Per another source there's a difference in what each side would like to claim as the marketplace:
"Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.
Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store."
What is the good or service ultimately provided to the consumer? Is not “an iOS app,” per se, it’s a specific set of functionality provided to the consumer. A calendar app on iOS and the same calendar app compiled under Android, provide the same functionality to the end user. Ergo, it cannot be said that Apple’s iOS ecosystem defines the market for that calendar app. It defines only a portion of that market, and for most apps, the smaller share of the overall market. To define the market based on the edition of the app compiled for iOS makes no sense. There’s equal precedent that that market should instead be defined based on the Android-complied edition.
There is a way to bring an iOS app to market without selling it through Apple’s App Store. Simply recompile it for the Android App Store. It’s silliness to define the market in this manner.
Per another source there's a difference in what each side would like to claim as the marketplace:
Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution.
The first sentence is downright stupid. There has never ever been any case where the relevant market is defined that narrowly. We might as well accuse BMW of monopolizing the relevant market called "Cars with BMW engines". Or closer to home, Microsoft is monopolizing the relevant market called "Xbox games".
They aren't, but you have inadvertently proven that there is no competition on iOS. If someone wants to buy a BMW and put an engine from Lexus in there (or more realistically tyres from Bridgestone rather than BMW), that's up to you, BMW won't stop you by remotely disabling the engine or tyres next time it updates. But Apple is trying its hardest to prevent iOS users from doing exactly that: buying apps elsewhere and running them on iOS. If people kept buying BMWs to put Lexus engines in, BMW would improve their own engines to compete. As is, Apple has no need to improve the App Store because they know no one else can compete on iOS.
And you once again inadvertently proven that iOS is not a monopoly as you can jailbreak your iOS device and install all the apps you want from where ever you want. Apple is not stopping you from doing this. Nearly every iOS version can be jailbroken. And better yet, there would be no cost to have to change over to Android in order to download apps from where ever you want. (Another of your pointless excuses.)
Now, do you expect BMW to help you install a Lexus engine into your BMW? Then what makes you think Apple should help you install apps from other places other than their Apple App Store?
And just exactly what do Apple need to improve with their App Store, in order to compete? The last I checked, the Apple App Store is doing just fine.
Or is your idea of improving the Apple App Store in order to compete is to allow third party app stores in iOS or allow developers to skip paying Apple a commission with in-app purchases, so that Apple can make less money competing with their own App Store? Gee, you're funny and delusional. That would be like BMW buying Lexus engines from Toyota and installing then into their own BMW, in order to compete. Or to allow Toyota to set up shop inside a BMW dealership, to sell Lexus.
And I got news for you, Apple make their money selling iDevices, not iOS. iOS is just one of many features that Apple uses in trying to sway consumers to buy an iDevice, over a competing Android device. And the Apple Apple Store is just a fraction of the many features in iOS. With better security being its proven and main selling feature and more privacy being the next. Any "improvements" to the Apple App Store that compromises either of those, is not improving iOS, in order to compete.
Per another source there's a difference in what each side would like to claim as the marketplace:
"Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.
Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store."
What is the good or service ultimately provided to the consumer? Is not “an iOS app,” per se, it’s a specific set of functionality provided to the consumer. A calendar app on iOS and the same calendar app compiled under Android, provide the same functionality to the end user. Ergo, it cannot be said that Apple’s iOS ecosystem defines the market for that calendar app. It defines only a portion of that market, and for most apps, the smaller share of the overall market. To define the market based on the edition of the app compiled for iOS makes no sense. There’s equal precedent that that market should instead be defined based on the Android-complied edition.
There is a way to bring an iOS app to market without selling it through Apple’s App Store. Simply recompile it for the Android App Store. It’s silliness to define the market in this manner.
Yes, and in addition, apps in iOS currently don't have to be loaded via the App Store. You can access a calendar app (which is your example) on the web also. The Apple App store does not have a monopoly of calendar apps for iOS because you can get your calendar apps via the web, such as from Google (mail.google.com) or Apple's iCloud (www.iCloud.com). In fact right now you can purchase "Google One" for extra storage and benefits and it doesn't go through the Apple App store so Apple doesn't get a dime.
As a result iOS does not even have "a 100% monopoly on the sale and distribution" of apps on iOS as gatorguy claims, nor is he correct when he says "there is no way for a developer to bring an app to iOS users without selling it through the App Store." Google is proving gatorguy wrong right now.
I must have at least a dozen apps on my iPhone and EVERY ONE of them seems to have a web-based alternative.
Per another source there's a difference in what each side would like to claim as the marketplace:
"Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.
Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store."
This doesn't respond well to a bricks-and-mortar store or mall analogy. I can't think of any store, mall or even flea market that would respond well if I were to waltz into their store, mall or flea market and set up a kiosk to sell my wares without paying the store, mall or flea market operator a cut of the profit or a rental fee. If anything, the app store is most like a consignment shop. The shop owner covers the overhead and handles sales transactions, only taking a cut from those transactions. I can't even think of a consignment shop that would also go so far as to provide a space for people to give away things for free, including things that will lead to revenue outside of the shop's control. There's no monopoly in any of this.
Note the fourth item in this list:
The CCA (Australian Competition and Consumer Act) :
prohibits cartels and anti-competitive conduct such as concerted practices and abuses of market power
provides for private damages actions for anti-competitive conduct on a ‘single damages’ basis
imposes personal liability for individuals, such as executives and management personnel knowingly involved in cartel conduct
imposes access obligations on monopoly infrastructure owners, which allows others to access and use that infrastructure in certain circumstances
prohibits misleading or deceptive conduct, as well as unconscionable conduct, in commercial and consumer transactions
prohibits unfair terms in contracts involving small businesses and consumers
sets out statutory guarantees related to the safety and quality of goods and services in consumer contracts
establishes a strict liability regime for manufacturers that produce defective goods.
