Typically, it does not cost a developer just 3% of sales, if they were to use their own payment system, instead of using Apple's iTunes. The 3% is just what they have to pay the CC companies and processing fees. What about the cost of hosting a payment system outside the Apple App Store? Just like all those the thinks it only cost Apple 3% to process an app sales through iTunes, they forget that the payment system itself cost Apple something to maintain.
Developers that don't want to pay Apple 30% of sales would have to set up and maintain their own secure server, to accept and process CC or PayPal payments. Or maybe there are companies that offer this kind of service. I can't imagine that it's not going to cost anything for a developer to set up their own payment system. What? Are they going to only accept checks in the mail?
Then there's the logistics of how to you activate the app that a customer paid for, from outside of the Apple App Store. The app has to be available in the Apple App Store. There's no other way for your customers to get an iOS app into their iDevice. Will all the downloads use the same password? If so, then what prevents a customer from sharing the password with others? Which means that each download must have it's own serial number and unique password, which must be emailed to the customer after payment. How much time is that going to add to developing an app and the time it takes to process a payment and email the unique password?
What about refunds? Or what happens if the payment don't go through? What if customers don't want to use a CC or don't have one or don't want to give their CC info to a developer for a $1.99 purchase? Will the developer offer gift cards, like with Apple iTunes? Time is not free, if you're a developer trying to make money selling software.
Will the customer have to pay for each download of the same app, for all their iDevices? If not, then it will require providing several passwords to the paying customers that will be using the same purchased app on more than one iDevices. What if a customer iDevice crashes and is reset to factory? What if a paying customer buy a new iDevice? How much time will the developer have to spend to provide customers that already paid for an app months or years ago, to have it working again after a factory reset or want to have it on another iDevice they already own or purchased later or transferred to a new iDevice that replaces their old one, if each download requires a unique password to activate? Apple's 30% takes care of all of this with iTunes.
It might only cost big developers like Epic, Spotify or MS just 3% to process payments for apps sales because they already have a secure payment system in place that most of their customers trust. But it's going to cost the average small and medium size developers way more than just 3% of sales. I'm willing to bet that for those developers that don't already have a payment system in place and must use Apple's iTunes, 30% of sales is a bargain. Even if one don't include the benefit of having access to Apple customers on their iOS platform.
It's a joke that so many people think that Apple's 30% cut only goes toward covering the 3% that is paid to the CC companies. And even more of a joke to think that if a developer were allowed to set up their own payment system, they will make 27% more on each sale, after covering the 3% CC transaction fee. If anything, most developers will lose sales because many potential customers are not going to trust unknown developers websites, with their CC info, for a one time purchase that will probably be less than $5.
This is a really great post. I would go further to add that the App store makes upgrading to a new device real easy.
Many of us remember (not fondly I hope) the often daunting prospect of moving your Windows system to a new PC. You could spend days before even starting locating all the software (with the right version) and the license keys. Then the seemingly endless system reboots, each time it getting slightly slower as you created your environment once again and could become productive.
That is still very much the case with Microsoft's mess of an OS.
By contrast, I moved from a 2015 15in MBP to a new 16in MBP and was up and working again in under two hours. That benefit is priceless to many of us.
I for one don't want to go backwards thank you very much. Maybe this is because I'm getting older? I don't know. I do know that I used to tinker with my kit all the time. I actually built an A-D and D-A interface for an IMP-16P (16bit micro made by Nat Semi) in 1974 (yes I'm getting ancient) but these days I really don't want to tinker with computers any more. I have bigger things to tinker with now as I'm rebuilding a Traction Engine from the 1930's.
I think Apple’s fees are high, but it’s difficult to sympathize with Epic.
I remember the cost of games before the App Store and the like. Epic is being asinine here and should get slapped down big time. Apple created the whole platform they’re using. Don’t like it, don’t offer the app.
Epic is that drunk who comes into your bar, demands your best scotch, and refuses to pay.
Unfortunately, Epic's ultimate goal is to set up their own stand near the entrance and sell their own swill, imported from China and made from the finest gutter oil.
Epic is that drunk who comes into your bar, demands your best scotch, and refuses to pay.
Unfortunately, Epic's ultimate goal is to set up their own stand near the entrance and sell their own swill, imported from China and made from the finest gutter oil.
I'm beginning to think that Apple's strategy is flawed. They could have simply tried to respond to Epic's lawsuit by saying "Apple has no legal obligation to accept any software from Epic. We don't like them and will no longer accept anything from them." But no, they are getting into the weeds. They should have just perma-banned Epic. Winning this issue would be the biggest win of all that Apple could obtain. I mean really, why would Apple be interested in accepting software from a company that takes you to court? Apple should even ban the companies that recently created the organization against Apple. You don't think that Google, Microsoft, Sony and Nintendo have companies that they won't allow on their stores? They don't need justification to choose business partners. But there is no better justification than "They are suing us in court." By choosing not to fight for their rights to select business partners, Apple is weakening its right to fight back against them.
