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> They are probably one of the best run companies in the world. I would disagree with this. Although their risk is spread much better than it was in the early

> They are probably one of the best run companies in the world. I would disagree with this. Although their risk is spread much better than it was in the early 00s, a huge amount of their recurring revenue right now teeters on the brink of destruction in the form of their 30% app store cut and the walled-garden nature of their app store. All it would take is a morally principled, non-lobbied regulator to step in and regulate that down to something reasonable like 5% or 3% and require allowing third party app stores (both actions would be equivalent economically because their current fee only works because of their monopoly), and I don't see someting like this not happening in the next decade. It will be a huge and deserved adjustment when this does happen, and stock speculation will only amplify the blow in the form of lost stock value. There are many, many long-time holders of apple stock who might see the threat of such an event as a time to finally sell. Then we'll see how much value is really there. Additionally, they have sunk billions of dollars in a brand new campus at a time when WFH is here to stay. That investment will also likely turn out to be worthless in the coming decades as the value of CRE races to $0.

lotsofpulp 4y ago
Playing the game according to the current rules seems preferable than playing the game according to rules that may or may not come into existence. Also, they will still be one of the, if not most, profitable businesses in the world even if they lose all the App Store revenue, so it does not seem reasonable to expect more.
- sam0x17 4y ago
  Companies of this size need to play the long game, but quarterly OKRs and a beuracratic structure ensure they only ever play the short game. The 30% is great this quarter and next quarter, and every quarter until the quarter where it goes away completely. Keeping it this high is extremely risky behavior, literally taunting for regulation.
  - lotsofpulp 4y ago
    If you look at Apple’s results and products and think they are playing for next quarter, I do not know what to tell you. The App Store model has served them well for years. If it stops serving them well next quarter, so what?
  - BurningFrog 4y ago
    This old myth will never die. If it was true, these short sighted companies would fade away in the long run. Empirically, top companies stay on top for decades.
    - ClumsyPilot 4y ago
      If facebook qas so well run, it wouldnt need to buy up all the competition to stay relevant, like Whatsapp and instagram. Once you are that huge and cam but competition, you don't fade away unless you go full-on Lehmon Brothers
  - JumpCrisscross 4y ago
    > this quarter and next quarter Apple Silicon was a decade-long play, largely by Cook. Even if the App Store is threatened, Apple remains plump.
dmix 4y ago
So you're saying Apple isn't a well run company because they haven't properly managed their regulatory risk around the app store? What should they do hire more lobbyists? Not have built a $100 billion/year business because of a vague threat of future regulatory change? We've seen pushback on the 30% but mostly for a select group of major companies who want to offer alternative payments. The majority of apps aren't going to be asking customers for their credit cards separately vs a single "subscribe" button, nor do they all have CCs already in their existing DBs. Even worst case if 25% of the revenue gets lost due to secondary subscription payment support (assuming they don't somehow still take a cut), that 75% is still a monster that could support Apple for a long time. Not to mention the rest of their businesses.
- sam0x17 4y ago
  I'm saying they have over-extended to the point where they are begging for regulation. Much wiser to not over-extend to the point where regulators are pissed off. Now they could lose it all instead of having a more reasonable rate. At this point they should self-regulate, like any misbehaving child who realizes they are in the wrong should before they get punished. It's not a risk and it's not going to hurt their stock if it's self-imposed. People always praise anything that comes from within with Apple so it would actually be a pretty savvy play, given what's on the horizon.
  - dmix 4y ago
    So what should they have done? Conceded to a group of Epic type companies on a VIP-type basis so regulators don't eat their lucrative subscription model? Without bigco lobbying the gov I doubt there'd be as much regulatory pressure. So the best bet might have been to work with the major companies hiring lobbyists and getting PR. Rumour is Apple is opening up side-loading so the "walled garden" thing might be neutered. Not sure what other regulatory risks they have.
    - sam0x17 4y ago
      No no they should have never had it above 10% to begin with. The case with Epic never should have needed to happen. They've been over-extended all along.
guhidalg 4y ago
