The bottom line is that the 30% rule has been in effect for years without issue. Secondly, Apple was already in the process of amending its 30% rule for subscription services. Thirdly, Apple has to tread carefully because if they play dirty app makers can go to other platforms. The market can sort this stuff out. This isn't analogous to 20 years ago when MSFT was giving stuff away for free. Apple isn't giving anything away for free. In fact they've made it a point not to offer up Apple Music for free....There is nothing wrong with directing people to get the cheaper rates on their site in exchange for giving up more of your data directly to them.
It took me a minute, but I don't completely disagree with you.
In some respects it is like the old Microsoft case, while not being free, it's still at a reduced cost over what the competition can offer. If Apple charges $10 and Spotify charges $13 to make up the fees Apple imposes then they're still operating at a loss/disadvantage to compete with Apple, free or not. And the whole thing is a lot like the Microsoft Surface, which allows MS to bundle their own software at no cost, in contrast to their PC licensors who have to pay MS a huge chunk of the product cost to include Windows. And that seems to have worked out OK, for everyone, though I'd love to know what MS has done to assuage the concerns of their licensing partners that the surface won't undercut their similar products in the marketplace -- lower their license fees for tablet/hybrids?
As for Apple not giving away anything for free, just call the FTC the Taylor Swift of anti-competitive practices. Apple is clearly not completely free of wrongdoing as they wade into this business. The FTC hasn't opened an investigation, anymore than Taylor Swift filed a lawsuit ... But the threat of action forces Apple to rethink its position. And let's not revise history -- the 30% in app purchase fee has long been a sore point for developers. The fact Apple can offer the convenience of buying things in app without the burden of 30% surcharge puts them in a much better position vis a vis their competition with similar apps. Nothing has changed, hence your own observation that Apple is addressing it. While there's nothing wrong with directing a customer to another site to get a discount, Apple doesn't do this, they don't have to -- and that's the point. And again, 30% or no, with a platform as successful as Apple, and as affluent customer base, no developer is realistically going to go to abandon it for another platform. And like Microsoft of old, that's the power Apple currently enjoys.
But in the end, I agree with your ultimate point ... The market should work this out amongst themselves. Surely Apple would rather not be perceived as a bully, and will offer a solution for those apps with which it competes directly with its developers to mitigate the cost or lack of convenience their current policies impose. That said, it's nice to know the FTC is there to ensure Apple does eventually work something equitable out.
One major point that is not included in their breakdown, and that is any cost related to Apple's own software released through the app store. Which has grown from only apps for phone, iPad, iPod to now all apps for the Mac as well. Now some of these things are charged and I assume Apple makes a certain level of profit directly from the sales of them. But many of them are sold at no cost, though clearly they of course due have considerable cost related to them.
Now without factoring apple's cost for its own downloads in the App store to bring a 22% margin, which is low for apple. You then must factor in the amount of storage, credit card fees, development fees for things like every single system upgrade across all platforms. Then the development cost of full applications, and the development costs of the the full system of all devices that apple sales. I would assume the fact that software that used to be hundreds of dollars and now provided at no cost aren't free to create and make, and thus would have to come out of the 22%.
Heck even if apple accounts for any free software on a computer, phone, pad against the purchase price of that item. It would still have to account for any full system upgrade used on previously purchased systems. and of course all software and system upgrades like the recent iOS and iTunes update all are free to consumers, but which have direct and sizable cost to apple. i mean look at the adoption of iOS 8, versus the number off purchases that would have that system already installed, most are from previously owned devices. i assume that also (though clearly with fewer total downloads) applies to the Mac lineup.
That should take a sizable bite right out of that 22%.
That would be a significant cost. Without that data, you can't even get close to what it truly costs for apple. Now if apple didn't deliver any of its own software through the app store, and its deliver system, then yeah run with the 22% margin. But we know that apple does use the app store for its own software, for its systems, and for it's software, and system upgrades.