That would have been a big mistake, and could be interpreted as using monopoly power to harm another business. Much better to do what they are doing, which is basically saying "this is ridiculous, a store has every right to charge whatever markup it wants on a product it carries and the manufacturer has every right to say sorry, no deal". Epic is clearly trying to have its cake and eat it too. They will ultimately have to determine whether 70% of a lot is better than 100% of nothing from the iOS platform.
I think Apple’s fees are high, but it’s difficult to sympathize with Epic.
Right now Apple's fee structure favours the small developer, because all developers pay almost NOTHING (only that $99 annual developer fee) until they start selling products, through that 15% to 30% fee. Would you prefer that there be an upfront fee of $1000 per developer for the Xcode tools and developer accounts and services, even before a single product is sold? That would be great for big companies like Epic but bad for the million developers who would have to pay $1000 each just to join the table.
Basically Epic doesn't want to be subsidizing the small developer (who include their competitors) any more. Understandable. But every one of the 200 million socialists in the US should be outraged at Epic.
I think if you're offering a free app, then the $99 fee is appropriate. If you're developing an app that you will charge for, then $1000 is not that much if that meant that you can control the purchase of the app yourself (ie., through your own payment systems which typically costs 3% and not 30% of the App Store). Developing a pay-for app is a business and there are costs to start a business or a new project in an existing business. A Mac computer is way more than $1000, which is needed to develop apps. Add to that the cost of an iPhone if you're developing iOS apps.
The cost of starting a business isn't $99 so it's appropriate for a free app. I think $1000 is a great starting point to get the dev tools and marketing and distribution. The payment system should be the devs choice -- stick with App Store (30%) or go it alone (3% by most CC systems). Either way, Apple got their $1000 to allow you to market your app on their store, at least until there are other options to market and distribute your app outside the App Store. The current investigations against Apple for being a monopoly will tell us soon if that is an option.
Typically, it does not cost a developer just 3% of sales, if they were to use their own payment system, instead of using Apple's iTunes. The 3% is just what they have to pay the CC companies and processing fees. What about the cost of hosting a payment system outside the Apple App Store? Just like all those that thinks it only cost Apple 3% to process an app sales through iTunes, they forget that the payment system itself cost Apple something to maintain.
Developers that don't want to pay Apple 30% of sales would have to set up and maintain their own secure server, to accept and process CC or PayPal payments. Or maybe there are companies that offer this kind of service. I can't imagine that it's not going to cost anything for a developer to set up their own payment system. What? Are they going to only accept checks in the mail?
Then there's the logistics of how to you activate the app that a customer paid for, from outside of the Apple App Store. The app has to be available in the Apple App Store. There's no other way for your customers to get an iOS app into their iDevice. Will all the downloads use the same password? If so, then what prevents a customer from sharing the password with others? Which means that each download must have it's own serial number and unique password, which must be emailed to the customer after payment. How much time is that going to add to developing an app and the time it takes to process a payment and email the unique password?
What about refunds? Or what happens if the payment don't go through? What if customers don't want to use a CC or don't have one or don't want to give their CC info to a developer for a $1.99 purchase? Will the developer offer gift cards, like with Apple iTunes? Time is not free, if you're a developer trying to make money selling software.
Will the customer have to pay for each download of the same app, for all their iDevices? If not, then it will require providing several passwords to the paying customers that will be using the same purchased app on more than one iDevices. What if a customer iDevice crashes and is reset to factory? What if a paying customer buy a new iDevice? How much time will the developer have to spend to provide customers that already paid for an app months or years ago, to have it working again after a factory reset or want to have it on another iDevice they already own or purchased later or transferred to a new iDevice that replaces their old one, if each download requires a unique password to activate? Apple's 30% takes care of all of this with iTunes.
It might only cost big developers like Epic, Spotify or MS just 3% to process payments for apps sales because they already have a secure payment system in place that most of their customers trust. But it's going to cost the average small and medium size developers way more than just 3% of sales. I'm willing to bet that for those developers that don't already have a payment system in place and must use Apple's iTunes, 30% of sales is a bargain. Even if one don't include the benefit of having access to Apple customers on their iOS platform.
It's a joke that so many people think that Apple's 30% cut only goes toward covering the 3% that is paid to the CC companies. And even more of a joke to think that if a developer were allowed to set up their own payment system, they will make 27% more on each sale, after covering the 3% CC transaction fee. If anything, most developers will lose sales because many potential customers are not going to trust unknown developers websites, with their CC info, for a one time purchase that will probably be less than $5.
This is the best explanation I have ever read on this topic. I wish Apple lawyers, or maybe the appointed judge on the case, would be reading this. No need to read further. Apple is clearly on the right side of history here, but your fine elaboration nailed it!
Comments
Unfortunately, Epic's ultimate goal is to set up their own stand near the entrance and sell their own swill, imported from China and made from the finest gutter oil.
This is the best explanation I have ever read on this topic. I wish Apple lawyers, or maybe the appointed judge on the case, would be reading this. No need to read further. Apple is clearly on the right side of history here, but your fine elaboration nailed it!