7 ms·

Apple denies App Store profit margin is 75% – claims to have no clue

30 points by galogon 2y ago

fabrixxm 2y ago
> Senior company execs wouldn’t lie about it under oath, ahahahahahahahah
taylodl 2y ago
They're so happy they can hardly count
beardyw 2y ago
Perhaps it's 74% or 76%.
pjmlp 2y ago
People lie all the time under oath, they only need to be sure they wouldn't get caught in first place. Folks are so naive.
- johnisgood 2y ago
  I never understood the practice of it. It makes no sense to me.
  - pjmlp 2y ago
    A leftover from cultures where everyone supposedly always does the right thing.
    - johnisgood 2y ago
      Supposedly. :P I think it was always naive.
elashri 2y ago
Doesn't courts have the power to ask Apple to actually calculate this number and give the supporting evidence about that? Because judges are not robots and understand that it is really Apple doesn't want to know the number so that it doesn't have to disclose the margin. This is probably not the first a time a company trying this tactic in court. It would be surprising (for me) if not.
- Clent 2y ago
  How could they calculate this if they weren't tracking it? The cost would need to included not just development hours that have gone into creating and maintaining the system, but hours of other employee's used for the project. Also the servers, the network, buildings, etc. If there were forced to calculate this number, it wouldn't surprise me if they were able to do so in a manner that shows they lose money. At best they could be forced to track the cost going forward using a third party auditor.
  - danpattn 2y ago
    It isn't hard. It is basic managerial accounting. You just need access to lots of internal data. Ultimate parent level GAAP accounting won't provide the specific details you need. Apple definitely knows what the number is, every 10k they won't shut up about how much growth is coming from services.
  - elashri 2y ago
    > If there were forced to calculate this number, it wouldn't surprise me if they were able to do so in a manner that shows they lose money That's why a court would ask for the procedures that they followed and revise if they did something like that intentionally. This would be the definition of malicious compliance.
karaterobot 2y ago
It is difficult for me to believe Apple doesn't have a pretty good idea what the profit margin for the App Store is. When they say that the profit margin isn't 75-78%, I assume that's because it's 79% or more.
- basch 2y ago
  The App Store is dependent on the OS. The OS is dependent on the hardware. Are you including the cost of API development, architecture, and hardware R&D into the probability of the app store. Because that is what Apple is round-a-bout saying. That its such an integrated product, you can't tally the net revenue from one component and call it profit.
  - karaterobot 2y ago
    Right, they would have to define their parameters first, and there might be a margin of error. But then, that's true of every revenue number they track. And this probably is one of the most important sources of revenue they have. So, I just try unsuccessfully to imagine a scenario where an executive says "I guess we'll never know if revenue is going up or down, c'est la vie!"
  - lostlogin 2y ago
    Do you really believe that Tim Cook doesn’t know the profit margin on a key Apple product?
    - basch 2y ago
      How much "profit" does the app store need to pay back to all the api development that powers the apps under the hood? Similar to the amazon dont make a profit for a decade by dumping it into growth, Apple can dump all their app store "profit" into developing new api's that apps can access, such as ai tools etc.
      - BriggyDwiggs42 2y ago
        Apple is quite large, so I suspect they don’t exactly use the same strategy as Amazon did in its early days. It also wouldn’t be profit, because that would be an expense they would keep track of.
knowitnone 2y ago
"we make so much we can't even count it anymore" -Apple Apple pretending they don't have accountants or data analysts.
Fin_Code 2y ago
Umm good for Apple? They produce a service that people want. 3rd parties are making loads of money off of it. Its win win all around.
neilv 2y ago
I thought Chief Financial Officers were supposed to be good at financials. Do they also have to be good at perjury? Is that FAANG job interview analogous to the one for software engineers? "Can you go to the whiteboard, and perform for me one of the standard case studies of CFOs who got away with perjury? Which you should have memorized, even if you learned nothing else in school." "Using STAR format, tell me about a time that you lied about financials, and got away with it." "OK, in the 3 minutes left, I want to turn this over to you, for any questions you have. ... Oh, if you have experience working with financials, normally people mention that in the Hobbies section of their resume; here at Faang, our interviews focus instead on the fundamentals."
rahimnathwani 2y ago
For those claiming Apple should be able to calculate the App Store's profit margin - can you actually define how to do it? As someone who qualified as an accountant over 15 years ago, it's not obvious to me how you would develop a meaningful allocation of costs. I suspect this misunderstanding stems from the same thinking that leads people to believe the myth that Costco makes no profit on its physical products, only on memberships.
- xhkkffbf 2y ago
  I agree. It's not possible to do. But that being said, if the AppStore were somehow spun off into a separate company, I think their costs would be less than 10% or even 5% of the cut that Apple takes from the AppStore sales. I'm sure I could run it at those costs. Still, it's fair for Apple to want the cut they take from the App store revenues. I totally get their position. They built a great product and platform. They deserve to reap the rewards.
  - rahimnathwani 2y ago
    But that being said, if the AppStore were somehow spun off into a separate company The 'somehow' assumes we have some way of deciding which costs should be borne by this separate entity. But we've already agreed that's not possible!
  - amluto 2y ago
    > I'm sure I could run it at those costs. Are you counting the surely enormous amount you would have to pay Apple for the privilege of being the App Store?
- andrewmcwatters 2y ago
  Are you serious? What company doesn’t categorize labor and expenses, especially for capitalization and R&D purposes. There’s zero chance Apple doesn’t know. It’s 100% nonsense. They know all the labor costs and revenue for each of their products. Every single one. Zero chance Apple doesn’t categorize server allocation and assign those to budgets. Small companies do it. So, the obvious answer is they’re lying. They’ve done it before, too. They’re doing it now.
deleted 2y ago
[deleted]
senordevnyc 2y ago
For all of those claiming that of course they know, because big companies always know exactly how much everything they do is worth: 1. Do you think your employer can calculate the profit margin on what you do? I sincerely doubt it, unless maybe you work in sales or something. 2. How would you calculate the value of HN to YC? 3. How would you calculate the value of iMessage? It has no direct revenue, but it has a huge effect on other revenue. How much though?
sfifs 2y ago
Taking these positions is a foolish risk. Such obvious disingenuous behaviour may be rewarded in the US but judicial systems in other countries may take a dim view of this sort of obvious obfuscation. The judge could appoint a forensic accounting firm to get full access to their financial records system and calculate the profitability.They will surely find some report to management in the system reporting profitability at which point there's a perjury and contempt of court charge risk. They need less arrogant lawyers :-)
snvzz 2y ago
Similar to protections against usury, we need laws to prevent this sort of abusive revenue split. I'd say a hard limit like 10% for digital download stores (app store, google play, steam, ...), and 20% for streaming sites (youtube, twitch, ...)
pretext-1 2y ago
I typically don’t argue in favor of big corporations but I believe them, kind of. Apple includes a lot of things into their SDKs for free, which are paid on Google's platform. For example Apple Maps, Apple Weather, etc. components are all free and can be extremely expensive on Android (Google charging per view for Google Maps, for example). That is of course if you use these things in your app.
- andrejguran 2y ago
  they could still calculate their profit margin: cost to build all their free SDK / profit from app store. Seems quite simple. Why would you believe them that they are not able to perform this calculation?

