Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
(2) The different 'kits' are in iOS. Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
(2) The "kits" that I mentioned (HomeKit, CloudKit, and many others) are code that COMMUNICATE with Apple's servers and obtain services from Apple's servers. I'd have to go through the list of 50 kits to determine how many are online services and how many are not. And you are implying that Apple's online services need to support apps that communicate with Apple's servers to obtain services but are obtained by users without having paid Apple any fee for doing so. I hope you see how that position is both hilarious and insane. You should be admitting that Apple has not obligation to provide any services to any app that was obtained without paying any fee.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
On App Store revenue. A quick Google returned this:
No one knows for sure as Apple doesn't reveal that information. I'd guess there's a good reason for that and it's profit related.
The different 'kits' are in iOS.
Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
The $64B in your link is the App store gross sales for 2020, not gross revenue. That number came from Apple reporting that they generated $45B for developers. So Apple estimated gross revenue from the App store is only 30% of that $64B gross sales number. Apple do not count the 70% they pay to developers as their revenue. It's the developer that pays Apple a commission, not the other way around.
So Apple gross revenue from the App store comes in at $19B for fiscal 2020, using these numbers.
To put $19B in perspective. Apple total revenue for fiscal 2020 was $275B. So the App store generated about 6% of Apple's total revenue with that number. Still not too shabby. But no where near $60B. At $60B, the App Store revenue would be about 25% of Apple 2020 revenue.That is totally unrealistic.
Even the $19B estimate seems too high. Apple services revenue, that Apple do report and includes the revenue from the App Store, is about 17% of Apple total revenue. That would be about $47B in 2020. And the Apple App Store is not the service that generate the most revenue in Apple services. Apple Care generate the most and Apple Music alone generate over $6B a year now. Apple services includes iTunes Music Store, e-books, Apple TV+ subscriptions, Apple TV movie rentals and sales and licensing. Tough to imagine that if at $19B, Apple App Store revenue accounts for 40% of Apple services revenue.
There's no competition for the 70% ($45B) developers got. No third party store is going to survive by giving developers less than 70%. So $45B of Apple App Store gross sales is off the table when it comes to a third party app store competing for some of Apple App Store gross sales.
So the only money a third party app store would be competing for is a piece of the 30% commission Apple charges.
Here's a break down of the app store revenue generated by Google and Apple app stores.
There's no doubt that Apple App Store generate more revenue than Google Play Store. There's no doubt that the Apple App Store generate much more revenue for developers than the Google Play Store. How much revenue developers generate using Android is an unknown. But developers are are their own when they sell their Android software outside of the Google Play Store. And Google neither get or claim any credit for it.
Notice that subscriptions and games with in-app purchases are by far the biggest revenue generators for Apple in their App Store. Without them, I doubt that even the Apple App Store would be profitable.
All Apple has to do is to not offer any support to subscription services that put their free apps in a third party store. If a third party app store app runs into trouble, it's up to the third party store owner to fix it. After all, they are the ones that got the commission. Apple will only support the apps that are in the Apple App Store. Subscription services will not put up with their subscribers having trouble getting access to their paid subscription with a third party app store app.
Apple do not have to allow a third party app store to accept iTunes account as a form of payment. This alone will make most third party app store unprofitable, as every iOS user has an iTunes account. Most iOS users don't use their iTunes account to pay for purchases because it's the only way to pay. They use their iTunes account to pay because it's the only way they want to pay.
Even Epic would not put their games in a third party app store. They want to have their games in their own app store. Where they don't have to pay a commission at all.
Let's face it. The only third party app store that will be profitable are the ones that big developers like Epic wants to open. And they are only interested in selling their own software in their app stores, to save on the 30% "tax". They couldn't careless about small time developers selling $1.99 app. The big money for them is not having to pay the 30% "tax" on their own software, not making a maybe a 12% commission on some $1.99 fart app.
And here's why Epic is not trying to force Google to allow third party app stores on Android devices. And it's not because Google allows downloading app from the internet.
And that's just the saving they could realize from not having to pay the Apple 30% 'tax" on just one game, Fortnight.
I think you lost track of the point along the way.
Apple is making billions running the app store. Put the actual numbers aside for a moment. Do you doubt that a competing store would be able to offer the same infrastructure to developers for far less and still make a huge profit?
You put a lot speculation in there, too.
It would be nice to see alternative stores on iDevices. A Play Store, an AppGallery or a new entry into the field. Competition is a must unless the purchaser wilfully accepts the limitations involved in a single Apple App Store model - and at the time of purchase.
That is the only way I see Apple getting through this unscathed (especially with EU investigations) and even that might be unacceptable to some government bodies.
