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The desire to collect rent drives so many nasty behaviors in companies. At its core, this is a discussion about rent seeking. Apple and Google lust after thei

by efitz 5y ago

The desire to collect rent drives so many nasty behaviors in companies. At its core, this is a discussion about rent seeking. Apple and Google lust after their 30% cut, which is outrageous and would not be long tolerated in any other business arrangement. They keep the gravy train going because of gatekeeping. “I want to root/mod my device” and “right to repair” are interesting but orthogonal arguments. Those arguments are about “what does it mean to own a thing”. I am glad the EU is doing this but I despair that Apple and Google will still avoid this in the US. Personally, I’m mostly happy with the App Store except their bans based on political POV (disguised as content violations). I’m much more unhappy with the content stores on mobile devices; I want to set Amazon as my book store and buy within the Kindle app. Ed s/list/lust/g stupid autocorrect

vlovich123 5y ago
What’s the typical margin in physical retail stores, particularly with respect to software (eg video games)? It’s hard to find. All the things I found are about profit margins not what the price breakdown is at the point of checkout. I think 30% has been ridiculously high although I don’t know what a fairer margin is. For what it’s worth Apple has managed to maintain a 30% profit margin (not just sales) on the hardware they sell which is unheard of in the consumer electronics industry (everyone else is struggling to just barely make money in phones and mostly losing while others are taking a much more modest cut in other categories). Partly it’s branding. Partly it’s savvy business practices. Partly it’s immoral business practices.
- efitz 5y ago
  I don’t know about markups but in most industries businesses would envy a 10% profit margin.
  - vlovich123 5y ago
    Finally found something [1]. > When setting your wholesale price, first multiply your cost of goods by two. This will ensure your wholesale profit margin is at least 50%. Profit margin is the gross profit a retailer earns when an item is sold. Apparel retail brands typically aim for a 30% to 50% wholesale profit margin, while direct-to-consumer retailers aim for a profit margin of 55% to 65%. (A margin is sometimes also referred to as “markup percentage.”) So 50% is about normal for retail goods. Yes yes. They have physical merchandise they need to manage. Apple has engineers they need to pay to do their virtual distribution. Maybe 30% is excessive. Certainly that they're the only store and hold a monopoly on the things they allow people to do on their platform is probably fueling that margin to be higher than it should. However, if we look at Steam[2] and other console manufacturers, we see similar 30% markups. Maybe everyone is just copying Apple's lead here as "customers will swallow this". Or maybe Apple figured out a good virtual store distribution model and this is the markup needed for a sustainable thriving business. [1] https://www.shopify.com/retail/product-pricing-for-wholesale-and-retail https://www.shopify.com/retail/product-pricing-for-wholesale... [2] https://www.ign.com/articles/2019/10/07/report-steams-30-cut-is-actually-the-industry-standard https://www.ign.com/articles/2019/10/07/report-steams-30-cut...
    - olliej 5y ago
      The argument that 30% is excessive and a product of their monopoly is bullshit. 1) the majority of apps don’t pay apple a cent because they make their money off selling user information 2) of those that remain most likely aren’t reaching the income point where it stops being 15% 3) 30% matches the payments of every other store, except those stores that don’t pay for any of the platform development. It’s super easy to charge next to nothing when you don’t have to pay actual engineers to make actual products.