So now it would depend on how the Australian competition authorities look at Apple's iOS infrastructure and whether it operates in a monopoly position, and if so whether it allows for sufficient competition. I'm certainly not qualified to make that decision, nor are you in all probability. Just guessing, but I personally believe the relevant market will be determined as 'iOS ecosystem". Apple obviously recognizes that a distinctly possible outcome too, as will Google..
You're right, I'm certainly not an expert in Australian law. Nonetheless, it's nonsensical to ignore competitive platforms, say that the relevant market is just "the iOS ecosystem" and therefore declare it to be a monopoly. The bricks-and-mortar parallel isn't just rhetoric. If the app store represents an internal monopoly, how would anyone differentiate that from the same monopoly operation currently carried out inside every store and mall in the world? Those businesses have complete control over who gets to do business on their platform and on what terms those vendors are allowed in. If the terms are untenable, competition down the road (with the exact same control over vendors) will get all the good vendors and take all the customers. For that matter, a side-road strip mall that only attracts second-tier vendors can't claim that the better-located, better managed mall has a monopoly just because they're able to attract a more lucrative customer base. That's not how any of this works. If Australian courts declare the iOS ecosystem to be a monopoly, if I were Apple, I would immediately insist on the right to establish pop-up Apple Stores inside various retail stores and malls throughout Australia, rent and commission-free. It's the same thing.
But - and I have said this about 20 times here, what you and others regularly and intentionally neglect to consider is that the competition regulators don't see the entire app market as the relevant market - because it's not, due to brand lock-ins. Once someone has spent £1000 on an iPhone, they have no option but to use the App Store. They can't "just switch to Android", that would involve another £££ for an Android phone, plus purchasing all the apps and services again, and replacing HomePods, AppleTVs etc with their non-Apple equivalents. Therefore, the market is defined as apps that work on iOS, and that market is just the Apple App Store. If you could use iOS apps on Android, and the AppleTV etc with Android phones without financial cost then the market would be bigger and there would likely be no investigation.
Sorry, more unless excuses.
A Home Pod only works with an iDevice. There is no excuse for buying an Apple HomePod and then finding out you can only use the Apple App Store to download apps. One must already have an iDevice and already know this, before they bought the HomePod or any devices that only works with an iDevice. That's like saying X-Box users don't have a choice to switch because all the games they purchased for their X-Box will have to be re-purchased for a PlayStation. They are locked-in and Microsoft is to blame for creating this lock-in barrier.
An Apple TV is a stand alone device. It doesn't require any iDevice in order to be functional. An Apple TV will work perfectly fine if one don't own an iDevice or Mac. All one needs is an iTunes account. And that can be done using a PC or Android device. This is also true with any Apple device with AirPlay. There's a free Android app that will broadcast to Apple airplay devices.
Consumers switch from Android to iOS all the time. So where's the barrier with all their apps having to be re-purchased? The truth is that there is no barrier there. 75% of the apps are free in both app stores. The over 95% of app stores revenue (both Google Play and Apple) are derive from in-app purchases using free apps. Only a small percent of app stores revenue are derive from the sale of the apps itself. And even with this, many of the purchased apps are cross platform, so buying then on one platform allows you to use it with another. The only real "lock-in" would be companies own apps that are used by their own employees, that are only on one of the mobile platforms. Apple and Google can not be blamed for this type of "lock-in".
Plus, I mentioned this to you before. The average consumer replace their mobile device every 2 to 3 years, with the newest or newer used ones. At this point, there is no barrier to switching to another platform, if that's what they want to choose to do. They were already going to pay for another mobile device anyway. And there is no excuse for not knowing that with iOS, one can only download apps from the Apple App Store, after buying a second or third or fourth, etc., iDevice. If you bought another iDevice, you can't bitch about how you have no choice but to use the Apple App Store to install apps. The time to bitch was when you were using your iDevice the first time you bought it. And you had the choice of using another app store, before buying another iDevice. No one forced you to buy another iDevice. There is no lock-in "barrier".
And, if you do have to switch, your old mobile device is still worth something. If you're are switching for good, there would be no need for it and you can sell it. So it's not as expensive to buy a new device for another platform, as you make it out to be.
Per another source there's a difference in what each side would like to claim as the marketplace:
Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution.
The first sentence is downright stupid. There has never ever been any case where the relevant market is defined that narrowly. We might as well accuse BMW of monopolizing the relevant market called "Cars with BMW engines". Or closer to home, Microsoft is monopolizing the relevant market called "Xbox games".
I see the AppStore as being quite similar to how Ticketmaster operates (and I'm not the only one). Are there any antitrust cases involving Ticketmaster?
How they operate are not similar at all. Not even "quite". And really, you might be the only one to think that.
With Ticketmaster, the concert/sport/event venues determines the face value for a ticket and Ticketmaster will add their service charges and fees to arrive at the final cost of the ticket they sell to consumers. No matter what the final price of the ticket to consumers, the venue still gets 100% of what they wanted for the ticket plus sometimes a percentage of Ticketmaster fees. The venue do not have to take into consideration Ticketmaster fees, when determining the face value of their tickets. The consumers pays Ticketmaster fees directly.
