooperate, since cheating the cartel will actually lower their profits instead of raising them. [1]: https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfiles/107/Global_Diamond_Industry.pdf https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfile...
Factorium 5y ago
Just to be clear, this is just 30% --> 15% for subscriptions. One-off purchases for large companies ($1m+) still attracts 30%.
- d0gsg0w00f 5y ago
  This is the part I don't understand. What is a subscription? I'm skeptical that this is just PR smoke and mirrors.
mdoms 5y ago
> I don't see the point. Spotify's not willing to give up 10% of their Android revenue, they'll still use their own payment. Epic won't give up 15%. Sounds like we've got a healthy competitive marketplace. Great.
didibus 5y ago
On the desktop, ton of apps don't do their own payments. It takes quite a lot for a company to be able to process their own payments. That's why you see a lot of pay with PayPal, Amazon, Google Pay, Apple Pay, etc. So I think for sure people will still offer Apple Pay. The difference is that there'd be competition now, so Apple would be forced to reduce their margins to the minimum, maybe close to cost price to compete. That's basically the point, the competition would drive prices down.
- deleted 5y ago
  [deleted]
- likeabbas 5y ago
  It’s pretty easy to integrate Stripe as a payment processor and they only take 3%
  - reilly3000 5y ago
    Don’t forget the + $.30. That is the most material part of transaction fees on small purchases, such as $.99 If not for the bulk discounts they must get, they would lose money at 30% of a $0.99 sale.
    - mikevm 5y ago
      Don't they also charge + %1 for international customers?
  - HatchedLake721 5y ago
    And how easy it is for a developer selling software worldwide to apply valid local taxes and report them to the right authorities?
- moonchrome 5y ago
  Apple pay != App store payment
  - 5y ago
FormerBandmate 5y ago
Google makes most of it's money on Android from integration of services. If Windows Phone had taken over the non-Apple market, as looked somewhat likely in 2009, Google may not have ended up a trillion dollar company
totony 5y ago
>Google Play constitutes most of Android revenue. Google also includes a few services apps use (eg google play services) which they could disable if an app isnt bought through google play. Their alternative might be to monetize their current services.
paxys 5y ago
You are only talking about Spotify, Epic, Netflix and the like, but this makes a huge difference for services that are a tier below that. For any smaller company having trouble with growth/user conversion, a 30% cut to Google for the lifetime of the account is still way too steep, but at 15% you start to consider it.
- RNCTX 5y ago
  15% is highway robbery. The cost via your own account on Stripe is 5% on the high end.
  - lobocinza 5y ago
    You pay for marketing.
    - oblio 5y ago
      Marketing what? Being in the app stores is a requirement to be alive these days, there are 0 discoverability benefits. Also, both Apple and Google sell app store app ads, double dipping on this source of income.
  - chenzhekl 5y ago
    But there is operational cost like bandwidth for Google, which is not there for Stripe.
    - RNCTX 5y ago
      Do you think that hits to the Stripe checkout page are free? Or that their databases for storing all of the payment info are free? Stripe needs servers and bandwidth like everything else.
  - rahimnathwani 5y ago
    This would carry more weight if Stripe were to maintain a mobile operating system, and an app store to help developers get customers.
reissbaker 5y ago