Commenting on the campus bit.... Apple makes devices, not just software. Good luck developing device from home and dealing with the constant headache of shipping samples around the world. The campus was not a mistake.
- officeplant 4y ago
  Trusted engineers get to take home prototypes. Usually also loaned a maxed out Mac Pro so they have something with enough memory to unpack MacOS's built in system process recording mode. (digging through a 5 minute recording of MacOS took ~~200GB of system memory to unpack and evaluate.)
  - guhidalg 4y ago
    I assume by your answer that you work at Apple or know someone who works there so let me clarify that I'm talking about the messy work that happens before you have a take home prototype for a device. I'm talking about building the prototype with in-house machinery before asking the manufacturer to make samples at the factory. If you do work at Apple, do you hand assemble prototypes at the office or do you just ask the manufacturer to build them and overnight them to your house? If so, do you have lab equipment at home to inspect and test it?
briandear 4y ago
> regulate that down to something reasonable like 5% or 3% How is 5% "reasonable?" Who determines that? That's not something up for a vote -- that's up to the market. Let's say you have an iOS app. If you sell it for $5 on the App Store, you keep $3.5. And you sell 100,000. App Store nets you $350k. And let's say you sold the app direct to users and did everything yourself: $5 sales price, you keep $5 however, you also have to collect and remit sales tax for jurisdictions in which you sell. Your street price is $5 + tax, and you keep the $5 but you incur some expense for sales tax compliance. You have to use a payment processor. That's 2.9% + $0.30 per transaction. So if you sold 100k apps at $5, that's $455,500 in revenue after credit card fees are paid. However, there's also chargebacks. Chargeback ratio averages roughly 0.6% across all industries (it's much higher for digital goods and CNP transactions -- so let's call it 1.5%) So from 100k sales, you really sell 98,5000, so your revenue is $448,667 (after cc fees.) However, you have 1500 in chargebacks that cost $20 each (per stripe.). So that's $30k in chargeback fees. So now your revenue is $418,667. Apple rarely loses chargebacks and refunds are extremely rare. So that sales loss is negligible. You also have to set up a server to serve the downloads and pay hosting, storage, and bandwidth. As well as shipping updates to all of your customers. As well as ensuring updates are compatible for any iOS version your customers might be using. There's going to be some level of customer support required. That's a non-zero cost. Finally, how are people going to discover your app? You aren't on any app stores, so you have to advertise. You'll need to market. And -- convince people that you aren't going to infect their device with malware. Let's just assume that you sell just as many outside the App Store as you would doing it yourself. (That won't happen, but let's assume your marketing is so good that it's the case.) The difference is $419-$350k. (That's assuming zero expense for hosting, marketing, customer support, etc.) So you're "losing" $69k per year. After tax however -- $280k from the App Store, $335k doing it yourself. So $55k additional. Yet you have hosting, customer support, marketing -- etc. $55k per year as a salary for doing those tasks is tiny and that doesn't include the cost of the hosting and bandwidth.
- lapcat 4y ago
  > If you sell it for $5 on the App Store, you keep $3.5. Try $0. Look at the App Store charts. The 200 top grossing apps are ironically all "Free": https://appfigures.com/top-apps/ios-app-store/united-states/iphone/top-overall https://appfigures.com/top-apps/ios-app-store/united-states/... This is the real problem, the crApp Store race to the bottom. Apple's cut was never really the problem. The cut is obscene, but only because the prices are already obscenely low. I'd be happy to give Apple 50% if I could sell my software for higher prices. > And you sell 100,000. Good luck with that. > You also have to set up a server to serve the downloads and pay hosting, storage, and bandwidth. Cheap. > As well as shipping updates to all of your customers. As well as ensuring updates are compatible for any iOS version your customers might be using. There's going to be some level of customer support required. You have to do these things anyway. > Finally, how are people going to discover your app? You aren't on any app stores, so you have to advertise. You'll need to market. And -- convince people that you aren't going to infect their device with malware. You have to do all of this stuff regardless of whether you're in the App Store. As an App Store developer myself, I can tell you that Apple absolutely does not do these things for you. Notice how many Mac developers, given the choice, choose to distribute themselves rather than via the Mac App Store. They don't see the App Store as a win like you do.
scarface74 4y ago
I mean it is public information how much Apple makes from services. It doesn’t take much research to realize you are wrong.