With the Apple App Store (and all app stores for that matter), the developers determines the final price of their apps and Apple (or the app store owner) gets a commission when the apps are sold through their app stores. The developers has to consider the commission when determining what they want to sell their apps for, to ensure a reasonable profit. The consumer buying the apps are paying only what the developers charges. The consumers pays the app store commission indirectly.
Plus, with app stores and developers with free apps, the consumers can still download their free apps, for free. Will Ticketmaster process free venue tickets without adding a service charge and fees to the consumers or charging the venue for distributing their free tickets? Imagine if 75% of the tickets available at Ticketmaster, were free of charge to the consumers or the venue offering the free tickets.
And I'm willing to bet that if this was mainly about the Google Play Store, you wouldn't be so quick to say that they are quite similar to how Ticketmaster operates.
gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions.
What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.
Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.
I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so?
Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all. It might only slow down their App Store revenue growth by a rounding error. And here's why.
93% of Apple App Store (and Google Play Store) revenue are derive from 1% of the largest developers. These developers did not get any reduction in their commission in either app stores. They are still paying the 15% for reoccurring subscription payments and 30% for single time in-app purchases. So the rate cuts only benefit the 99% of developers responsible for 7% of Apple App Store revenue. The 99% where most, if not all, are, that can't afford to open their own app store or accept payment outside of iTunes and make their money from actually selling their apps and not from in-app purchases. The same 99% where app store revenue growth is not much of a factor for Apple or Google.
In the end, it cost Apple and Google hardly anything to do this and yet they vastly benefit from making Epic case that they are mainly in this to help the small developers, seem meaningless. Nothing wrong with that, even from a shareholder point of view.
It will be really interesting to see whether consumer apathy is considered in this case.
Despite the fact that it's relatively easy to move from iOS to Android and vice versa, if it's found that many people are NOT switching (which I suspect is actually the case), this might be used as an argument for action against Apple and Google.
There is precedence for this in the UK whereby gas and electricity suppliers were regulated to make it easier for people to switch suppliers. However it was found that many consumers still did NOT switch suppliers so suppliers faced additional regulations (price caps) to project consumers who were too apathetic to engage in the market. This has the effect of reducing prices for people who don't bother shopping around but increasing prices for those who do shop around.
I see the situation with Apple as quite similar; there are many people who pick Apple products specifically because of the way they currently operate and by regulating that away, those people can no longer pick what they want. On the flip side, you have people who currently don't pick Apple products because of the way they operate and regulating them in this way might then open up that option. The trouble with this approach is that it does not necessarily consider the fact that people don't switch because they are happy with what they already have.
It will be really interesting to see whether consumer apathy is considered in this case.
Despite the fact that it's relatively easy to move from iOS to Android and vice versa, if it's found that many people are NOT switching (which I suspect is actually the case), this might be used as an argument for action against Apple and Google.
I think it would be harder to make a case for "apathy" in court with phones due to the constantly changing features for hardware and software. Electricity and gas don't really provide any changing features, just changing prices.
gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions.
What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.
Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.
I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so?
Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all.
According to another AI article it did. Just 5% or thereabouts but that equates to millions of dollars. Therefore my original comment "if revenues were reduced at all" applies, correct?
Per another source there's a difference in what each side would like to claim as the marketplace:
"Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.
Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store."
What is the good or service ultimately provided to the consumer? Is not “an iOS app,” per se, it’s a specific set of functionality provided to the consumer. A calendar app on iOS and the same calendar app compiled under Android, provide the same functionality to the end user. Ergo, it cannot be said that Apple’s iOS ecosystem defines the market for that calendar app. It defines only a portion of that market, and for most apps, the smaller share of the overall market. To define the market based on the edition of the app compiled for iOS makes no sense. There’s equal precedent that that market should instead be defined based on the Android-complied edition.
There is a way to bring an iOS app to market without selling it through Apple’s App Store. Simply recompile it for the Android App Store. It’s silliness to define the market in this manner.
This is exactly right. There are examples throughout the marketplace of devices sold with add-on or replaceable components that are intended to keep the consumer 'bought in' to that device's sphere. Duster mops, razors, video game systems, coffee machines, guitars, cars, electric mixers, etc, ad nauseam, all have add-ons or replaceable components that are not interchangeable with other brands in the category, but that effectively serve the same function. Some are proprietary and must be sourced exclusively from the device manufacturer, while others are available from third parties. None represent a monopoly. If you've got $50 worth of Gillette razor cartridges under the bathroom sink and you break the Gillette handle, you have an incentive to stick with the brand and buy another Gillette handle, but that doesn't make it a monopoly. You can switch brands any time you like. I recently was in exactly that position with an electric toothbrush, and irritating as it was, I took the hit on expensive, unused brush heads, because the expensive handle was clearly designed to crap out just after the warranty ran out. Irritating? Yes. Monopoly? Nope.
If you've paid for a Costco membership, you're incentivized to go there rather than Sam's Club, but Costco doesn't have a monopoly on selling five-gallon jars of mayonnaise in the discount club market. Also, neither place will allow you to pull up in the parking lot and start selling peaches out of the back of your truck. Älso, älso, they're absolutely not going to entertain any demands that they sell your truckload of peaches in the store, using the store's point-of-sale system, all at no charge. None of the above devices or retail establishments could accurately be described by themselves as a "relevant market" which therefore represents a monopoly. Neither can iOS and the app store.