I'll guess you didn't read the link I provided earlier. Here it is again: http://seekingalpha.com/article/1470121-apple-app-store-now-makes-over-1-billion-in-profits-per-year
It's pretty detailed and inclusive, arriving at the conclusion that Apple was seeing profits of $1B a year in 2013. Seeing as App Store revenues and payouts doubled tripled in the two years since it would be reasonable to guess Apple's App Store NET profits to currently be closer to $2-3B or more a year.
Read the article and comment again if you would. Do you honestly believe the App Store is operating at close to break-even? If so where did the article's author go wrong?
(Edited to note revenues tripled,not doubled.)
First, I was replying to a message that quoted an overall profit of $10 billion over the lifetime of the App Store. And I suppose that you imagine the App Store was profitable from day one, that it didn't run at a loss for even a moment of the years it's been in existence.
I went to the movie theater the other night. They check you at the door and won't let you bring your own snacks. The theater sells popcorn, and nachos and hot dogs, all unbranded, which is to say, these are the theater's own snack products. 3rd party snack manufacturers, like Nestle, Hershey's, Mars, also sell their snack foods in the theater. They undoubtedly give up a percentage of the cost of those snacks to the theater, which provides the reason people come there and ultimately buy snacks, and also provides the display cases and collects payments, and covers costs of cleaning up chocolate melted into the theater seats and costs of disposing of empty snack packaging. I guess theaters across the nation should be forced to provide all this at no cost to the snack vendors, and also allow theater patrons to buy their theater snacks from the grocery store down the street. Or... NOT!
Right, and I have to wonder if Disney or Carnival contemplated buying Greece with the Euro being weak . BTW I was staggered to read the entire population is about that of Miami.
The problem is their massive debt, otherwise it would be cool if Disney bought the whole country and turned it into DisneyGreece™.
Spin off Jimmy & Co. as a separate company? I'd be all for that so long as it was a completely independent company and not just some subsidiary of Apple. Take Eddy Cue with them and let him run the company. And then bring in someone who actually gets the cloud to run Apple's internet services business.
Eddy does get the cloud. I just think Apple needs more engineers.
It took me a minute, but I don't completely disagree with you.
In some respects it is like the old Microsoft case, while not being free, it's still at a reduced cost over what the competition can offer. If Apple charges $10 and Spotify charges $13 to make up the fees Apple imposes then they're still operating at a loss/disadvantage to compete with Apple, free or not. And the whole thing is a lot like the Microsoft Surface, which allows MS to bundle their own software at no cost, in contrast to their PC licensors who have to pay MS a huge chunk of the product cost to include Windows. And that seems to have worked out OK, for everyone, though I'd love to know what MS has done to assuage the concerns of their licensing partners that the surface won't undercut their similar products in the marketplace -- lower their license fees for tablet/hybrids?
As for Apple not giving away anything for free, just call the FTC the Taylor Swift of anti-competitive practices. Apple is clearly not completely free of wrongdoing as they wade into this business. The FTC hasn't opened an investigation, anymore than Taylor Swift filed a lawsuit ... But the threat of action forces Apple to rethink its position. And let's not revise history -- the 30% in app purchase fee has long been a sore point for developers. The fact Apple can offer the convenience of buying things in app without the burden of 30% surcharge puts them in a much better position vis a vis their competition with similar apps. Nothing has changed, hence your own observation that Apple is addressing it. While there's nothing wrong with directing a customer to another site to get a discount, Apple doesn't do this, they don't have to -- and that's the point. And again, 30% or no, with a platform as successful as Apple, and as affluent customer base, no developer is realistically going to go to abandon it for another platform. And like Microsoft of old, that's the power Apple currently enjoys.
But in the end, I agree with your ultimate point ... The market should work this out amongst themselves. Surely Apple would rather not be perceived as a bully, and will offer a solution for those apps with which it competes directly with its developers to mitigate the cost or lack of convenience their current policies impose. That said, it's nice to know the FTC is there to ensure Apple does eventually work something equitable out.
We agree on the end result the market should work this out....and Im as liberal as they come. I think it's premature getting the FTC involved. Apple had already hinted that it was in the process of lowering the 30% fee. The other issue is that people used "freemium" things to circumvent the 30% fee on app store purchases.