lotsofpulp 4y ago

Playing the game according to the current rules seems preferable than playing the game according to rules that may or may not come into existence. Also, they will still be one of the, if not most, profitable businesses in the world even if they lose all the App Store revenue, so it does not seem reasonable to expect more.

sam0x17 4y ago
Companies of this size need to play the long game, but quarterly OKRs and a beuracratic structure ensure they only ever play the short game. The 30% is great this quarter and next quarter, and every quarter until the quarter where it goes away completely. Keeping it this high is extremely risky behavior, literally taunting for regulation.
- lotsofpulp 4y ago
  If you look at Apple’s results and products and think they are playing for next quarter, I do not know what to tell you. The App Store model has served them well for years. If it stops serving them well next quarter, so what?
- BurningFrog 4y ago
  This old myth will never die. If it was true, these short sighted companies would fade away in the long run. Empirically, top companies stay on top for decades.
  - ClumsyPilot 4y ago
    If facebook qas so well run, it wouldnt need to buy up all the competition to stay relevant, like Whatsapp and instagram. Once you are that huge and cam but competition, you don't fade away unless you go full-on Lehmon Brothers
- JumpCrisscross 4y ago
  > this quarter and next quarter Apple Silicon was a decade-long play, largely by Cook. Even if the App Store is threatened, Apple remains plump.

dmix 4y ago

So you're saying Apple isn't a well run company because they haven't properly managed their regulatory risk around the app store? What should they do hire more lobbyists? Not have built a $100 billion/year business because of a vague threat of future regulatory change? We've seen pushback on the 30% but mostly for a select group of major companies who want to offer alternative payments. The majority of apps aren't going to be asking customers for their credit cards separately vs a single "subscribe" button, nor do they all have CCs already in their existing DBs. Even worst case if 25% of the revenue gets lost due to secondary subscription payment support (assuming they don't somehow still take a cut), that 75% is still a monster that could support Apple for a long time. Not to mention the rest of their businesses.

sam0x17 4y ago
I'm saying they have over-extended to the point where they are begging for regulation. Much wiser to not over-extend to the point where regulators are pissed off. Now they could lose it all instead of having a more reasonable rate. At this point they should self-regulate, like any misbehaving child who realizes they are in the wrong should before they get punished. It's not a risk and it's not going to hurt their stock if it's self-imposed. People always praise anything that comes from within with Apple so it would actually be a pretty savvy play, given what's on the horizon.
- dmix 4y ago
  So what should they have done? Conceded to a group of Epic type companies on a VIP-type basis so regulators don't eat their lucrative subscription model? Without bigco lobbying the gov I doubt there'd be as much regulatory pressure. So the best bet might have been to work with the major companies hiring lobbyists and getting PR. Rumour is Apple is opening up side-loading so the "walled garden" thing might be neutered. Not sure what other regulatory risks they have.
  - sam0x17 4y ago
    No no they should have never had it above 10% to begin with. The case with Epic never should have needed to happen. They've been over-extended all along.

guhidalg 4y ago

Commenting on the campus bit.... Apple makes devices, not just software. Good luck developing device from home and dealing with the constant headache of shipping samples around the world. The campus was not a mistake.