Apple is already only charging 15% commission for ongoing subscription after the first year and to developers that sells less than $1M in apps. No third party app store is going to be highly profitable with subscription services in their app store. Remember, the only money up for grab is the commission Apple charges. So how low can a third party go with their commission rate for a big developer like Netflix or Spotify or Hulu or HBO and small developers, when they are already paying only a 15% commission for a significant portion of their subscribers paying in-app or for the sale of an app, in order still to make a huge profit? Would big subscription services even care to save 5% on the commission, to be in a third party app store that's charging only a 10% commission? Without iTunes payment, a lot of developer that don't already have a payment system in place, are not going to put their app in a third party app store and lose customers that wants to pay with iTunes. And the third party store will incur at least a 3-5% charge for processing CC payment.
Apple is already responding to possible completion by maybe being forced to allow third party app stores in iOS and they are making it very unlikely that any third party app store will be hugely profitable. Unless the big developer like Epic can open one, to save the 30% commission on their sales. Don't believe Sweeney when he say that he's looking after the small developers. Why would Sweeney sell his highly profitable apps in a third party app store with even 15% commission , when he can open his own and pay 0%? And this goes for nearly all the highly profitable subscription services. You don't think Amazon will open their own third party store, just to avoid the 15% -30% "tax" on digital goods sale in the Apple App Store?
This remind me of when ATT was broken up to the "Baby Bells", that took control of local calls from ATT. The average consumers ended paying a lot more for phone services because ATT retained their long distance services. And ATT was charging less for local calls when they had control of those because the money they made with from long distance calls subsidized the cost of the local calls. Without being able to rely on highly profitable long distance calls, the "Baby Bells" had to raise the price of local calls for the consumers.
I remember not only was my local phone service more expensive, i had to contract separately with ATT, or MCI or Sprint, if I wanted long distance as part of my phone service. And this would cost about an extra $5 a month, even if I never made a long distance call. Otherwise, I would need to dial some 10 to 16 digital code of one of dozens of long distance providers, in front of the long distance number, to make a long distance call. Plus long distance calls was now any where over 100 miles(?), not out of State. Competition is always great for the consumers...right? Most of the "Baby Bells" were never highly profitable, even when the infrastructure was already in place for them.
Expect the developers that offer free apps or depend on free apps to make money and the iOS users that uses a lot of free apps (that makes up 75% of the apps in the App Store), to be tossed under the bus, like the consumers with local calls in the ATT breakup, if third party app stores were to be allowed and they don't have to pay Apple anything to support iDevices and the iOS infrastructure.
Once again, there are a lot of questions you are asking that don't have clear answers - yet.
What is crystal clear is that without competition (or even the threat of competition) Apple would not change anything and would still be raking in many billions in App Store profits. Be it at 30% or 15% commission.
More App Stores would bring possible fragmentation and therefore change the dynamics of the market but that is necessary IMO. That isn't to say having one, Apple controlled, App Store is necessarily illegal. I just think it will be deemed anti-competitive in its current setup.
Like I said, set aside actual numbers for a moment, forget speculation on comissions, CC processing fees etc, and focus on the reality. The current reality. At 30% commission we're talking many, many billions. At 15%, we are still talking billions and you can probably slash that 15% and still be talking in the billions. That is the point.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
(2) The different 'kits' are in iOS. Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
(2) The "kits" that I mentioned (HomeKit, CloudKit, and many others) are code that COMMUNICATE with Apple's servers and obtain services from Apple's servers. I'd have to go through the list of 50 kits to determine how many are online services and how many are not. And you are implying that Apple's online services need to support apps that communicate with Apple's servers to obtain services but are obtained by users without having paid Apple any fee for doing so. I hope you see how that position is both hilarious and insane. You should be admitting that Apple has not obligation to provide any services to any app that was obtained without paying any fee.
The apps hook into Apple services wherever they may be. Using 'services' as an excuse to defend against competition in the app store is a failed defence.
I believe things will have to change somewhere in the current setup.
I have stated, and on many occasions, that I believe Apple's current setup is anti-competitive and will need to change. That's just my opinion. I can't say how the different competition bodies will rule on the subject. That's why investigations are in progress.
That said, I also believe that Apple could introduce a system that would not allow for competition and still be considered legal (again, just my opinion). That would require users to tacitly concede to the regulations of the current system but prior to purchase. Users would be made aware of Apple's commissions, the lack of competition etc and sign their complete understanding of the situation.
By reading many of the comments here you would think that iDevice users would jump at the prospect. After all, there would be zero material change in anything at all for users. Everything would continue 'as is' and all the competition investigations would possibly be history.
So why not do just that?
Well, for starters, some people here are simply wrong with their claims.
Apple would probably never go down that route because it's very likely it would change the image people have of the company and kill sales.
Remember, we're taking about making zero material changes here. Simply requiring users to understand what is happening NOW, and has been happening forever in iPhone land.
What could go wrong? Everything really.
So, with that option ruled out, it would be the moment to allow for alternative approaches.
Let's take your stance on the iOS 'kits'.