Apple created a closed, exclusive App store to make an always-connected internet Phone more stable and more secure. This was one of those clever reinventions for which Steve Jobs was so legendary. My understanding was that he didn't want third party apps to be a thing at all, initially. Nonetheless, prior to the app store, third-party software was a consumer crap-shoot, particularly when considering apps from unknown developers. Was it going to be bloatware? Malware? Would it crash your device or create compatibility issues with other software? Could you trust them with your credit card? Would you need a 100-page manual to understand the clunky user interface? The app store, by being closed and exclusive, changed all that. In doing so, they opened up a huge software developer market that really didn't much exist before.
Google and others have decided to go in a different direction with their operating systems, which is great. In a competitive market, some of us can choose Apple, among other reasons specifically because we want the iOS ecosystem that ensures third-party apps meet standards for security, operability and UI functionality. Forcing Apple to crack that open would undermine competition by removing my choice to have the more secure system. Yes, under that supposedly "open" model, I could still choose to only buy apps through the app store, but developers could also refuse to sell through the app store because they now have a "free" (for them) access model, ultimately narrowing market options and taking away the thing I have now, an iPhone with a secure, closed system for iOS apps.
gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions.
What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.
Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.
I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so?
Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all.
According to another AI article it did. Just 5% or thereabouts but that equates to millions of dollars. Therefore my original comment "if revenues were reduced at all" applies, correct?
FYI- Apple has not yet reported any revenue from their App Store since they reduced their commission rates. It took effect on Jan.1, 2021. So how does anyone know that App Store revenue will b reduced by 5%? No one knows until Apple report 2nd fiscal quarterly earnings (1st quarter yearly earnings) this April. If anything, like I mentioned, the revenue growth from the 1% of developers that received no reduction in their commission rates and accounts for over 93% of the App Store revenue, will easily make up for any loss from the reduction of commission rates and there will no be reduction of revenue when they report earnings next month. Apple App Store revenue grew by 28% in 2020. Mostly because of the largest 1% of developers.
Apple does not break out how much each of the sectors in their Apple Service Revenue are making. But Apple Service Revenue have been growing by double digits in the past few years. So even a 5% lost in commission in the App Store, will not show up as a reduction in App Store revenue.
Here's a thought, the revenue lost from not having Fortnight in the app store will be way more costly than any loss from the reduction of the commissions. (At least for this quarter.) That also will be in the millions of dollars. Don't forget, Apple only count their commissions as revenue. They do not count the 70% the developer gets as revenue. At least not when they report it in their earnings. But the 70% the developers gets can be found out and use to roughly come up with Apple App Store gross/net revenue. So far, the actual 30% that Apple makes, has never been revealed by Apple.
You do know that any "reduction" in revenue is calculated using last quarter numbers. Not what the revenue would have been if they didn't lower the commission ...... right?
gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions.
What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.
Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.
I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so?
Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all.
According to another AI article it did. Just 5% or thereabouts but that equates to millions of dollars. Therefore my original comment "if revenues were reduced at all" applies, correct?
FYI- Apple has not yet reported any revenue from their App Store since they reduced their commission rates. Don't forget, Apple only count their commissions as revenue. They do not count the 70% the developer gets as revenue.
The last I was aware Apple claims all the gross income from the App Store in their services segment before payouts to developers. Apple collects it and banks it. Apple's money. When you see gross "Services" reported it includes the entirety of app sales, not just the 30% Apple retains. If that has changed somewhat recently I've not found any mention of it, but happy to be brought up to date if you have some source for it.
gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions.
What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.
Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.
I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so?
Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all.
According to another AI article it did. Just 5% or thereabouts but that equates to millions of dollars. Therefore my original comment "if revenues were reduced at all" applies, correct?
FYI- Apple has not yet reported any revenue from their App Store since they reduced their commission rates. Don't forget, Apple only count their commissions as revenue. They do not count the 70% the developer gets as revenue.
The last I was aware Apple claims all the gross income from the App Store in their services segment before payouts to developers. Apple collects it and banks it. Apple's money. When you see gross "Services" reported it includes the entirety of app sales, not just the 30% Apple retains. If that has changed somewhat recently I've not found any mention of it, but happy to be brought up to date if you have some source for it.
Apple reports revenue from third-party app sales on a net basis. In other words, it only counts in Services revenue the commission it keeps from such sales. That's part of why Apple's gross margins for Services are so high. Counting the revenue from such sales on a gross basis wouldn't make as such sense because, in essence, Apple is in that context more an agent seller than a reseller.
That is, as far as I'm aware, how Apple has always counted revenue from third-party app sales. At a minimum that's how Apple has counted such revenue for quite a while - at least a decade.
gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions.
What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.
Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.
I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so?
Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all.
According to another AI article it did. Just 5% or thereabouts but that equates to millions of dollars. Therefore my original comment "if revenues were reduced at all" applies, correct?
FYI- Apple has not yet reported any revenue from their App Store since they reduced their commission rates. Don't forget, Apple only count their commissions as revenue. They do not count the 70% the developer gets as revenue.
The last I was aware Apple claims all the gross income from the App Store in their services segment before payouts to developers. Apple collects it and banks it. Apple's money. When you see gross "Services" reported it includes the entirety of app sales, not just the 30% Apple retains. If that has changed somewhat recently I've not found any mention of it, but happy to be brought up to date if you have some source for it.
Apple reports revenue from third-party app sales on a net basis. In other words, it only counts in Services revenue the commission it keeps from such sales. That's part of why Apple's gross margins for Services are so high. Counting the revenue from such sales on a gross basis wouldn't make as such sense because, in essence, Apple is in that context more an agent seller than a reseller.