officeplant 4y ago
Trusted engineers get to take home prototypes. Usually also loaned a maxed out Mac Pro so they have something with enough memory to unpack MacOS's built in system process recording mode. (digging through a 5 minute recording of MacOS took ~~200GB of system memory to unpack and evaluate.)
- guhidalg 4y ago
  I assume by your answer that you work at Apple or know someone who works there so let me clarify that I'm talking about the messy work that happens before you have a take home prototype for a device. I'm talking about building the prototype with in-house machinery before asking the manufacturer to make samples at the factory. If you do work at Apple, do you hand assemble prototypes at the office or do you just ask the manufacturer to build them and overnight them to your house? If so, do you have lab equipment at home to inspect and test it?

briandear 4y ago

> regulate that down to something reasonable like 5% or 3% How is 5% "reasonable?" Who determines that? That's not something up for a vote -- that's up to the market. Let's say you have an iOS app. If you sell it for $5 on the App Store, you keep $3.5. And you sell 100,000. App Store nets you $350k. And let's say you sold the app direct to users and did everything yourself: $5 sales price, you keep $5 however, you also have to collect and remit sales tax for jurisdictions in which you sell. Your street price is $5 + tax, and you keep the $5 but you incur some expense for sales tax compliance. You have to use a payment processor. That's 2.9% + $0.30 per transaction. So if you sold 100k apps at $5, that's $455,500 in revenue after credit card fees are paid. However, there's also chargebacks. Chargeback ratio averages roughly 0.6% across all industries (it's much higher for digital goods and CNP transactions -- so let's call it 1.5%) So from 100k sales, you really sell 98,5000, so your revenue is $448,667 (after cc fees.) However, you have 1500 in chargebacks that cost $20 each (per stripe.). So that's $30k in chargeback fees. So now your revenue is $418,667. Apple rarely loses chargebacks and refunds are extremely rare. So that sales loss is negligible. You also have to set up a server to serve the downloads and pay hosting, storage, and bandwidth. As well as shipping updates to all of your customers. As well as ensuring updates are compatible for any iOS version your customers might be using. There's going to be some level of customer support required. That's a non-zero cost. Finally, how are people going to discover your app? You aren't on any app stores, so you have to advertise. You'll need to market. And -- convince people that you aren't going to infect their device with malware. Let's just assume that you sell just as many outside the App Store as you would doing it yourself. (That won't happen, but let's assume your marketing is so good that it's the case.) The difference is $419-$350k. (That's assuming zero expense for hosting, marketing, customer support, etc.) So you're "losing" $69k per year. After tax however -- $280k from the App Store, $335k doing it yourself. So $55k additional. Yet you have hosting, customer support, marketing -- etc. $55k per year as a salary for doing those tasks is tiny and that doesn't include the cost of the hosting and bandwidth.

lapcat 4y ago
> If you sell it for $5 on the App Store, you keep $3.5. Try $0. Look at the App Store charts. The 200 top grossing apps are ironically all "Free": https://appfigures.com/top-apps/ios-app-store/united-states/iphone/top-overall https://appfigures.com/top-apps/ios-app-store/united-states/... This is the real problem, the crApp Store race to the bottom. Apple's cut was never really the problem. The cut is obscene, but only because the prices are already obscenely low. I'd be happy to give Apple 50% if I could sell my software for higher prices. > And you sell 100,000. Good luck with that. > You also have to set up a server to serve the downloads and pay hosting, storage, and bandwidth. Cheap. > As well as shipping updates to all of your customers. As well as ensuring updates are compatible for any iOS version your customers might be using. There's going to be some level of customer support required. You have to do these things anyway. > Finally, how are people going to discover your app? You aren't on any app stores, so you have to advertise. You'll need to market. And -- convince people that you aren't going to infect their device with malware. You have to do all of this stuff regardless of whether you're in the App Store. As an App Store developer myself, I can tell you that Apple absolutely does not do these things for you. Notice how many Mac developers, given the choice, choose to distribute themselves rather than via the Mac App Store. They don't see the App Store as a win like you do.

scarface74 4y ago

I mean it is public information how much Apple makes from services. It doesn’t take much research to realize you are wrong.