Developers are already complying with Apple's requirements by using Apple APIs to make calls to the different services, wherever they may be. The apps themselves are built using Apple's IDE.
Apple needs apps for the success of the platform. If you are worried about Apple losing monetisation for anything, that is a problem for Apple to resolve, not developers. Remember, I'm speaking from a competition perspective.
Apple could start charging for OS updates. It could charge developers for certain aspects (like it already does with developer subscriptions).
What it cannot do is create an unfair playing field in the process.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
(2) The different 'kits' are in iOS. Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
(2) The "kits" that I mentioned (HomeKit, CloudKit, and many others) are code that COMMUNICATE with Apple's servers and obtain services from Apple's servers. I'd have to go through the list of 50 kits to determine how many are online services and how many are not. And you are implying that Apple's online services need to support apps that communicate with Apple's servers to obtain services but are obtained by users without having paid Apple any fee for doing so. I hope you see how that position is both hilarious and insane. You should be admitting that Apple has not obligation to provide any services to any app that was obtained without paying any fee.
The apps hook into Apple services wherever they may be. Using 'services' as an excuse to defend against competition in the app store is a failed defence.
I believe things will have to change somewhere in the current setup.
I have stated, and on many occasions, that I believe Apple's current setup is anti-competitive and will need to change. That's just my opinion. I can't say how the different competition bodies will rule on the subject. That's why investigations are in progress.
That said, I also believe that Apple could introduce a system that would not allow for competition and still be considered legal (again, just my opinion). That would require users to tacitly concede to the regulations of the current system but prior to purchase. Users would be made aware of Apple's commissions, the lack of competition etc and sign their complete understanding of the situation.
By reading many of the comments here you would think that iDevice users would jump at the prospect. After all, there would be zero material change in anything at all for users. Everything would continue 'as is' and all the competition investigations would possibly be history.
So why not do just that?
Well, for starters, some people here are simply wrong with their claims.
Apple would probably never go down that route because it's very likely it would change the image people have of the company and kill sales.
Remember, we're taking about making zero material changes here. Simply requiring users to understand what is happening NOW, and has been happening forever in iPhone land.
What could go wrong? Everything really.
So, with that option ruled out, it would be the moment to allow for alternative approaches.
Let's take your stance on the iOS 'kits'.
Developers are already complying with Apple's requirements by using Apple APIs to make calls to the different services, wherever they may be. The apps themselves are built using Apple's IDE.
Apple needs apps for the success of the platform. If you are worried about Apple losing monetisation for anything, that is a problem for Apple to resolve, not developers.
Apple could start charging for OS updates. It could charge developers for certain aspects (like it already does with developer subscriptions).
What it cannot do is create an unfair playing field in the process.
I don't know
I get what you are saying, but I am not sure if I would agree with the bolded part. It is pure conjecture at this stage that everything would go wrong with that approach. It is quite possible that it would work out very well for Apple, given that iOS & Android are having "repeat" customers largely (>90%) and the cross over of platforms has been minimal in the last few years. it is NOT done by Apple so far, because it has not been a requirement by law. As and when the law change mandating what you suggested happens, I could very well see this exact scenario play out successfully for Apple.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
(2) The different 'kits' are in iOS. Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
(2) The "kits" that I mentioned (HomeKit, CloudKit, and many others) are code that COMMUNICATE with Apple's servers and obtain services from Apple's servers. I'd have to go through the list of 50 kits to determine how many are online services and how many are not. And you are implying that Apple's online services need to support apps that communicate with Apple's servers to obtain services but are obtained by users without having paid Apple any fee for doing so. I hope you see how that position is both hilarious and insane. You should be admitting that Apple has not obligation to provide any services to any app that was obtained without paying any fee.
The apps hook into Apple services wherever they may be. Using 'services' as an excuse to defend against competition in the app store is a failed defence.
I believe things will have to change somewhere in the current setup.
I have stated, and on many occasions, that I believe Apple's current setup is anti-competitive and will need to change. That's just my opinion. I can't say how the different competition bodies will rule on the subject. That's why investigations are in progress.
That said, I also believe that Apple could introduce a system that would not allow for competition and still be considered legal (again, just my opinion). That would require users to tacitly concede to the regulations of the current system but prior to purchase. Users would be made aware of Apple's commissions, the lack of competition etc and sign their complete understanding of the situation.
By reading many of the comments here you would think that iDevice users would jump at the prospect. After all, there would be zero material change in anything at all for users. Everything would continue 'as is' and all the competition investigations would possibly be history.
So why not do just that?
Well, for starters, some people here are simply wrong with their claims.
Apple would probably never go down that route because it's very likely it would change the image people have of the company and kill sales.
Remember, we're taking about making zero material changes here. Simply requiring users to understand what is happening NOW, and has been happening forever in iPhone land.
What could go wrong? Everything really.
So, with that option ruled out, it would be the moment to allow for alternative approaches.
