Epic Games head Tim Sweeney bemoans iOS App Store's leeching of developer profits

Posted:
in iPhone edited August 2017
App developers are losing too much money from the cut of app revenues taken by app stores operated by Apple and other companies, according to Tim Sweeney, CEO of Epic Games, declaring the iOS App Store's high charge "a parasitic loss."




Addressing an audience of developers at Devcom in Cologne on Tuesday, Sweeney took time out from his keynote speech to talk about the business models of mobile gaming, reports GamesIndustry.biz. Sweeney suggested the current system in operation by the iOS App Store, Google Play, and others is "pretty unfair at the moment," insinuating Apple is earning too much compared to what it offers developers in terms of service.

"These app stores take 30 percent of your revenue for distribution," notes Sweeney. "That's strange because Mastercard, Visa, and other companies that handle transactions take 2 percent or three percent of the revenue."

Sweeney admits there are more costs to take into account, including content delivery and customer service, but still suggests it is difficult to believe these extra costs to consume more than 5 percent to 6 percent of revenue for their operation. "So they're pocketing a huge amount of profit from your order - and they aren't really doing much to help us anymore."

Reminiscing about the early years of the app economy where there were "just a few releases every week" and developers had a "pretty good chance" of topping the charts, Sweeney points out that the same charts are dominated by "a few games with $100 million marketing budgets," making it difficult for smaller developers to thrive.

Smaller developers are said to be put into the situation where they have to spend heavily on user acquisition through social networks and advertising, which Sweeney values at around $3 per installation for a free-to-play game.

"This is a market failure," added Sweeney. "Gamers really want to find great new games, developers want to reach gamers, and there's a lot of opportunity for discovery that isn't really working out in an effective way."

Sweeney concludes by telling developers not to accept it as the "status quo," that developers "should be angry about this," and they should "constantly be on the lookout for other solutions, and new ways to reach gamers."

The 30 percent charge has been attacked in the past as being too high, with Apple Music rival Spotify accusing Apple's policy of "causing grave harm to Spotify and its customers" in a 2016 complaint. To cover the fee without reducing subscription revenue, Spotify charges $12.99 per month for Spotify Premium in the App Store while charging $9.99 on its website, and has previously hinted to subscribers that paying directly to the company would save them money.

The iOS App Store has become a considerable driver for Apple's profits, forming part of the company's Services business alongside the Mac App Store, iTunes, iCloud, Apple Music, Apple Pay, and Apple Care. In the third fiscal quarter results, Apple's Services business totaled $7.27 billion in revenue, making it the equivalent size of a Fortune 100 company, though it is unknown how much of this is down to App Store revenues.

While Sweeney's Devcom comments may resonate with developers trying to earn a living from the App Store, it is worth noting that Epic Games takes a similar revenue cut from merchants providing assets to the Unreal Engine Marketplace. According to the marketplace frequently asked questions page, for every item sold in the online store, developers "receive 70 percent of the base price," with Epic taking its own 30 percent cut.
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Comments

  • Reply 1 of 42
    mubailimubaili Posts: 448member
    Appleinsider should really put the last paragraph on top, then I don't need to waste my time reading the article.
    mark fearingtmayalandailwonkothesanerandominternetpersonStrangeDaysRacerhomieXericthehalfbeechiawlym
  • Reply 2 of 42
    I think it's funny how he says "but still suggests it is difficult to believe these extra costs to consume more than 5 percent to 6 percent of revenue for their operation. "So they're pocketing a huge amount of profit from your order" ... ahhh, yeah. Capitalism. Believe me, NIKE doesn't pay $149 to produce and sell your $150 shoes either. Probably less than 4 bucks per pair. Maybe a lot less.

    I mean, I get his point, but as pointed out in that last paragraph - the market will bear what the market will bear.
    StrangeDaysRacerhomieX2old4funwatto_cobraSpamSandwich
  • Reply 3 of 42
    Sweeney really loves to put his foot in his mouth. Before the iOS app store, it wasn't uncommon for 3rd party Windows Mobile and Symbian app stores to take 40% to even 60% for the most populars ones.
    RacerhomieXSolichiacornchipwatto_cobradanhSpamSandwich
  • Reply 4 of 42
    22july201322july2013 Posts: 3,002member
    This is a fabulous opportunity for Sweeney. He can start his own store, take half the cut that Apple is taking, and still make billions!
    wonkothesanewilliamhStrangeDaysRacerhomieXlkruppwlymcornchipwatto_cobrabeowulfschmidtSpamSandwich
  • Reply 5 of 42
    Maybe he can jump-start a change in the industry by altering the practice of his own company.  But I bet he won't.
    StrangeDayswlymcornchipwatto_cobra
  • Reply 6 of 42
    Considering that it literally only costs developers $99/year to have access to all the iOS (and MacOS, etc.) APIs and development tools, the 30% is a bargain.
    RacerhomieXksecwatto_cobraSpamSandwich
  • Reply 7 of 42
    StrangeDaysStrangeDays Posts: 12,122member
    App developers are losing too much money from the cut of app revenues taken by app stores operated by Apple and other companies, according to Tim Sweeney, CEO of Epic Games, declaring the iOS App Store's high charge "a parasitic loss."