That is, as far as I'm aware, how Apple has always counted revenue from third-party app sales. At a minimum that's how Apple has counted such revenue for quite a while - at least a decade.
Some source for that would be appreciated Carnegie. On the surface that would make no sense since all revenues are collected and processed by Apple directly. Typically payouts to other parties, in this case a developer, would be reported under "cost of sales", then deducted from gross revenues to determine a net margin. If you see a footnote in Apple financials that indicate the reported service revenues are only the portion retained by Apple a link would be helpful.
EDIT: Ah, found it, so no citations needed Carnegie: "For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered. For
these arrangements, the Company does not have a right to bill for the undelivered services.The Company has determined that any
unbilled consideration relates entirely to the value of the undelivered services.Accordingly, the Company has not recognized revenue,
and has elected not to disclose amounts, related to these undelivered services.
For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the
Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when
determining whether it obtains control of third-party products including, but not limited to, evaluating if it can establish the price of
the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product.
For third party applications sold through the App Store
®
, Mac App Store, TV App Store and Watch App Store and certain digital content sold
through the Company’s other digital content stores, the Company does not obtain control of the product before transferring it to the
customer.Therefore, the Company accounts for such sales on a net basis by recognizing in Services net sales only the commission
it retains.
The Company has elected to record revenue net of taxes collected from customers that are remitted to governmental authorities,
with the collected taxes recorded within other current liabilities until remitted to the relevant government authority."
So Apple only counts the portion of AppStore revenues that it retains, making my understanding at least as it stands today incorrect, but those revenue numbers are not specifically reported. Thanks for the prompt to investigate sir.
BTW, another footnote I've missed in the past is "Services net sales also include amortization of the deferred value of Maps, Siri, and free iCloud storage and
Apple TV+ services, which are bundled in the sales price of certain products."
gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions.
What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.
Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.
I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so?
Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all.
According to another AI article it did. Just 5% or thereabouts but that equates to millions of dollars. Therefore my original comment "if revenues were reduced at all" applies, correct?
FYI- Apple has not yet reported any revenue from their App Store since they reduced their commission rates. Don't forget, Apple only count their commissions as revenue. They do not count the 70% the developer gets as revenue.
The last I was aware Apple claims all the gross income from the App Store in their services segment before payouts to developers. Apple collects it and banks it. Apple's money. When you see gross "Services" reported it includes the entirety of app sales, not just the 30% Apple retains. If that has changed somewhat recently I've not found any mention of it, but happy to be brought up to date if you have some source for it.
Apple reports revenue from third-party app sales on a net basis. In other words, it only counts in Services revenue the commission it keeps from such sales. That's part of why Apple's gross margins for Services are so high. Counting the revenue from such sales on a gross basis wouldn't make as such sense because, in essence, Apple is in that context more an agent seller than a reseller.
That is, as far as I'm aware, how Apple has always counted revenue from third-party app sales. At a minimum that's how Apple has counted such revenue for quite a while - at least a decade.
Some source for that would be appreciated Carnegie. On the surface that would make no sense since all revenues are collected and processed by Apple directly. Typically payouts to other parties, in this case a developer, would be reported under "cost of sales", then deducted from gross revenues to determine a net margin. If you see a footnote in Apple financials that indicate the reported service revenues are only the portion retained by Apple a link would be helpful.
EDIT: Ah, found it, so no citations needed Carnegie: ...........
Think about this. If Apple used the gross revenue from their App Store, that includes the 70% they pay out to the developers, when reporting App Store revenue, then reducing their commissions will NEVER show up as a reduction in App Store revenue in their report. Apple could reduce their commission to 0% and it would not reduce App Store revenue by a penny, if they were using the gross revenue for their report.
gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions.
What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.
Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.
I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so?
Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all.
According to another AI article it did. Just 5% or thereabouts but that equates to millions of dollars. Therefore my original comment "if revenues were reduced at all" applies, correct?
FYI- Apple has not yet reported any revenue from their App Store since they reduced their commission rates. Don't forget, Apple only count their commissions as revenue. They do not count the 70% the developer gets as revenue.
The last I was aware Apple claims all the gross income from the App Store in their services segment before payouts to developers. Apple collects it and banks it. Apple's money. When you see gross "Services" reported it includes the entirety of app sales, not just the 30% Apple retains. If that has changed somewhat recently I've not found any mention of it, but happy to be brought up to date if you have some source for it.
Apple reports revenue from third-party app sales on a net basis. In other words, it only counts in Services revenue the commission it keeps from such sales. That's part of why Apple's gross margins for Services are so high. Counting the revenue from such sales on a gross basis wouldn't make as such sense because, in essence, Apple is in that context more an agent seller than a reseller.
That is, as far as I'm aware, how Apple has always counted revenue from third-party app sales. At a minimum that's how Apple has counted such revenue for quite a while - at least a decade.
Some source for that would be appreciated Carnegie. On the surface that would make no sense since all revenues are collected and processed by Apple directly. Typically payouts to other parties, in this case a developer, would be reported under "cost of sales", then deducted from gross revenues to determine a net margin. If you see a footnote in Apple financials that indicate the reported service revenues are only the portion retained by Apple a link would be helpful.
EDIT: Ah, found it, so no citations needed Carnegie: "For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered. For
these arrangements, the Company does not have a right to bill for the undelivered services.The Company has determined that any
unbilled consideration relates entirely to the value of the undelivered services.Accordingly, the Company has not recognized revenue,
and has elected not to disclose amounts, related to these undelivered services.
For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the
Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when
determining whether it obtains control of third-party products including, but not limited to, evaluating if it can establish the price of
the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product.