Given that so much of Apple's profits are from extortionate App Store fees... I can't help but think this is a classic "commodify your complement" strategy from Google. The lion's share of Google's revenue comes from search: if cutting subscription fees on the Play Store forces Apple to cut their take on the App Store by half, then Apple loses considerably more than Google — and Apple's loss is Google's gain. And if Apple doesn't cut their rate... It's a lot harder for them to argue to regulators that they shouldn't be forced into having oversight, since it's no longer standard to take so much.
- alexjurkiewicz 5y ago
  Search and Play Store come from the same company, but is play store revenue really a complement to search? How does removing play store fees improve Google's search moat?
  - reissbaker 5y ago
    Android was explicitly created to give Google leverage in the mobile space and drive more web usage + search: https://www.theatlantic.com/technology/archive/2013/12/the-day-google-had-to-start-over-on-android/282479/ https://www.theatlantic.com/technology/archive/2013/12/the-d...
- paxys 5y ago
  > if cutting subscription fees on the Play Store forces Apple to cut their take on the App Store by half Will it though? Or will the fee just become another "premium" differentiator between the two? The average Android phone sells for $250, but that hasn't discouraged Apple from pricing iPhones at 3-5x that. Other than strong government regulation (or the threat of it), I don't see Apple ever willingly reducing the App Store tax.
  - reissbaker 5y ago
    One of Apple's arguments in the Epic case was that 30% was standard; if it's not, it makes it look worse to courts and potential regulators.
supah 5y ago
The part that people overlook. Is what does your mobile first start up look like without Google or Apple providing a distribution point like the respective app stores. While the original 30% fee is BS. 15% Is reasonable to pay to get your application out there. Otherwise your Brilliant idea in most cases is worthless if it’s not visible to majority of users. I like the way that Apple has approached it where it’s capped for apps under 1M.
- deleted 5y ago
  [deleted]
matheusmoreira 5y ago
> It just seems that the "app store pay toll" is getting less and less justifiable Monopolists rent seeking is never justifiable. Hopefully these things will be banned worldwide.
fredestine 5y ago
u live in a country where people give more than 50% their revenue to rent seeking liberals that praise themselves of being for equity, fairness, diversity while living off those people work.
quitit 5y ago
I’d like a source for the “37%” profit from the App store. Apple’s services division which includes the app store, music service, icloud services, apple pay, apple card, arcade/news/tv+ and fitness generated 20% of apple’s profit in their last filing. If we rewind to before the addition of apple music and most of those other services we have this division earning just 10%. It’s simply not supported that the app store is as profitable as you state - the figure you’ve suggested is closer to the iPhone’s share of apple’s profit. Sources: fy21q3 & fy15q3 earnings statements.
- heavyset_go 5y ago
  From here[1]: > In the second week of the trial, in which the maker of “Fortnite” alleged monopolistic practices by Apple in federal court in Oakland, Calif., Epic called an expert witness — Ned Barnes of the Berkeley Research Group — to the stand. > Barnes calculated that the App Store had hefty profit margins, which increased to 78% in 2019, up from 75% in 2018, and generated $22 billion in commissions for Apple last year. [1] https://www.marketwatch.com/story/how-profitable-is-apples-app-store-even-a-landmark-antitrust-trial-couldnt-tell-us-11622224506 https://www.marketwatch.com/story/how-profitable-is-apples-a...
  - quitit 5y ago
    .. but this didn’t at all support your statement that the App Store generates 37% of apple’s profit. Apple make around 70-80B revenue per quarter, 22B in annual commission is around 6% of annual revenue… That 22B figure doesn’t even touch on costs.