      - yywwbbn 5y ago
        Why do you think Apple still makes Macs? According to your argument it should be a net loss for them.
        olliej 5y ago
        People often complain about the markup on Macs, so it seems reasonable to interpret that as a higher margin being used to compensate for the lack of ongoing revenue. Higher margins are the obvious (only?) alternative to ongoing commission revenue - that obviously puts Apple at a disadvantage compared to * Google, who makes money by harvesting information from every android user; or * Samsung, etc who don't pay the cost of developing a platform * Steam, GoG, etc who literally only operate a store front, yet still take 30% cuts. They don't even have significant proportion of free games - and the games that they do have are frequently > $50 so their per-sale absolute revenue is insane. * The various console platforms, because somehow consoles are magically different from everyone else * Microsoft (ignoring consoles) who charges for their OS, and despite that seems hell bent on putting ads into the OS
        yywwbbn 5y ago
        Are margins on Macs higher than on iPhones? I’d assume at least with Intel they were lower than for iOS devices. Also basically all Apple’s direct competitors both in the PC and smartphone businesses operate on paltry margins in comparison to Apple. They usually sell a mix of low/high margin products though, e.g. most premium Dell or Lenovo laptops are priced at similar levels to Macbooks (of course their real price might significantly lower due to infinitely better customizability and reparability options). And almost none of them have significant additional revenue streams (not to a degree comparable to Apple). Yet they are still in business. Apple would be able not to only to survive but to still thrive if they significantly cut their margins and the app store tax. Of course it would not be fair or sensible to expect any company to leave free money on the table. This is why we get ads in Windows, seem like most users dont’t really mind them too much (to be fair I’m not sure I have actually seen one, maybe it’s a windows edition and/or country thing.
- ebbp 5y ago
  My partner works in buying for physical retail (caveats: nothing to do with software, also she’s generally worked mid market and above, rather than anything high volume/low cost) and I believe _margin_ is often 30-60%, or a range similar to that. Larger retailers will also have agreements with suppliers where the margin is stipulated, I believe per SKU. Obviously the comparison is slightly Apples to oranges, as physical retailers have massive overheads/COGS that Apple don’t incur for the App Store.
  - vlovich123 5y ago
    Those physical retailers aren't paying engineer salaries to sit around and develop new IDEs, develop the app store ecosystem, content moderators etc. I think people see "zomg - I'm paying Apple 30% for their app store" without realizing the end retailer often charges a fairly large markup to run their part of the business.
    - LegitShady 5y ago
      apple can charge whatever they want once they allow alternatives for competition.
      - olliej 5y ago
        The point is none of the third party app stores pay for any of the platform development, so why should they get to benefit from them?
        LegitShady 5y ago
        the platform development comes with sale of the platform - which is to say the customer has already paid to have it developed by buying the phone. Many developers don't want to have apple be their gatekeeper for apps. They should be able to have alternatives. Apple's rent seeking behaviour is to take platform development in the cost of the device and again to distribute apps without any alternative.
- 2OEH8eoCRo0 5y ago
  I don't know what percent is fair, that's for the market to decide. There needs to be competition though.

