Originally Posted by piot
And in a nutshell, you have succinctly pointed out why you don't understand how commerce works.
Why do sellers HAVE TO receive the same amount!
Your restatement changes the meaning of my original statement.
They don't "HAVE" to receive the same amount, but IN ORDER TO
receive the same amount where 30% is taken off the top, the selling price must be increased by 43%.
What businesses MUST
do in order to stay in business is sell their products and/or services at something higher than their costs.
For example, Amazon is willing to keep only 30% of the selling price of books which meet a certain criteria, one of which is that the book costs $9.99 or less. To simplify the math I'll round that up to $10.
This means that for every one of these $10 books, Amazon keeps $3 and sends the other $7 to the publisher. Out of that $3.00, Amazon has to pay the credit card processing company somewhere between 1.5% and 2.8% of the original $10. Let's assume Amazon gets a really good rate and only has to pay 1.5%. That leaves $2.85 for Amazon to pay for the servers used to host the book, commercial software they use, internet connectivity, employees for tech support, server support, software development, managers, health insurance for employees, taxes, etc.
Now if Apple takes 30% right off the top for that sale, Amazon doesn't have to pay credit card fees. So they've saved $0.15 and Apple gives them a check for $7.00. After Amazon pays the publisher their $7.00 cut, that leaves Amazon a whole $0.00 to pay for the servers they still need because they're hosting the book, the software they purchase, their employees and expenses, internet connections, taxes, etc.
In other words, their net profit on that sale is less than zero. There is just no way a business can survive by consistently selling a product at a loss.
Now lets assume that Amazon's net profit (after costs) is 1/3rd of their take. That makes their profit $1 before Apple gets involved. (My understanding is that this is quite good, but these are just rounded guestimates for the sake of example.) So let's say that Amazon is nice and decides to accept just half the profit they were making before Apple's new rules. In other words, they decide to accept a $0.50 profit on a book they used to make $1.00 on.
That means they're initial costs are $7.00 publisher payment, $1.85 Amazon costs, and $0.50 profit. (There's no CC fee since Apple carries that cost, so Amazon saves 15 cents in this scenario.) That means for Amazon to make HALF the profit they used to make, they MUST
now to raise the price of that $10 book to $13.36.
Congratulations, your $10 book now costs $3.36 more than it used to. The company doing most of the work is getting half the profit it used to get. What value did Apple add to the process? Was it worth the extra money for Apple to get involved?
Now, I'm well aware that Amazon is not going to be selling all their books through an iOS app. I'm also well aware that Amazon's take on some books is higher. (I'd be willing to bet that those higher take books pay enough of Amazon's costs that it makes the 30% books possible.) Furthermore, I'm well aware that not all iOS app users will actually do their purchases within the app.
On the other hand, given that Apple wants these three things:
1) Apps must contain that ability to purchase via Apple
2) Apps cannot contain links to resellers' sites to make purchases
3) In app purchases cannot cost more than direct purchases,
It seems entirely reasonable to me that the average iOS user will see absolutely no advantage to manually going to the resellers' site to make a purchase, and will instead opt to go the quick and easy route of just using the in app purchase. In fact, it would totally surprise me if less
than 80% of iOS eligible purchases were made outside of apps.
In order to keep from going out of business because they're losing too much money, businesses which stay in the App Store will be forced to raise their prices based on what percentage of sales they expect to get via iOS devices.
In the example I gave, if 80% of those book sales came via iOS devices, of which 80% were placed in app (64% of all sales), the price would have to be raised to about $11.97 for everybody
just so Amazon could continue to receive half
the profit they get now. If only 30% of sales came via iOS devices, Amazon would still
have to raise the price of that book to $10.66 just get back to half their previous profit.
No matter how you shake it, even customers who don't use iOS devices wind up paying more because of Apple's actions, even if the reseller is willing to give up how much profit they get. That is, of course, unless the reseller pulls out all-together, in which case, that very expensive (and very nice) iDevice just became quite a bit less nice.