kumarvvr 5y ago

Not everyone is as big as Spotify and the likes. A lot of smaller developers would benefit from this. Hopefully, some of the savings are passed on to users.

thetrb 5y ago

My view is that it's an effort to avoid regulation. It's easier to justify a fee of 10-15% to regulators than a flat 30% fee.

leucineleprec0n 5y ago
Of course.

joenathanone 5y ago

Agreed, personally I think 3-5% would be fair anything more is rent seeking.

kfprt 5y ago
The percentage should be set by the market. The problem is that there exists a rent seeking monopoly at present.
- cvlasdkv 5y ago
  Markets naturally lead towards monopolies.
  - WkmYq 5y ago
    Citation needed. Can you name a monopoly that lasted 10 years or more without government help?
    - deleted 5y ago
      [deleted]
    - rnjesus 5y ago
      de beers?
      - WkmYq 5y ago
        De Beers certainly had government help. The paper used by Wikipedia to support the claim that they are considered a monopoly[1] acknowledges this: > In addition to the structure of the De Beers cartel, the main force behind this dominance for many years has been the role played by governments. It is possible for a cartel to continue if there is a governing body above that can enforce agreement. Through continuously changing its stance toward corporations, the South African government and other governments essentially protected the companies that were providing them with easily and centrally collected tax revenues. Governments have frequently imposed output quotas and have used legislation, such as the Illicit Diamond Buying laws (IDB), to protect these companies from black markets and their effects on pricing. (As a comparison, one of the weaknesses of OPEC is that it is a cartel of governments over which no other actor can impose control, whereas De Beers has formed a cartel of companies and has often successfully lobbied governments to enforce cooperation on its behalf). > This argument of government-forced cooperation held while Africa was the dominant supplier of diamonds, but it no longer has the complete stranglehold that it once did. As the cartel has not yet disintegrated, however, other reasons must also exist. Researchers believe that De Beers exists as a monopoly to maximize profits, not just to maintain them. Hence, it is in the members’ interest to stay within the cartel rather than go it alone. It's however conceivable that a monopoly like De Beers could survive even in a free market because they seem to be the optimal solution to a coordination problem where everyone's (including the consumer's and the prospective competitor's) incentives are aligned. The paper explains: > Second, the demand for diamonds is not typical and must be analyzed using Veblen’s theory of conspicuous consumption. This theory replaces the traditional downward-sloping demand curve with one that is upward-sloping, suggesting that the higher the price of an item, the higher the demand. This phenomenon would imply that higher prices have a dual effect on the profits of a company, first, through higher margins and, second, through increased sales. Therefore, it is in a company’s best interest to maintain high prices. For diamonds in particular, this means that the perception of desirability associated with diamonds is critical to the life of the industry as a whole and that if the price of diamonds falls, the overall demand for them will follow. Therefore, it is again in the interest of the individual players in this industry to “play nice” and cooperate, since cheating the cartel will actually lower their profits instead of raising them. [1]: https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfiles/107/Global_Diamond_Industry.pdf https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfile...

Factorium 5y ago

Just to be clear, this is just 30% --> 15% for subscriptions. One-off purchases for large companies ($1m+) still attracts 30%.

d0gsg0w00f 5y ago
This is the part I don't understand. What is a subscription? I'm skeptical that this is just PR smoke and mirrors.

mdoms 5y ago

> I don't see the point. Spotify's not willing to give up 10% of their Android revenue, they'll still use their own payment. Epic won't give up 15%. Sounds like we've got a healthy competitive marketplace. Great.

didibus 5y ago

On the desktop, ton of apps don't do their own payments. It takes quite a lot for a company to be able to process their own payments. That's why you see a lot of pay with PayPal, Amazon, Google Pay, Apple Pay, etc. So I think for sure people will still offer Apple Pay. The difference is that there'd be competition now, so Apple would be forced to reduce their margins to the minimum, maybe close to cost price to compete. That's basically the point, the competition would drive prices down.

deleted 5y ago
[deleted]
likeabbas 5y ago
It’s pretty easy to integrate Stripe as a payment processor and they only take 3%
- reilly3000 5y ago
  Don’t forget the + $.30. That is the most material part of transaction fees on small purchases, such as $.99 If not for the bulk discounts they must get, they would lose money at 30% of a $0.99 sale.
  - mikevm 5y ago
    Don't they also charge + %1 for international customers?
- HatchedLake721 5y ago
  And how easy it is for a developer selling software worldwide to apply valid local taxes and report them to the right authorities?
moonchrome 5y ago
Apple pay != App store payment
- 5y ago

FormerBandmate 5y ago

Google makes most of it's money on Android from integration of services. If Windows Phone had taken over the non-Apple market, as looked somewhat likely in 2009, Google may not have ended up a trillion dollar company

totony 5y ago

>Google Play constitutes most of Android revenue. Google also includes a few services apps use (eg google play services) which they could disable if an app isnt bought through google play. Their alternative might be to monetize their current services.

paxys 5y ago

You are only talking about Spotify, Epic, Netflix and the like, but this makes a huge difference for services that are a tier below that. For any smaller company having trouble with growth/user conversion, a 30% cut to Google for the lifetime of the account is still way too steep, but at 15% you start to consider it.