The complaint from users was that app developers were labeling their products as free but then charging for them once people started to actually use the app. Developers were misleading the public. This means all software updates and the like Apple gets nothing for even though it costs lots of man hours to review and host all of those gazillions of apps. Developers were trying to cheat the system that's why the policy is what it is as it stands right now. Developers created the freemium apps simply to get around the app store 30%. After a couple of embarrassing scandals where little jimmy spent $800 playing a game Apple stepped in.
We agree on the end result the market should work this out....and Im as liberal as they come. I think it's premature getting the FTC involved. Apple had already hinted that it was in the process of lowering the 30% fee. The other issue is that people used "freemium" things to circumvent the 30% fee on app store purchases.
The complaint from users was that app developers were labeling their products as free but then charging for them once people started to actually use the app. Developers were misleading the public. <span style="line-height:1.4em;">This means all software updates and the like Apple gets nothing for even though it costs lots of man hours to review and host all of those gazillions of apps. Developers were trying to cheat the system that's why the policy is what it is as it stands right now. Developers created the freemium apps simply to get around the app store 30%. After a couple of embarrassing scandals where little jimmy spent $800 playing a game Apple stepped in.</span>
Apple gets 30% of the in-app purchase revenue from those "freemium" games so they aren't being cheated out of any money. Some consumers are. The labeling has now changed in the App Store to make users aware of the in-app purchases as far as I know.
EDIT:
As a side note both Apple and Google get the overwhelming majority of their app revenue from those "freemium" apps so neither one wants them to go away. Both are doing a little something to let users know the games and such aren't completely free, but that's about it.
The government needs to stay out of it and let the free market sort this stuff out TBQH. I hate when the government gets involved in picking winners and losers with the interpretation of the law. Apple's 30% cut is standard retail practice. The maintenance of such a HUGE app ecosystem alone is a HUGE expensive undertaking. The 30% covers the cost and offers Apple what is at best a slightly above break-even proposition. Apple has not done anything wrong to Spotify other than offer up more competition in the music streaming market seeing as Spotify's efforts to get users to stream their music have been unprofitable for pretty much everyone involved.
I don't mind the 30% for the first month, You buy a game for example and Apple takes their 30% cut and that's it!!! It's the 30% cut for pretty much forever as long as a person is signed up that I have a problem with. Imagine if you went grocery shopping and the store just started charging you a extra 30% every time you went shopping there. Transaction fee's are only 2-3%, I don't think Apple should charge more then 10% after the first month!!! They're still making a profit. Apple is not doing anything else other then the fee processing. Why should they continue to grab 30% every month and for what? All your streaming is going through Spotify, not Apple's servers.
I'd even say OK to the 30% if Apple didn't have their No In App buying or telling people to go to their own web site to pay instead. Apple is almost forcing company's to use Apple's stores and then raping them 30%!!!! The rumors are Apple only gets 15% from places like HBO!!! So Apple cut the fee in Half and that's actually much more a part of AppleTV then Spotify is.
Once Apple got into the Music Streaming like Spotify and others, Apple can't have a unfair advantage. That just makes the 30% cut even worse looking. I really don't like the Government to get involved in these things, but,......
Spotify etc do not need to sell their subscription through the APP but can offer the APP with the free service and do what Amazon Prime video does which is have a banner stating how do I get the premium access visit our website for details. Don't post a URL or anything just have that statement. Problem solved.
Excellent point, only offering the free version via the AppStore.
I still take issue with Apple getting a cut of an ongoing subscription forever. I can see a "finders fee" of 30% for 6 months or a year. Perhaps a few percent a month when Apple collects the monthly fee – absolutely appropriate. Sure, you can argue that Apple asks and the seller can take it or leave it. Yup, I got it. That's business. IMHO, It still doesn't justify the logic of Apple getting a cut ad infinitum.... unless....
Excellent point, only offering the free version via the AppStore.