30 points by galogon 2y ago

fabrixxm 2y ago

> Senior company execs wouldn’t lie about it under oath, ahahahahahahahah

taylodl 2y ago

They're so happy they can hardly count

beardyw 2y ago

Perhaps it's 74% or 76%.

pjmlp 2y ago

People lie all the time under oath, they only need to be sure they wouldn't get caught in first place. Folks are so naive.

johnisgood 2y ago
I never understood the practice of it. It makes no sense to me.
- pjmlp 2y ago
  A leftover from cultures where everyone supposedly always does the right thing.
  - johnisgood 2y ago
    Supposedly. :P I think it was always naive.

elashri 2y ago

Doesn't courts have the power to ask Apple to actually calculate this number and give the supporting evidence about that? Because judges are not robots and understand that it is really Apple doesn't want to know the number so that it doesn't have to disclose the margin. This is probably not the first a time a company trying this tactic in court. It would be surprising (for me) if not.

Clent 2y ago
How could they calculate this if they weren't tracking it? The cost would need to included not just development hours that have gone into creating and maintaining the system, but hours of other employee's used for the project. Also the servers, the network, buildings, etc. If there were forced to calculate this number, it wouldn't surprise me if they were able to do so in a manner that shows they lose money. At best they could be forced to track the cost going forward using a third party auditor.
- danpattn 2y ago
  It isn't hard. It is basic managerial accounting. You just need access to lots of internal data. Ultimate parent level GAAP accounting won't provide the specific details you need. Apple definitely knows what the number is, every 10k they won't shut up about how much growth is coming from services.
- elashri 2y ago
  > If there were forced to calculate this number, it wouldn't surprise me if they were able to do so in a manner that shows they lose money That's why a court would ask for the procedures that they followed and revise if they did something like that intentionally. This would be the definition of malicious compliance.

karaterobot 2y ago

It is difficult for me to believe Apple doesn't have a pretty good idea what the profit margin for the App Store is. When they say that the profit margin isn't 75-78%, I assume that's because it's 79% or more.