Let's take your stance on the iOS 'kits'.
Developers are already complying with Apple's requirements by using Apple APIs to make calls to the different services, wherever they may be. The apps themselves are built using Apple's IDE.
Apple needs apps for the success of the platform. If you are worried about Apple losing monetisation for anything, that is a problem for Apple to resolve, not developers.
Apple could start charging for OS updates. It could charge developers for certain aspects (like it already does with developer subscriptions).
What it cannot do is create an unfair playing field in the process.
I don't know
I get what you are saying, but I am not sure if I would agree with the bolded part. It is pure conjecture at this stage that everything would go wrong with that approach. It is quite possible that it would work out very well for Apple, given that iOS & Android are having "repeat" customers largely (>90%) and the cross over of platforms has been minimal in the last few years. it is NOT done by Apple so far, because it has not been a requirement by law. As and when the law change mandating what you suggested happens, I could very well see this exact scenario play out successfully for Apple.
It's a curious situation.
I think your everyday user has no problems with how things are working from a client perspective. Not too many complain about it either. For them things have always been the same. They could even be considered satisfied customers.
The problems arise when perspectives change, and marketing people are very capable of swaying perspective and opinion.
Very slowly, Apple has been making changes to App Store policies, commissions, agreements etc. Those changes were largely due to increased scrutiny and many increasing numbers of investigations into its business practices. It is also lobbying very hard to protect its interests but away from the front line of public opinion.
It's almost like a game of chicken. Apple doesn't want wholesale change to be forced onto how it does business but doesn't want to voluntarily make enough changes to make the investigations less of a threat.
I think it has chosen to wait and see what conclusions are drawn by the investigations. If no major wrongdoing is found, Apple would breathe a collective sigh of relief and continue more or less as it is.
If it is found to be using (or have used anti-competitive practices) it would have two major choices.
One, would be to not open up its platform and instead make potential buyers aware (in clear and concise terms) of the situation they are buying into. When Spanish mortgage 'floor' clauses were challenged, the issue went right to the highest courts in the EU. Even though the clauses were clearly present in the mortgage contracts the banks still had to reimburse customers who had been affected by the clauses. Strangely though, the clauses themselves were not considered illegal. It was the lack of clarity in how they were communicated to bank clients. Just putting the clause in the contract and having a public notary read it aloud was not enough. The customer had to comprehend the clause and the banks had to be able to demonstrate this.
I think, on paper at least, Apple would be able to continue as it does now but on the understanding that users fully comprehend what the situation entails.
Now, as I said above, in reality there would be no material change in anything from a consumer perspective. Nothing at all would change.
The problem is perspective itself. I have no formal training in marketing but I could instill serious doubts into any iDevice user, should any investigation go the wrong way with its findings.
Put into the hands of professionals and part of a campaign, the damage to the App market in general could be devastating.
People accept many things without question but the moment you tell them that they are signing away choice, things change dramatically.
I don't see Apple taking that risk.
Far better would to simply allow for third party stores and let people choose which one to use. In that scenario, perspective isn't widely altered, and users have choice.
But everything is moot to a degree until conclusions from these investigations are revealed.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
On App Store revenue. A quick Google returned this:
No one knows for sure as Apple doesn't reveal that information. I'd guess there's a good reason for that and it's profit related.
The different 'kits' are in iOS.
Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
The $64B in your link is the App store gross sales for 2020, not gross revenue. That number came from Apple reporting that they generated $45B for developers. So Apple estimated gross revenue from the App store is only 30% of that $64B gross sales number. Apple do not count the 70% they pay to developers as their revenue. It's the developer that pays Apple a commission, not the other way around.
So Apple gross revenue from the App store comes in at $19B for fiscal 2020, using these numbers.
To put $19B in perspective. Apple total revenue for fiscal 2020 was $275B. So the App store generated about 6% of Apple's total revenue with that number. Still not too shabby. But no where near $60B. At $60B, the App Store revenue would be about 25% of Apple 2020 revenue.That is totally unrealistic.
Even the $19B estimate seems too high. Apple services revenue, that Apple do report and includes the revenue from the App Store, is about 17% of Apple total revenue. That would be about $47B in 2020. And the Apple App Store is not the service that generate the most revenue in Apple services. Apple Care generate the most and Apple Music alone generate over $6B a year now. Apple services includes iTunes Music Store, e-books, Apple TV+ subscriptions, Apple TV movie rentals and sales and licensing. Tough to imagine that if at $19B, Apple App Store revenue accounts for 40% of Apple services revenue.
There's no competition for the 70% ($45B) developers got. No third party store is going to survive by giving developers less than 70%. So $45B of Apple App Store gross sales is off the table when it comes to a third party app store competing for some of Apple App Store gross sales.
So the only money a third party app store would be competing for is a piece of the 30% commission Apple charges.