I still take issue with Apple getting a cut of an ongoing subscription forever. I can see a "finders fee" of 30% for 6 months or a year. Perhaps a few percent a month when Apple collects the monthly fee – absolutely appropriate. Sure, you can argue that Apple asks and the seller can take it or leave it. Yup, I got it. That's business. IMHO, It still doesn't justify the logic of Apple getting a cut ad infinitum.... unless....
Are the Apple servers doing the streaming?
Apple don't provide the streaming, they just offer the application and collect the revenue for Spotify.
The rumours are that neither Hulu or Netflix pay anywhere near the 30% (or anything at all) as they add value to Apple devices and Apple want them on their platforms. If Spotify have a bee in their bonnet about paying Apple then they should stop supporting iOS and OS X and pull their apps to create negative feedback from customers towards Apple.
This may or may not work depending on the percentage of Apple users who subscribe to Spotify but they could amp this up in the press to get themselves a better deal or Spotify could disappear into obscurity, who knows.
I don't mind the 30% for the first month, You buy a game for example and Apple takes their 30% cut and that's it!!! It's the 30% cut for pretty much forever as long as a person is signed up that I have a problem with. Imagine if you went grocery shopping and the store just started charging you a extra 30% every time you went shopping there. Transaction fee's are only 2-3%, I don't think Apple should charge more then 10% after the first month!!! They're still making a profit. Apple is not doing anything else other then the fee processing. Why should they continue to grab 30% every month and for what? All your streaming is going through Spotify, not Apple's servers.
I'd even say OK to the 30% if Apple didn't have their No In App buying or telling people to go to their own web site to pay instead. Apple is almost forcing company's to use Apple's stores and then raping them 30%!!!! The rumors are Apple only gets 15% from places like HBO!!! So Apple cut the fee in Half and that's actually much more a part of AppleTV then Spotify is.
Once Apple got into the Music Streaming like Spotify and others, Apple can't have a unfair advantage. That just makes the 30% cut even worse looking. I really don't like the Government to get involved in these things, but,......
You are right, the Government shouldn't need to get involved. If you have a product and what to offer it in various marketplaces you look at the cost of entry and the cost of doing business. Google, Amazon and Apple all take a 30% cut if you are selling through their marketplace but they also have a free tier which you can use. You can't sign up to a service and once on board cry foul and act like you didn't know what it was you signed up for.
Comments
In some respects it is like the old Microsoft case, while not being free, it's still at a reduced cost over what the competition can offer. If Apple charges $10 and Spotify charges $13 to make up the fees Apple imposes then they're still operating at a loss/disadvantage to compete with Apple, free or not. And the whole thing is a lot like the Microsoft Surface, which allows MS to bundle their own software at no cost, in contrast to their PC licensors who have to pay MS a huge chunk of the product cost to include Windows. And that seems to have worked out OK, for everyone, though I'd love to know what MS has done to assuage the concerns of their licensing partners that the surface won't undercut their similar products in the marketplace -- lower their license fees for tablet/hybrids?
As for Apple not giving away anything for free, just call the FTC the Taylor Swift of anti-competitive practices. Apple is clearly not completely free of wrongdoing as they wade into this business. The FTC hasn't opened an investigation, anymore than Taylor Swift filed a lawsuit ... But the threat of action forces Apple to rethink its position. And let's not revise history -- the 30% in app purchase fee has long been a sore point for developers. The fact Apple can offer the convenience of buying things in app without the burden of 30% surcharge puts them in a much better position vis a vis their competition with similar apps. Nothing has changed, hence your own observation that Apple is addressing it. While there's nothing wrong with directing a customer to another site to get a discount, Apple doesn't do this, they don't have to -- and that's the point. And again, 30% or no, with a platform as successful as Apple, and as affluent customer base, no developer is realistically going to go to abandon it for another platform. And like Microsoft of old, that's the power Apple currently enjoys.
But in the end, I agree with your ultimate point ... The market should work this out amongst themselves. Surely Apple would rather not be perceived as a bully, and will offer a solution for those apps with which it competes directly with its developers to mitigate the cost or lack of convenience their current policies impose. That said, it's nice to know the FTC is there to ensure Apple does eventually work something equitable out.