For third party applications sold through the App Store
®
, Mac App Store, TV App Store and Watch App Store and certain digital content sold
through the Company’s other digital content stores, the Company does not obtain control of the product before transferring it to the
customer.Therefore, the Company accounts for such sales on a net basis by recognizing in Services net sales only the commission
it retains.
The Company has elected to record revenue net of taxes collected from customers that are remitted to governmental authorities,
with the collected taxes recorded within other current liabilities until remitted to the relevant government authority."
So Apple only counts the portion of AppStore revenues that it retains, making my understanding at least as it stands today incorrect, but those revenue numbers are not specifically reported. Thanks for the prompt to investigate sir.
BTW, another footnote I've missed in the past is "Services net sales also include amortization of the deferred value of Maps, Siri, and free iCloud storage and
Apple TV+ services, which are bundled in the sales price of certain products."
You're welcome.
Yeah, all of Apple's 10-Qs and 10-Ks would report that Apple accounts for third-party app sales this way - i.e., on a net revenue basis. Apple also provided some supplemental reporting a few years back that shed some light on gross app store revenue.
As for accounting for revenues in the way you describe in the first paragraph, that would be more likely when we're talking about a reseller model. Walmart, e.g., would generally count all of the revenue it receives from sales of third-party products. What it paid third parties for those products would then be deducted, as part of cost of sales, to leave gross margins. But as I indicated, Apple isn't really acting as a reseller when it comes to third-party apps. It's acting as an agent seller. It's collecting the money for the developers and then taking out what it's owed (as well as, e.g., taxes) before passing the remaining proceeds along to the developers.
gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions.
What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.
Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.
I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so?
Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all.
According to another AI article it did. Just 5% or thereabouts but that equates to millions of dollars. Therefore my original comment "if revenues were reduced at all" applies, correct?
FYI- Apple has not yet reported any revenue from their App Store since they reduced their commission rates. Don't forget, Apple only count their commissions as revenue. They do not count the 70% the developer gets as revenue.
The last I was aware Apple claims all the gross income from the App Store in their services segment before payouts to developers. Apple collects it and banks it. Apple's money. When you see gross "Services" reported it includes the entirety of app sales, not just the 30% Apple retains. If that has changed somewhat recently I've not found any mention of it, but happy to be brought up to date if you have some source for it.
Apple reports revenue from third-party app sales on a net basis. In other words, it only counts in Services revenue the commission it keeps from such sales. That's part of why Apple's gross margins for Services are so high. Counting the revenue from such sales on a gross basis wouldn't make as such sense because, in essence, Apple is in that context more an agent seller than a reseller.
That is, as far as I'm aware, how Apple has always counted revenue from third-party app sales. At a minimum that's how Apple has counted such revenue for quite a while - at least a decade.
Some source for that would be appreciated Carnegie. On the surface that would make no sense since all revenues are collected and processed by Apple directly. Typically payouts to other parties, in this case a developer, would be reported under "cost of sales", then deducted from gross revenues to determine a net margin. If you see a footnote in Apple financials that indicate the reported service revenues are only the portion retained by Apple a link would be helpful.
EDIT: Ah, found it, so no citations needed Carnegie: "For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered. For
these arrangements, the Company does not have a right to bill for the undelivered services.The Company has determined that any
unbilled consideration relates entirely to the value of the undelivered services.Accordingly, the Company has not recognized revenue,
and has elected not to disclose amounts, related to these undelivered services.
For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the
Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when
determining whether it obtains control of third-party products including, but not limited to, evaluating if it can establish the price of
the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product.
For third party applications sold through the App Store
®
, Mac App Store, TV App Store and Watch App Store and certain digital content sold
through the Company’s other digital content stores, the Company does not obtain control of the product before transferring it to the
customer.Therefore, the Company accounts for such sales on a net basis by recognizing in Services net sales only the commission
it retains.
The Company has elected to record revenue net of taxes collected from customers that are remitted to governmental authorities,
with the collected taxes recorded within other current liabilities until remitted to the relevant government authority."
So Apple only counts the portion of AppStore revenues that it retains, making my understanding at least as it stands today incorrect, but those revenue numbers are not specifically reported. Thanks for the prompt to investigate sir.
BTW, another footnote I've missed in the past is "Services net sales also include amortization of the deferred value of Maps, Siri, and free iCloud storage and
Apple TV+ services, which are bundled in the sales price of certain products."
You're welcome.
Yeah, all of Apple's 10-Qs and 10-Ks would report that Apple accounts for third-party app sales this way - i.e., on a net revenue basis. Apple also provided some supplemental reporting a few years back that shed some light on gross app store revenue.
As for accounting for revenues in the way you describe in the first paragraph, that would be more likely when we're talking about a reseller model. Walmart, e.g., would generally count all of the revenue it receives from sales of third-party products. What it paid third parties for those products would then be deducted, as part of cost of sales, to leave gross margins. But as I indicated, Apple isn't really acting as a reseller when it comes to third-party apps. It's acting as an agent seller. It's collecting the money for the developers and then taking out what it's owed (as well as, e.g., taxes) before passing the remaining proceeds along to the developers.
Another way Gatorguy can make sense of this is that Apple is not the one selling anything in their App Store, except maybe their own apps. The developers are selling their apps in the App Store. Apple is only providing a "service" that helps developers sell their apps. And for this "service", which includes processing payments for the developers, Apple collects a commission. Which they report as App Store revenue.