Here's a break down of the app store revenue generated by Google and Apple app stores.
There's no doubt that Apple App Store generate more revenue than Google Play Store. There's no doubt that the Apple App Store generate much more revenue for developers than the Google Play Store. How much revenue developers generate using Android is an unknown. But developers are are their own when they sell their Android software outside of the Google Play Store. And Google neither get or claim any credit for it.
Notice that subscriptions and games with in-app purchases are by far the biggest revenue generators for Apple in their App Store. Without them, I doubt that even the Apple App Store would be profitable.
All Apple has to do is to not offer any support to subscription services that put their free apps in a third party store. If a third party app store app runs into trouble, it's up to the third party store owner to fix it. After all, they are the ones that got the commission. Apple will only support the apps that are in the Apple App Store. Subscription services will not put up with their subscribers having trouble getting access to their paid subscription with a third party app store app.
Apple do not have to allow a third party app store to accept iTunes account as a form of payment. This alone will make most third party app store unprofitable, as every iOS user has an iTunes account. Most iOS users don't use their iTunes account to pay for purchases because it's the only way to pay. They use their iTunes account to pay because it's the only way they want to pay.
Even Epic would not put their games in a third party app store. They want to have their games in their own app store. Where they don't have to pay a commission at all.
Let's face it. The only third party app store that will be profitable are the ones that big developers like Epic wants to open. And they are only interested in selling their own software in their app stores, to save on the 30% "tax". They couldn't careless about small time developers selling $1.99 app. The big money for them is not having to pay the 30% "tax" on their own software, not making a maybe a 12% commission on some $1.99 fart app.
And here's why Epic is not trying to force Google to allow third party app stores on Android devices. And it's not because Google allows downloading app from the internet.
And that's just the saving they could realize from not having to pay the Apple 30% 'tax" on just one game, Fortnight.
I think you lost track of the point along the way.
Apple is making billions running the app store. Put the actual numbers aside for a moment. Do you doubt that a competing store would be able to offer the same infrastructure to developers for far less and still make a huge profit?
You put a lot speculation in there, too.
It would be nice to see alternative stores on iDevices. A Play Store, an AppGallery or a new entry into the field. Competition is a must unless the purchaser wilfully accepts the limitations involved in a single Apple App Store model - and at the time of purchase.
That is the only way I see Apple getting through this unscathed (especially with EU investigations) and even that might be unacceptable to some government bodies.
I think you're right in that it might matter whether iPhone buyers generally understand, when they buy their iPhones, that there's only one store through which they can buy or load iOS apps. That could matter, e.g., when it comes to defining a relevant market under existing U.S. antitrust law precedents. But as it is, I would think that most iPhone buyers do generally understand that there aren't competing app stores on iOS.
That said, I do doubt that apps would for the most part be sold for less - at least, for substantially less - through a competing app store. A competing app store might itself charge the developers less for, e.g., hosting apps and processing payments. But developers would still need to pay Apple for the use of its IP. That's part of what the 30% or 15% is for. If developers wanted to develop iOS apps and distribute them through a different app store, Apple should still be entitled collect a licensing fee - e.g., 25% of the cost of iOS apps or of digital goods sold through iOS apps - as a condition of allowing developers to use its IP. Developers don't just have an innate right to use that IP.
There could be competition when it comes to processing payments or hosting apps for download. But there can't be competition, for Apple, when it comes to the licensing of its IP. That's the nature of intellectual property rights; they represent legal monopolies. Apple has, or should have, the right to decide who gets to use its IP and under what conditions. Another app store can't give iOS developers the right to use Apple's IP.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
(2) The different 'kits' are in iOS. Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
(2) The "kits" that I mentioned (HomeKit, CloudKit, and many others) are code that COMMUNICATE with Apple's servers and obtain services from Apple's servers. I'd have to go through the list of 50 kits to determine how many are online services and how many are not. And you are implying that Apple's online services need to support apps that communicate with Apple's servers to obtain services but are obtained by users without having paid Apple any fee for doing so. I hope you see how that position is both hilarious and insane. You should be admitting that Apple has not obligation to provide any services to any app that was obtained without paying any fee.
That CNBC report doesn't contradict Apple's quarterly reports. Apple's financial statements don't report the metric which is being estimated in that CNBC article.
Based on Apple's financial reports, it had about $57 billion in Services revenue in calendar year 2020. That includes App Store revenues in addition to, among other things, revenues from Apple Care and Apple Card. But Apple accounts for App Store revenues on a net basis. So $64 billion in gross App Store revenue would translate into something like $19 billion (or less) in net revenues to Apple. Apple generally doesn't count the portion of App Store revenue which goes to developers. Of $57 billion in Services revenue, it seems plausible to me that $19 billion or so is attributable to App Store sales.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
(2) The different 'kits' are in iOS. Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
(2) The "kits" that I mentioned (HomeKit, CloudKit, and many others) are code that COMMUNICATE with Apple's servers and obtain services from Apple's servers. I'd have to go through the list of 50 kits to determine how many are online services and how many are not. And you are implying that Apple's online services need to support apps that communicate with Apple's servers to obtain services but are obtained by users without having paid Apple any fee for doing so. I hope you see how that position is both hilarious and insane. You should be admitting that Apple has not obligation to provide any services to any app that was obtained without paying any fee.