    "These app stores take 30 percent of your revenue for distribution," notes Sweeney. "That's strange because Mastercard, Visa, and other companies that handle transactions take 2 percent or three percent of the revenue."
    Bogus argument -- the percentage isn't for the credit card transaction, it's for the market access and distribution. I've shipped physical products to national retailers, just as Sweeney has, and I know that distributors and retailers take about the same over my whole sale price and the final retail price. Often you're forced to go thru a distributor and can't sell directly to the retailer. Sweeney knows this, having shipped to Best Buy and Target, etc, so I can only conclude he's trying to play a false sense of anger to drum up popular dev anger in order to negotiate better terms for his products.
    edited August 2017 Solichiawilliamlondonksecwatto_cobraedredhmlongco
  • Reply 8 of 42
    RacerhomieXRacerhomieX Posts: 95unconfirmed, member
    Make your own store then, nobody is stopping you. Then take 80% of all the profits.
    watto_cobra
  • Reply 9 of 42
    SoliSoli Posts: 10,033member
    He lost me at "Mastercard, Visa […] take 2 percent or three percent of the revenue." I know he then said that there's more involved in the App Store, but I see no mention of the tools Apple develops for their many OSes for 3rd party developers, but mostly it's because he decided to plant the seed of a fallacious and facile comparison.
    watto_cobraStrangeDays
  • Reply 10 of 42
    foggyhillfoggyhill Posts: 4,767member
    Complete fracking hypocritical whiners. The worse ones.

    Apple  gives the devs a platform, tools, and  most of all a market.

    What he wants is the equivalent of building a cruise ship and letting anyone just take some of your top notch equipment on the ship (cause you don't own any)  and set up some high end service on your billion dollar boat selling to your clients and barely paying anything.

    Epic built and exact replica of the god damn app store and you have the gal to speak.




    edited August 2017 watto_cobra
  • Reply 11 of 42
    netroxnetrox Posts: 1,193member
    It costs money to develop an online store, maintain it, and to advance superior hardware/software.
    watto_cobra
  • Reply 12 of 42
    lkrupplkrupp Posts: 9,991member
    DilirX said:
    Make your own store then, nobody is stopping you. Then take 80% of all the profits.
    More than one commenter has trotted this out. Next time someone excoriates Apple for its pricing structure or iPhone features, hardware construction, labor policies, CarPlay Karaoke, et al, just remember... tell them to build their own damn near trillion dollar company and implement all the stuff they scream at Apple about. If they're so smart and are  business geniuses then have at it. Same goes for those always bitching about their mobile carrier and their data plans and screaming for the government to step in and regulate prices and plans, caterwauling about Net Neutrality (sniff, sniff, tear in the eye.)
    watto_cobraStrangeDays
  • Reply 13 of 42
    I think he forgot how much developers makes when someone buys a physical copy at a store (which used to be the only way you could get software).
    watto_cobraSpamSandwichStrangeDays
  • Reply 14 of 42
    Take your apps off the Store if you're unhappy Epic, no-one is forcing you to be on the App Store.
    cornchipwatto_cobra
  • Reply 15 of 42
    He is attempting to get in front of the tsunami that is coming from developers who will be shipping apps with the Unreal Engine. Developers selling apps that use the Unreal Engine will be paid 40% of the cost of the app thanks to the App Store and Epic. Blaming Apple and others while excluding his company is wrong.

    watto_cobraSpamSandwich
  • Reply 16 of 42
    The Martin Shkreli of mobile gaming? Maybe that's too harsh. 
    Soliwatto_cobra
  • Reply 17 of 42
    realisticrealistic Posts: 1,154member
    Comparing any app store to MasterCard, Visa etc is not a valid comparison whatsoever.
    cornchipwatto_cobraSpamSandwich
  • Reply 18 of 42
    22july201322july2013 Posts: 3,002member
    Sweeney could petition Apple to model software sales after streaming music sales so that the buyer pays about "1 cent per play" on average.
    cornchipSpamSandwich
  • Reply 19 of 42
    SoliSoli Posts: 10,033member
    The Martin Shkreli of mobile gaming? Maybe that's too harsh. 
    Yeah. This guy may be a douche, but that's definitely too harsh. It's like looking at a guy dating/marrying a much younger women—like U.S. Treasury Secretary Steven Mnuchin or Jerry Seinfeld—and comparing them to Jared Fogle. Yet, I love when people work in topical analogies so you get a Like from me.
    edited August 2017
  • Reply 20 of 42
    SoliSoli Posts: 10,033member
    Still on topic, but segueing from Sweeney and comments, I do wonder if it would be boohoo Apple to reduce their take from 30% to say, 25%.

    When they started their App Store it was untested a big risk. They also came in at a lower percentage than other "smart" mobile device app stores that preceded it. Even though there are certain expenses that that don't benefit from economics of scale (a 100 MiB app still takes up 100 MiB on many drives in their data centers) and others that have diseconomies of scale (like an increasing number of free apps that need to be stored, verified before posting, and using bandwidth to download, to name a few), there are certainly many economies of scale (like their developer tools).

    Additionally, if developers saw that Apple was offering them more to sell via the App Store it could not only help shift development away from other platforms toward iOS, which could help sell more devices for Apple and less for other vendors. As great as their HW, as well as their long-term synergy of HW and SW, the strength of their platform still resides on having the best apps. Many of these are built into their OS, but many are by 3rd parties.

    This is no un-similar to an argument I made many years ago about making major macOS nee Mac OS X updates free when they still charged $129 for each major update.

    I'm not saying this will happen, nor am I saying this should happen, but I am saying that there's a discussion to be had as to how a drop in their cut could help increase their bottom line.
    fulles
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