If Apple were selling the apps, like how they sell third party products in their Apple Store, by marking up their cost in order to make a profit, the App Store would not be in the "Apple Services" category in their earnings report.
Comments
Now, do you expect BMW to help you install a Lexus engine into your BMW? Then what makes you think Apple should help you install apps from other places other than their Apple App Store?
And just exactly what do Apple need to improve with their App Store, in order to compete? The last I checked, the Apple App Store is doing just fine.
Or is your idea of improving the Apple App Store in order to compete is to allow third party app stores in iOS or allow developers to skip paying Apple a commission with in-app purchases, so that Apple can make less money competing with their own App Store? Gee, you're funny and delusional. That would be like BMW buying Lexus engines from Toyota and installing then into their own BMW, in order to compete. Or to allow Toyota to set up shop inside a BMW dealership, to sell Lexus.
And I got news for you, Apple make their money selling iDevices, not iOS. iOS is just one of many features that Apple uses in trying to sway consumers to buy an iDevice, over a competing Android device. And the Apple Apple Store is just a fraction of the many features in iOS. With better security being its proven and main selling feature and more privacy being the next. Any "improvements" to the Apple App Store that compromises either of those, is not improving iOS, in order to compete.
As a result iOS does not even have "a 100% monopoly on the sale and distribution" of apps on iOS as gatorguy claims, nor is he correct when he says "there is no way for a developer to bring an app to iOS users without selling it through the App Store." Google is proving gatorguy wrong right now.
I must have at least a dozen apps on my iPhone and EVERY ONE of them seems to have a web-based alternative.
Sorry, more unless excuses.
A Home Pod only works with an iDevice. There is no excuse for buying an Apple HomePod and then finding out you can only use the Apple App Store to download apps. One must already have an iDevice and already know this, before they bought the HomePod or any devices that only works with an iDevice. That's like saying X-Box users don't have a choice to switch because all the games they purchased for their X-Box will have to be re-purchased for a PlayStation. They are locked-in and Microsoft is to blame for creating this lock-in barrier.
An Apple TV is a stand alone device. It doesn't require any iDevice in order to be functional. An Apple TV will work perfectly fine if one don't own an iDevice or Mac. All one needs is an iTunes account. And that can be done using a PC or Android device. This is also true with any Apple device with AirPlay. There's a free Android app that will broadcast to Apple airplay devices.
Consumers switch from Android to iOS all the time. So where's the barrier with all their apps having to be re-purchased? The truth is that there is no barrier there. 75% of the apps are free in both app stores. The over 95% of app stores revenue (both Google Play and Apple) are derive from in-app purchases using free apps. Only a small percent of app stores revenue are derive from the sale of the apps itself. And even with this, many of the purchased apps are cross platform, so buying then on one platform allows you to use it with another. The only real "lock-in" would be companies own apps that are used by their own employees, that are only on one of the mobile platforms. Apple and Google can not be blamed for this type of "lock-in".
Plus, I mentioned this to you before. The average consumer replace their mobile device every 2 to 3 years, with the newest or newer used ones. At this point, there is no barrier to switching to another platform, if that's what they want to choose to do. They were already going to pay for another mobile device anyway. And there is no excuse for not knowing that with iOS, one can only download apps from the Apple App Store, after buying a second or third or fourth, etc., iDevice. If you bought another iDevice, you can't bitch about how you have no choice but to use the Apple App Store to install apps. The time to bitch was when you were using your iDevice the first time you bought it. And you had the choice of using another app store, before buying another iDevice. No one forced you to buy another iDevice. There is no lock-in "barrier".
And, if you do have to switch, your old mobile device is still worth something. If you're are switching for good, there would be no need for it and you can sell it. So it's not as expensive to buy a new device for another platform, as you make it out to be.
With Ticketmaster, the concert/sport/event venues determines the face value for a ticket and Ticketmaster will add their service charges and fees to arrive at the final cost of the ticket they sell to consumers. No matter what the final price of the ticket to consumers, the venue still gets 100% of what they wanted for the ticket plus sometimes a percentage of Ticketmaster fees. The venue do not have to take into consideration Ticketmaster fees, when determining the face value of their tickets. The consumers pays Ticketmaster fees directly.
With the Apple App Store (and all app stores for that matter), the developers determines the final price of their apps and Apple (or the app store owner) gets a commission when the apps are sold through their app stores. The developers has to consider the commission when determining what they want to sell their apps for, to ensure a reasonable profit. The consumer buying the apps are paying only what the developers charges. The consumers pays the app store commission indirectly.
Plus, with app stores and developers with free apps, the consumers can still download their free apps, for free. Will Ticketmaster process free venue tickets without adding a service charge and fees to the consumers or charging the venue for distributing their free tickets? Imagine if 75% of the tickets available at Ticketmaster, were free of charge to the consumers or the venue offering the free tickets.
And I'm willing to bet that if this was mainly about the Google Play Store, you wouldn't be so quick to say that they are quite similar to how Ticketmaster operates.
Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all. It might only slow down their App Store revenue growth by a rounding error. And here's why.
93% of Apple App Store (and Google Play Store) revenue are derive from 1% of the largest developers. These developers did not get any reduction in their commission in either app stores. They are still paying the 15% for reoccurring subscription payments and 30% for single time in-app purchases. So the rate cuts only benefit the 99% of developers responsible for 7% of Apple App Store revenue. The 99% where most, if not all, are, that can't afford to open their own app store or accept payment outside of iTunes and make their money from actually selling their apps and not from in-app purchases. The same 99% where app store revenue growth is not much of a factor for Apple or Google.
https://appdevelopermagazine.com/app-store-commission-cuts-to-15-percent-for-some/
Did you also ask why Google will also followed Apple and will reduce their rate by the same, under the same conditions, as Apple.
https://www.adweek.com/media/google-will-lower-some-payment-fees-for-app-developers/
In the end, it cost Apple and Google hardly anything to do this and yet they vastly benefit from making Epic case that they are mainly in this to help the small developers, seem meaningless. Nothing wrong with that, even from a shareholder point of view.