That CNBC report doesn't contradict Apple's quarterly reports. Apple's financial statements don't report the metric which is being estimated in that CNBC article.
Based on Apple's financial reports, it had about $57 billion in Services revenue in calendar year 2020. That includes App Store revenues in addition to, among other things, revenues from Apple Care and Apple Card. But Apple accounts for App Store revenues on a net basis. So $64 billion in gross App Store revenue would translate into something like $19 billion (or less) in net revenues to Apple. Apple generally doesn't count the portion of App Store revenue which goes to developers. Of $57 billion in Services revenue, it seems plausible to me that $19 billion or so is attributable to App Store sales.
I think you are trying to argue that I'm misinterpreting "gross revenue" with "net revenue" (profits). No I'm not confusing these two terms. The annual report and the numbers that I cited for you was talking only about net sales (gross revenue).
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
(2) The different 'kits' are in iOS. Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
(2) The "kits" that I mentioned (HomeKit, CloudKit, and many others) are code that COMMUNICATE with Apple's servers and obtain services from Apple's servers. I'd have to go through the list of 50 kits to determine how many are online services and how many are not. And you are implying that Apple's online services need to support apps that communicate with Apple's servers to obtain services but are obtained by users without having paid Apple any fee for doing so. I hope you see how that position is both hilarious and insane. You should be admitting that Apple has not obligation to provide any services to any app that was obtained without paying any fee.
The apps hook into Apple services wherever they may be. Using 'services' as an excuse to defend against competition in the app store is a failed defence.
I believe things will have to change somewhere in the current setup.
I have stated, and on many occasions, that I believe Apple's current setup is anti-competitive and will need to change. That's just my opinion. I can't say how the different competition bodies will rule on the subject. That's why investigations are in progress.
That said, I also believe that Apple could introduce a system that would not allow for competition and still be considered legal (again, just my opinion). That would require users to tacitly concede to the regulations of the current system but prior to purchase. Users would be made aware of Apple's commissions, the lack of competition etc and sign their complete understanding of the situation.
By reading many of the comments here you would think that iDevice users would jump at the prospect. After all, there would be zero material change in anything at all for users. Everything would continue 'as is' and all the competition investigations would possibly be history.
So why not do just that?
Well, for starters, some people here are simply wrong with their claims.
Apple would probably never go down that route because it's very likely it would change the image people have of the company and kill sales.
Remember, we're taking about making zero material changes here. Simply requiring users to understand what is happening NOW, and has been happening forever in iPhone land.
What could go wrong? Everything really.
So, with that option ruled out, it would be the moment to allow for alternative approaches.
Let's take your stance on the iOS 'kits'.
Developers are already complying with Apple's requirements by using Apple APIs to make calls to the different services, wherever they may be. The apps themselves are built using Apple's IDE.
Apple needs apps for the success of the platform. If you are worried about Apple losing monetisation for anything, that is a problem for Apple to resolve, not developers. Remember, I'm speaking from a competition perspective.
Apple could start charging for OS updates. It could charge developers for certain aspects (like it already does with developer subscriptions).
What it cannot do is create an unfair playing field in the process.
You said "yes", which I infer to mean that you think Apple has no right to charge any money for any apps which use Apple's APIs to access Apple's servers. The reason I'm happy is that that position is so obviously unreasonable I feel that I don't even need to respond to it at all because less than 1% of the population would share that point of view. So I simply will not respond to you. It's wasted breath, or in this case, wasted bits.
That said, I do doubt that apps would for the most part be sold for less - at least, for substantially less - through a competing app store. A competing app store might itself charge the developers less for, e.g., hosting apps and processing payments. But developers would still need to pay Apple for the use of its IP. That's part of what the 30% or 15% is for. If developers wanted to develop iOS apps and distribute them through a different app store, Apple should still be entitled collect a licensing fee - e.g., 25% of the cost of iOS apps or of digital goods sold through iOS apps - as a condition of allowing developers to use its IP. Developers don't just have an innate right to use that IP.
I presume you meant there to include apps sold through non-Apple app stores. Okay, and what is the mechanism for developers to pay Apple if it's not through a percentage of their sales? Does Apple have to read through the binaries of each of the 2 million apps available to iOS to figure out which ones are using Apple's IP and then send them a letter containing a bill even though Apple doesn't have access to their address because they may have registered only through a third party app store?