by efitz 5y ago

vlovich123 5y ago

What’s the typical margin in physical retail stores, particularly with respect to software (eg video games)? It’s hard to find. All the things I found are about profit margins not what the price breakdown is at the point of checkout. I think 30% has been ridiculously high although I don’t know what a fairer margin is. For what it’s worth Apple has managed to maintain a 30% profit margin (not just sales) on the hardware they sell which is unheard of in the consumer electronics industry (everyone else is struggling to just barely make money in phones and mostly losing while others are taking a much more modest cut in other categories). Partly it’s branding. Partly it’s savvy business practices. Partly it’s immoral business practices.

efitz 5y ago
I don’t know about markups but in most industries businesses would envy a 10% profit margin.
- vlovich123 5y ago
  Finally found something [1]. > When setting your wholesale price, first multiply your cost of goods by two. This will ensure your wholesale profit margin is at least 50%. Profit margin is the gross profit a retailer earns when an item is sold. Apparel retail brands typically aim for a 30% to 50% wholesale profit margin, while direct-to-consumer retailers aim for a profit margin of 55% to 65%. (A margin is sometimes also referred to as “markup percentage.”) So 50% is about normal for retail goods. Yes yes. They have physical merchandise they need to manage. Apple has engineers they need to pay to do their virtual distribution. Maybe 30% is excessive. Certainly that they're the only store and hold a monopoly on the things they allow people to do on their platform is probably fueling that margin to be higher than it should. However, if we look at Steam[2] and other console manufacturers, we see similar 30% markups. Maybe everyone is just copying Apple's lead here as "customers will swallow this". Or maybe Apple figured out a good virtual store distribution model and this is the markup needed for a sustainable thriving business. [1] https://www.shopify.com/retail/product-pricing-for-wholesale-and-retail https://www.shopify.com/retail/product-pricing-for-wholesale... [2] https://www.ign.com/articles/2019/10/07/report-steams-30-cut-is-actually-the-industry-standard https://www.ign.com/articles/2019/10/07/report-steams-30-cut...
  - olliej 5y ago
    The argument that 30% is excessive and a product of their monopoly is bullshit. 1) the majority of apps don’t pay apple a cent because they make their money off selling user information 2) of those that remain most likely aren’t reaching the income point where it stops being 15% 3) 30% matches the payments of every other store, except those stores that don’t pay for any of the platform development. It’s super easy to charge next to nothing when you don’t have to pay actual engineers to make actual products.
    - yywwbbn 5y ago
      Why do you think Apple still makes Macs? According to your argument it should be a net loss for them.
      - olliej 5y ago
        People often complain about the markup on Macs, so it seems reasonable to interpret that as a higher margin being used to compensate for the lack of ongoing revenue. Higher margins are the obvious (only?) alternative to ongoing commission revenue - that obviously puts Apple at a disadvantage compared to * Google, who makes money by harvesting information from every android user; or * Samsung, etc who don't pay the cost of developing a platform * Steam, GoG, etc who literally only operate a store front, yet still take 30% cuts. They don't even have significant proportion of free games - and the games that they do have are frequently > $50 so their per-sale absolute revenue is insane. * The various console platforms, because somehow consoles are magically different from everyone else * Microsoft (ignoring consoles) who charges for their OS, and despite that seems hell bent on putting ads into the OS
        yywwbbn 5y ago
        Are margins on Macs higher than on iPhones? I’d assume at least with Intel they were lower than for iOS devices. Also basically all Apple’s direct competitors both in the PC and smartphone businesses operate on paltry margins in comparison to Apple. They usually sell a mix of low/high margin products though, e.g. most premium Dell or Lenovo laptops are priced at similar levels to Macbooks (of course their real price might significantly lower due to infinitely better customizability and reparability options). And almost none of them have significant additional revenue streams (not to a degree comparable to Apple). Yet they are still in business. Apple would be able not to only to survive but to still thrive if they significantly cut their margins and the app store tax. Of course it would not be fair or sensible to expect any company to leave free money on the table. This is why we get ads in Windows, seem like most users dont’t really mind them too much (to be fair I’m not sure I have actually seen one, maybe it’s a windows edition and/or country thing.
ebbp 5y ago
My partner works in buying for physical retail (caveats: nothing to do with software, also she’s generally worked mid market and above, rather than anything high volume/low cost) and I believe _margin_ is often 30-60%, or a range similar to that. Larger retailers will also have agreements with suppliers where the margin is stipulated, I believe per SKU. Obviously the comparison is slightly Apples to oranges, as physical retailers have massive overheads/COGS that Apple don’t incur for the App Store.
- vlovich123 5y ago
  Those physical retailers aren't paying engineer salaries to sit around and develop new IDEs, develop the app store ecosystem, content moderators etc. I think people see "zomg - I'm paying Apple 30% for their app store" without realizing the end retailer often charges a fairly large markup to run their part of the business.
  - LegitShady 5y ago
    apple can charge whatever they want once they allow alternatives for competition.
    - olliej 5y ago
      The point is none of the third party app stores pay for any of the platform development, so why should they get to benefit from them?
      - LegitShady 5y ago
        the platform development comes with sale of the platform - which is to say the customer has already paid to have it developed by buying the phone. Many developers don't want to have apple be their gatekeeper for apps. They should be able to have alternatives. Apple's rent seeking behaviour is to take platform development in the cost of the device and again to distribute apps without any alternative.
2OEH8eoCRo0 5y ago
I don't know what percent is fair, that's for the market to decide. There needs to be competition though.