RNCTX 5y ago
15% is highway robbery. The cost via your own account on Stripe is 5% on the high end.
- lobocinza 5y ago
  You pay for marketing.
  - oblio 5y ago
    Marketing what? Being in the app stores is a requirement to be alive these days, there are 0 discoverability benefits. Also, both Apple and Google sell app store app ads, double dipping on this source of income.
- chenzhekl 5y ago
  But there is operational cost like bandwidth for Google, which is not there for Stripe.
  - RNCTX 5y ago
    Do you think that hits to the Stripe checkout page are free? Or that their databases for storing all of the payment info are free? Stripe needs servers and bandwidth like everything else.
- rahimnathwani 5y ago
  This would carry more weight if Stripe were to maintain a mobile operating system, and an app store to help developers get customers.

reissbaker 5y ago

Given that so much of Apple's profits are from extortionate App Store fees... I can't help but think this is a classic "commodify your complement" strategy from Google. The lion's share of Google's revenue comes from search: if cutting subscription fees on the Play Store forces Apple to cut their take on the App Store by half, then Apple loses considerably more than Google — and Apple's loss is Google's gain. And if Apple doesn't cut their rate... It's a lot harder for them to argue to regulators that they shouldn't be forced into having oversight, since it's no longer standard to take so much.

alexjurkiewicz 5y ago
Search and Play Store come from the same company, but is play store revenue really a complement to search? How does removing play store fees improve Google's search moat?
- reissbaker 5y ago
  Android was explicitly created to give Google leverage in the mobile space and drive more web usage + search: https://www.theatlantic.com/technology/archive/2013/12/the-day-google-had-to-start-over-on-android/282479/ https://www.theatlantic.com/technology/archive/2013/12/the-d...
paxys 5y ago
> if cutting subscription fees on the Play Store forces Apple to cut their take on the App Store by half Will it though? Or will the fee just become another "premium" differentiator between the two? The average Android phone sells for $250, but that hasn't discouraged Apple from pricing iPhones at 3-5x that. Other than strong government regulation (or the threat of it), I don't see Apple ever willingly reducing the App Store tax.
- reissbaker 5y ago
  One of Apple's arguments in the Epic case was that 30% was standard; if it's not, it makes it look worse to courts and potential regulators.

supah 5y ago

The part that people overlook. Is what does your mobile first start up look like without Google or Apple providing a distribution point like the respective app stores. While the original 30% fee is BS. 15% Is reasonable to pay to get your application out there. Otherwise your Brilliant idea in most cases is worthless if it’s not visible to majority of users. I like the way that Apple has approached it where it’s capped for apps under 1M.

deleted 5y ago
[deleted]

matheusmoreira 5y ago

> It just seems that the "app store pay toll" is getting less and less justifiable Monopolists rent seeking is never justifiable. Hopefully these things will be banned worldwide.

fredestine 5y ago

u live in a country where people give more than 50% their revenue to rent seeking liberals that praise themselves of being for equity, fairness, diversity while living off those people work.

quitit 5y ago

I’d like a source for the “37%” profit from the App store. Apple’s services division which includes the app store, music service, icloud services, apple pay, apple card, arcade/news/tv+ and fitness generated 20% of apple’s profit in their last filing. If we rewind to before the addition of apple music and most of those other services we have this division earning just 10%. It’s simply not supported that the app store is as profitable as you state - the figure you’ve suggested is closer to the iPhone’s share of apple’s profit. Sources: fy21q3 & fy15q3 earnings statements.

heavyset_go 5y ago
From here[1]: > In the second week of the trial, in which the maker of “Fortnite” alleged monopolistic practices by Apple in federal court in Oakland, Calif., Epic called an expert witness — Ned Barnes of the Berkeley Research Group — to the stand. > Barnes calculated that the App Store had hefty profit margins, which increased to 78% in 2019, up from 75% in 2018, and generated $22 billion in commissions for Apple last year. [1] https://www.marketwatch.com/story/how-profitable-is-apples-app-store-even-a-landmark-antitrust-trial-couldnt-tell-us-11622224506 https://www.marketwatch.com/story/how-profitable-is-apples-a...
- quitit 5y ago
  .. but this didn’t at all support your statement that the App Store generates 37% of apple’s profit. Apple make around 70-80B revenue per quarter, 22B in annual commission is around 6% of annual revenue… That 22B figure doesn’t even touch on costs.