Despite the fact that it's relatively easy to move from iOS to Android and vice versa, if it's found that many people are NOT switching (which I suspect is actually the case), this might be used as an argument for action against Apple and Google.
There is precedence for this in the UK whereby gas and electricity suppliers were regulated to make it easier for people to switch suppliers. However it was found that many consumers still did NOT switch suppliers so suppliers faced additional regulations (price caps) to project consumers who were too apathetic to engage in the market. This has the effect of reducing prices for people who don't bother shopping around but increasing prices for those who do shop around.
I see the situation with Apple as quite similar; there are many people who pick Apple products specifically because of the way they currently operate and by regulating that away, those people can no longer pick what they want. On the flip side, you have people who currently don't pick Apple products because of the way they operate and regulating them in this way might then open up that option. The trouble with this approach is that it does not necessarily consider the fact that people don't switch because they are happy with what they already have.
If you've paid for a Costco membership, you're incentivized to go there rather than Sam's Club, but Costco doesn't have a monopoly on selling five-gallon jars of mayonnaise in the discount club market. Also, neither place will allow you to pull up in the parking lot and start selling peaches out of the back of your truck. Älso, älso, they're absolutely not going to entertain any demands that they sell your truckload of peaches in the store, using the store's point-of-sale system, all at no charge. None of the above devices or retail establishments could accurately be described by themselves as a "relevant market" which therefore represents a monopoly. Neither can iOS and the app store.
Google and others have decided to go in a different direction with their operating systems, which is great. In a competitive market, some of us can choose Apple, among other reasons specifically because we want the iOS ecosystem that ensures third-party apps meet standards for security, operability and UI functionality. Forcing Apple to crack that open would undermine competition by removing my choice to have the more secure system. Yes, under that supposedly "open" model, I could still choose to only buy apps through the app store, but developers could also refuse to sell through the app store because they now have a "free" (for them) access model, ultimately narrowing market options and taking away the thing I have now, an iPhone with a secure, closed system for iOS apps.
Apple does not break out how much each of the sectors in their Apple Service Revenue are making. But Apple Service Revenue have been growing by double digits in the past few years. So even a 5% lost in commission in the App Store, will not show up as a reduction in App Store revenue.
Here's a thought, the revenue lost from not having Fortnight in the app store will be way more costly than any loss from the reduction of the commissions. (At least for this quarter.) That also will be in the millions of dollars. Don't forget, Apple only count their commissions as revenue. They do not count the 70% the developer gets as revenue. At least not when they report it in their earnings. But the 70% the developers gets can be found out and use to roughly come up with Apple App Store gross/net revenue. So far, the actual 30% that Apple makes, has never been revealed by Apple.
You do know that any "reduction" in revenue is calculated using last quarter numbers. Not what the revenue would have been if they didn't lower the commission ...... right?
That is, as far as I'm aware, how Apple has always counted revenue from third-party app sales. At a minimum that's how Apple has counted such revenue for quite a while - at least a decade.
EDIT:
Ah, found it, so no citations needed Carnegie:
"For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered. For these arrangements, the Company does not have a right to bill for the undelivered services.The Company has determined that any unbilled consideration relates entirely to the value of the undelivered services.Accordingly, the Company has not recognized revenue, and has elected not to disclose amounts, related to these undelivered services.
For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when determining whether it obtains control of third-party products including, but not limited to, evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product.
For third party applications sold through the App Store ® , Mac App Store, TV App Store and Watch App Store and certain digital content sold through the Company’s other digital content stores, the Company does not obtain control of the product before transferring it to the customer.Therefore, the Company accounts for such sales on a net basis by recognizing in Services net sales only the commission it retains.
The Company has elected to record revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within other current liabilities until remitted to the relevant government authority."
So Apple only counts the portion of AppStore revenues that it retains, making my understanding at least as it stands today incorrect, but those revenue numbers are not specifically reported. Thanks for the prompt to investigate sir.
BTW, another footnote I've missed in the past is "Services net sales also include amortization of the deferred value of Maps, Siri, and free iCloud storage and Apple TV+ services, which are bundled in the sales price of certain products."
Now it makes sense on why it's net revenue?
Yeah, all of Apple's 10-Qs and 10-Ks would report that Apple accounts for third-party app sales this way - i.e., on a net revenue basis. Apple also provided some supplemental reporting a few years back that shed some light on gross app store revenue.
As for accounting for revenues in the way you describe in the first paragraph, that would be more likely when we're talking about a reseller model. Walmart, e.g., would generally count all of the revenue it receives from sales of third-party products. What it paid third parties for those products would then be deducted, as part of cost of sales, to leave gross margins. But as I indicated, Apple isn't really acting as a reseller when it comes to third-party apps. It's acting as an agent seller. It's collecting the money for the developers and then taking out what it's owed (as well as, e.g., taxes) before passing the remaining proceeds along to the developers.
If Apple were selling the apps, like how they sell third party products in their Apple Store, by marking up their cost in order to make a profit, the App Store would not be in the "Apple Services" category in their earnings report.