basch 2y ago
The App Store is dependent on the OS. The OS is dependent on the hardware. Are you including the cost of API development, architecture, and hardware R&D into the probability of the app store. Because that is what Apple is round-a-bout saying. That its such an integrated product, you can't tally the net revenue from one component and call it profit.
- karaterobot 2y ago
  Right, they would have to define their parameters first, and there might be a margin of error. But then, that's true of every revenue number they track. And this probably is one of the most important sources of revenue they have. So, I just try unsuccessfully to imagine a scenario where an executive says "I guess we'll never know if revenue is going up or down, c'est la vie!"
- lostlogin 2y ago
  Do you really believe that Tim Cook doesn’t know the profit margin on a key Apple product?
  - basch 2y ago
    How much "profit" does the app store need to pay back to all the api development that powers the apps under the hood? Similar to the amazon dont make a profit for a decade by dumping it into growth, Apple can dump all their app store "profit" into developing new api's that apps can access, such as ai tools etc.
    - BriggyDwiggs42 2y ago
      Apple is quite large, so I suspect they don’t exactly use the same strategy as Amazon did in its early days. It also wouldn’t be profit, because that would be an expense they would keep track of.

knowitnone 2y ago

"we make so much we can't even count it anymore" -Apple Apple pretending they don't have accountants or data analysts.

Fin_Code 2y ago

Umm good for Apple? They produce a service that people want. 3rd parties are making loads of money off of it. Its win win all around.

neilv 2y ago

I thought Chief Financial Officers were supposed to be good at financials. Do they also have to be good at perjury? Is that FAANG job interview analogous to the one for software engineers? "Can you go to the whiteboard, and perform for me one of the standard case studies of CFOs who got away with perjury? Which you should have memorized, even if you learned nothing else in school." "Using STAR format, tell me about a time that you lied about financials, and got away with it." "OK, in the 3 minutes left, I want to turn this over to you, for any questions you have. ... Oh, if you have experience working with financials, normally people mention that in the Hobbies section of their resume; here at Faang, our interviews focus instead on the fundamentals."

rahimnathwani 2y ago

For those claiming Apple should be able to calculate the App Store's profit margin - can you actually define how to do it? As someone who qualified as an accountant over 15 years ago, it's not obvious to me how you would develop a meaningful allocation of costs. I suspect this misunderstanding stems from the same thinking that leads people to believe the myth that Costco makes no profit on its physical products, only on memberships.

xhkkffbf 2y ago
I agree. It's not possible to do. But that being said, if the AppStore were somehow spun off into a separate company, I think their costs would be less than 10% or even 5% of the cut that Apple takes from the AppStore sales. I'm sure I could run it at those costs. Still, it's fair for Apple to want the cut they take from the App store revenues. I totally get their position. They built a great product and platform. They deserve to reap the rewards.
- rahimnathwani 2y ago
  But that being said, if the AppStore were somehow spun off into a separate company The 'somehow' assumes we have some way of deciding which costs should be borne by this separate entity. But we've already agreed that's not possible!
- amluto 2y ago
  > I'm sure I could run it at those costs. Are you counting the surely enormous amount you would have to pay Apple for the privilege of being the App Store?
andrewmcwatters 2y ago
Are you serious? What company doesn’t categorize labor and expenses, especially for capitalization and R&D purposes. There’s zero chance Apple doesn’t know. It’s 100% nonsense. They know all the labor costs and revenue for each of their products. Every single one. Zero chance Apple doesn’t categorize server allocation and assign those to budgets. Small companies do it. So, the obvious answer is they’re lying. They’ve done it before, too. They’re doing it now.

deleted 2y ago

[deleted]

senordevnyc 2y ago

For all of those claiming that of course they know, because big companies always know exactly how much everything they do is worth: 1. Do you think your employer can calculate the profit margin on what you do? I sincerely doubt it, unless maybe you work in sales or something. 2. How would you calculate the value of HN to YC? 3. How would you calculate the value of iMessage? It has no direct revenue, but it has a huge effect on other revenue. How much though?

sfifs 2y ago

Taking these positions is a foolish risk. Such obvious disingenuous behaviour may be rewarded in the US but judicial systems in other countries may take a dim view of this sort of obvious obfuscation. The judge could appoint a forensic accounting firm to get full access to their financial records system and calculate the profitability.They will surely find some report to management in the system reporting profitability at which point there's a perjury and contempt of court charge risk. They need less arrogant lawyers :-)

snvzz 2y ago

Similar to protections against usury, we need laws to prevent this sort of abusive revenue split. I'd say a hard limit like 10% for digital download stores (app store, google play, steam, ...), and 20% for streaming sites (youtube, twitch, ...)

pretext-1 2y ago

I typically don’t argue in favor of big corporations but I believe them, kind of. Apple includes a lot of things into their SDKs for free, which are paid on Google's platform. For example Apple Maps, Apple Weather, etc. components are all free and can be extremely expensive on Android (Google charging per view for Google Maps, for example). That is of course if you use these things in your app.

andrejguran 2y ago
they could still calculate their profit margin: cost to build all their free SDK / profit from app store. Seems quite simple. Why would you believe them that they are not able to perform this calculation?