Gatorguy
One major point that is not included in their breakdown, and that is any cost related to Apple's own software released through the app store. Which has grown from only apps for phone, iPad, iPod to now all apps for the Mac as well. Now some of these things are charged and I assume Apple makes a certain level of profit directly from the sales of them. But many of them are sold at no cost, though clearly they of course due have considerable cost related to them.
Now without factoring apple's cost for its own downloads in the App store to bring a 22% margin, which is low for apple. You then must factor in the amount of storage, credit card fees, development fees for things like every single system upgrade across all platforms. Then the development cost of full applications, and the development costs of the the full system of all devices that apple sales. I would assume the fact that software that used to be hundreds of dollars and now provided at no cost aren't free to create and make, and thus would have to come out of the 22%.
Heck even if apple accounts for any free software on a computer, phone, pad against the purchase price of that item. It would still have to account for any full system upgrade used on previously purchased systems. and of course all software and system upgrades like the recent iOS and iTunes update all are free to consumers, but which have direct and sizable cost to apple. i mean look at the adoption of iOS 8, versus the number off purchases that would have that system already installed, most are from previously owned devices. i assume that also (though clearly with fewer total downloads) applies to the Mac lineup.
That should take a sizable bite right out of that 22%.
That would be a significant cost. Without that data, you can't even get close to what it truly costs for apple. Now if apple didn't deliver any of its own software through the app store, and its deliver system, then yeah run with the 22% margin. But we know that apple does use the app store for its own software, for its systems, and for it's software, and system upgrades.
First, I was replying to a message that quoted an overall profit of $10 billion over the lifetime of the App Store. And I suppose that you imagine the App Store was profitable from day one, that it didn't run at a loss for even a moment of the years it's been in existence.
The problem is their massive debt, otherwise it would be cool if Disney bought the whole country and turned it into DisneyGreece™.
Spin off Jimmy & Co. as a separate company? I'd be all for that so long as it was a completely independent company and not just some subsidiary of Apple. Take Eddy Cue with them and let him run the company. And then bring in someone who actually gets the cloud to run Apple's internet services business.
Eddy does get the cloud. I just think Apple needs more engineers.
It took me a minute, but I don't completely disagree with you.
In some respects it is like the old Microsoft case, while not being free, it's still at a reduced cost over what the competition can offer. If Apple charges $10 and Spotify charges $13 to make up the fees Apple imposes then they're still operating at a loss/disadvantage to compete with Apple, free or not. And the whole thing is a lot like the Microsoft Surface, which allows MS to bundle their own software at no cost, in contrast to their PC licensors who have to pay MS a huge chunk of the product cost to include Windows. And that seems to have worked out OK, for everyone, though I'd love to know what MS has done to assuage the concerns of their licensing partners that the surface won't undercut their similar products in the marketplace -- lower their license fees for tablet/hybrids?
As for Apple not giving away anything for free, just call the FTC the Taylor Swift of anti-competitive practices. Apple is clearly not completely free of wrongdoing as they wade into this business. The FTC hasn't opened an investigation, anymore than Taylor Swift filed a lawsuit ... But the threat of action forces Apple to rethink its position. And let's not revise history -- the 30% in app purchase fee has long been a sore point for developers. The fact Apple can offer the convenience of buying things in app without the burden of 30% surcharge puts them in a much better position vis a vis their competition with similar apps. Nothing has changed, hence your own observation that Apple is addressing it. While there's nothing wrong with directing a customer to another site to get a discount, Apple doesn't do this, they don't have to -- and that's the point. And again, 30% or no, with a platform as successful as Apple, and as affluent customer base, no developer is realistically going to go to abandon it for another platform. And like Microsoft of old, that's the power Apple currently enjoys.
But in the end, I agree with your ultimate point ... The market should work this out amongst themselves. Surely Apple would rather not be perceived as a bully, and will offer a solution for those apps with which it competes directly with its developers to mitigate the cost or lack of convenience their current policies impose. That said, it's nice to know the FTC is there to ensure Apple does eventually work something equitable out.