By the way, it's not just Apple's IP. Among other things, it's also the fact that different apps rely differently on Apple's online servers. I have an iOS app which transmits up to 1 GB of data per day to an Apple server. If I had bought this app from a third party app store, doesn't this cost more to Apple than if my app never contacted Apple's servers for any services? So it's not just the IP that need to get compensated. It's several dozen different things that Apple does for apps and developers. Apple graciously simplified its charges to a single percentage of sales, and now some developers are saying, "we don't want to pay any percentage, and we don't want Apple to charge us for any other of the services we get from them either."
So I'm trying to win you over to the side of letting Apple charge for fair use of all their services in a way that it deems fair to them. You seem to be straddling the fence.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
(2) The different 'kits' are in iOS. Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
(2) The "kits" that I mentioned (HomeKit, CloudKit, and many others) are code that COMMUNICATE with Apple's servers and obtain services from Apple's servers. I'd have to go through the list of 50 kits to determine how many are online services and how many are not. And you are implying that Apple's online services need to support apps that communicate with Apple's servers to obtain services but are obtained by users without having paid Apple any fee for doing so. I hope you see how that position is both hilarious and insane. You should be admitting that Apple has not obligation to provide any services to any app that was obtained without paying any fee.
The apps hook into Apple services wherever they may be. Using 'services' as an excuse to defend against competition in the app store is a failed defence.
I believe things will have to change somewhere in the current setup.
I have stated, and on many occasions, that I believe Apple's current setup is anti-competitive and will need to change. That's just my opinion. I can't say how the different competition bodies will rule on the subject. That's why investigations are in progress.
That said, I also believe that Apple could introduce a system that would not allow for competition and still be considered legal (again, just my opinion). That would require users to tacitly concede to the regulations of the current system but prior to purchase. Users would be made aware of Apple's commissions, the lack of competition etc and sign their complete understanding of the situation.
By reading many of the comments here you would think that iDevice users would jump at the prospect. After all, there would be zero material change in anything at all for users. Everything would continue 'as is' and all the competition investigations would possibly be history.
So why not do just that?
Well, for starters, some people here are simply wrong with their claims.
Apple would probably never go down that route because it's very likely it would change the image people have of the company and kill sales.
Remember, we're taking about making zero material changes here. Simply requiring users to understand what is happening NOW, and has been happening forever in iPhone land.
What could go wrong? Everything really.
So, with that option ruled out, it would be the moment to allow for alternative approaches.
Let's take your stance on the iOS 'kits'.
Developers are already complying with Apple's requirements by using Apple APIs to make calls to the different services, wherever they may be. The apps themselves are built using Apple's IDE.
Apple needs apps for the success of the platform. If you are worried about Apple losing monetisation for anything, that is a problem for Apple to resolve, not developers. Remember, I'm speaking from a competition perspective.
Apple could start charging for OS updates. It could charge developers for certain aspects (like it already does with developer subscriptions).
What it cannot do is create an unfair playing field in the process.
You said "yes", which I infer to mean that you think Apple has no right to charge any money for any apps which use Apple's APIs to access Apple's servers. The reason I'm happy is that that position is so obviously unreasonable I feel that I don't even need to respond to it at all because less than 1% of the population would share that point of view. So I simply will not respond to you. It's wasted breath, or in this case, wasted bits.
I said it would be a problem for Apple to resolve. How they do it, though shouldn't tilt things in their favour, or else they will be back under the microscope.
I gave a couple of examples, from charging for OS updates or increasing developer fees.
I don't know how the investigations will play out but I do believe some of the complainants have a point. Yes, they may have vested interests but the investigations won't look at them. They will look at things from a competition perspective.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
(2) The different 'kits' are in iOS. Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
(2) The "kits" that I mentioned (HomeKit, CloudKit, and many others) are code that COMMUNICATE with Apple's servers and obtain services from Apple's servers. I'd have to go through the list of 50 kits to determine how many are online services and how many are not. And you are implying that Apple's online services need to support apps that communicate with Apple's servers to obtain services but are obtained by users without having paid Apple any fee for doing so. I hope you see how that position is both hilarious and insane. You should be admitting that Apple has not obligation to provide any services to any app that was obtained without paying any fee.
That CNBC report doesn't contradict Apple's quarterly reports. Apple's financial statements don't report the metric which is being estimated in that CNBC article.
Based on Apple's financial reports, it had about $57 billion in Services revenue in calendar year 2020. That includes App Store revenues in addition to, among other things, revenues from Apple Care and Apple Card. But Apple accounts for App Store revenues on a net basis. So $64 billion in gross App Store revenue would translate into something like $19 billion (or less) in net revenues to Apple. Apple generally doesn't count the portion of App Store revenue which goes to developers. Of $57 billion in Services revenue, it seems plausible to me that $19 billion or so is attributable to App Store sales.
I think you are trying to argue that I'm misinterpreting "gross revenue" with "net revenue" (profits). No I'm not confusing these two terms. The annual report and the numbers that I cited for you was talking only about net sales (gross revenue).