We agree on the end result the market should work this out....and Im as liberal as they come. I think it's premature getting the FTC involved. Apple had already hinted that it was in the process of lowering the 30% fee. The other issue is that people used "freemium" things to circumvent the 30% fee on app store purchases.
The complaint from users was that app developers were labeling their products as free but then charging for them once people started to actually use the app. Developers were misleading the public. This means all software updates and the like Apple gets nothing for even though it costs lots of man hours to review and host all of those gazillions of apps. Developers were trying to cheat the system that's why the policy is what it is as it stands right now. Developers created the freemium apps simply to get around the app store 30%. After a couple of embarrassing scandals where little jimmy spent $800 playing a game Apple stepped in.
EDIT:
As a side note both Apple and Google get the overwhelming majority of their app revenue from those "freemium" apps so neither one wants them to go away. Both are doing a little something to let users know the games and such aren't completely free, but that's about it.
The government needs to stay out of it and let the free market sort this stuff out TBQH. I hate when the government gets involved in picking winners and losers with the interpretation of the law. Apple's 30% cut is standard retail practice. The maintenance of such a HUGE app ecosystem alone is a HUGE expensive undertaking. The 30% covers the cost and offers Apple what is at best a slightly above break-even proposition. Apple has not done anything wrong to Spotify other than offer up more competition in the music streaming market seeing as Spotify's efforts to get users to stream their music have been unprofitable for pretty much everyone involved.
I don't mind the 30% for the first month, You buy a game for example and Apple takes their 30% cut and that's it!!! It's the 30% cut for pretty much forever as long as a person is signed up that I have a problem with. Imagine if you went grocery shopping and the store just started charging you a extra 30% every time you went shopping there. Transaction fee's are only 2-3%, I don't think Apple should charge more then 10% after the first month!!! They're still making a profit. Apple is not doing anything else other then the fee processing. Why should they continue to grab 30% every month and for what? All your streaming is going through Spotify, not Apple's servers.
I'd even say OK to the 30% if Apple didn't have their No In App buying or telling people to go to their own web site to pay instead. Apple is almost forcing company's to use Apple's stores and then raping them 30%!!!! The rumors are Apple only gets 15% from places like HBO!!! So Apple cut the fee in Half and that's actually much more a part of AppleTV then Spotify is.
Once Apple got into the Music Streaming like Spotify and others, Apple can't have a unfair advantage. That just makes the 30% cut even worse looking. I really don't like the Government to get involved in these things, but,......
Spotify etc do not need to sell their subscription through the APP but can offer the APP with the free service and do what Amazon Prime video does which is have a banner stating how do I get the premium access visit our website for details. Don't post a URL or anything just have that statement. Problem solved.
Excellent point, only offering the free version via the AppStore.
I still take issue with Apple getting a cut of an ongoing subscription forever. I can see a "finders fee" of 30% for 6 months or a year. Perhaps a few percent a month when Apple collects the monthly fee – absolutely appropriate. Sure, you can argue that Apple asks and the seller can take it or leave it. Yup, I got it. That's business. IMHO, It still doesn't justify the logic of Apple getting a cut ad infinitum.... unless....
Are the Apple servers doing the streaming?
Apple don't provide the streaming, they just offer the application and collect the revenue for Spotify.
The rumours are that neither Hulu or Netflix pay anywhere near the 30% (or anything at all) as they add value to Apple devices and Apple want them on their platforms. If Spotify have a bee in their bonnet about paying Apple then they should stop supporting iOS and OS X and pull their apps to create negative feedback from customers towards Apple.
This may or may not work depending on the percentage of Apple users who subscribe to Spotify but they could amp this up in the press to get themselves a better deal or Spotify could disappear into obscurity, who knows.
You are right, the Government shouldn't need to get involved. If you have a product and what to offer it in various marketplaces you look at the cost of entry and the cost of doing business. Google, Amazon and Apple all take a 30% cut if you are selling through their marketplace but they also have a free tier which you can use. You can't sign up to a service and once on board cry foul and act like you didn't know what it was you signed up for.
Hogwash. Don't like the 30% cut, don't offer subscription services in the app. Make spotify ads refer people to spotify's website.