I wasn't saying anything other than that the CNBC report doesn't contradict Apple's financial reporting (to include the quarterly report you linked to).
I'm not sure where you got the $12 billion revenue number for all online services in the last quarter from. Apple doesn't report total online services, it reports Services - which includes things such as Apple Card and Apple Care. And the number for Services in the last quarter was about $16 billion, not $12 billion. Regardless, to the extent App Store revenues are included in that number they are counted on a net basis. Apple doesn't, e.g., report as Services revenue the total amount that people pay for apps on the App Store. It only counts the 30% (or, e.g., 15%) that it keeps from those sales. (It, of course, counts the total for sales of its own apps.) The CNBC report referred to gross App Store revenues. IOW, the estimate was for the total amount spent through the App Store, not the portion which Apple kept.
To be clear though, when I referred to reporting revenue on a net basis, I wasn't talking about reporting profits. I wasn't distinguishing between gross revenue and profit. I was talking about only reporting, from certain kinds of sales, the portion of revenues which Apple keeps. That isn't profit. In this context there's revenue reported on a gross basis - that would be the case if Apple counted all of the revenue it received from the sale of third-party apps, which it doesn't do - and then there's revenue reported on a net basis - that's what Apple does when it comes to sales of third-party apps, it only counts as revenue the portion of those sales which it keeps.
That said, I do doubt that apps would for the most part be sold for less - at least, for substantially less - through a competing app store. A competing app store might itself charge the developers less for, e.g., hosting apps and processing payments. But developers would still need to pay Apple for the use of its IP. That's part of what the 30% or 15% is for. If developers wanted to develop iOS apps and distribute them through a different app store, Apple should still be entitled collect a licensing fee - e.g., 25% of the cost of iOS apps or of digital goods sold through iOS apps - as a condition of allowing developers to use its IP. Developers don't just have an innate right to use that IP.
I presume you meant there to include apps sold through non-Apple app stores. Okay, and what is the mechanism for developers to pay Apple if it's not through a percentage of their sales? Does Apple have to read through the binaries of each of the 2 million apps available to iOS to figure out which ones are using Apple's IP and then send them a letter containing a bill even though Apple doesn't have access to their address because they may have registered only through a third party app store?
By the way, it's not just Apple's IP. Among other things, it's also the fact that different apps rely differently on Apple's online servers. I have an iOS app which transmits up to 1 GB of data per day to an Apple server. If I had bought this app from a third party app store, doesn't this cost more to Apple than if my app never contacted Apple's servers for any services? So it's not just the IP that need to get compensated. It's several dozen different things that Apple does for apps and developers. Apple graciously simplified its charges to a single percentage of sales, and now some developers are saying, "we don't want to pay any percentage, and we don't want Apple to charge us for any other of the services we get from them either."
So I'm trying to win you over to the side of letting Apple charge for fair use of all their services in a way that it deems fair to them. You seem to be straddling the fence.
Straddling the fence on what?
I generally think Apple should be able to charge developers what it wants for the use of its IP and, of course, for the use of its services.
As for the mechanism for developers paying Apple if they sell apps through other stores: That's one of the problems with this proposed legislation. Regardless of who processes the payments, Apple should be entitled (if it wants it) to some portion of the sales from developers who sell apps which use Apple's IP. Apple should of course be able to charge for the various services it provides to developers. But at a minimum, a developer developing iOS apps is using Apple's IP. And Apple should generally get to decide the terms under which it is willing to license the us of that IP.
That said, I do doubt that apps would for the most part be sold for less - at least, for substantially less - through a competing app store. A competing app store might itself charge the developers less for, e.g., hosting apps and processing payments. But developers would still need to pay Apple for the use of its IP. That's part of what the 30% or 15% is for. If developers wanted to develop iOS apps and distribute them through a different app store, Apple should still be entitled collect a licensing fee - e.g., 25% of the cost of iOS apps or of digital goods sold through iOS apps - as a condition of allowing developers to use its IP. Developers don't just have an innate right to use that IP.
I presume you meant there to include apps sold through non-Apple app stores. Okay, and what is the mechanism for developers to pay Apple if it's not through a percentage of their sales? Does Apple have to read through the binaries of each of the 2 million apps available to iOS to figure out which ones are using Apple's IP and then send them a letter containing a bill even though Apple doesn't have access to their address because they may have registered only through a third party app store?
By the way, it's not just Apple's IP. Among other things, it's also the fact that different apps rely differently on Apple's online servers. I have an iOS app which transmits up to 1 GB of data per day to an Apple server. If I had bought this app from a third party app store, doesn't this cost more to Apple than if my app never contacted Apple's servers for any services? So it's not just the IP that need to get compensated. It's several dozen different things that Apple does for apps and developers. Apple graciously simplified its charges to a single percentage of sales, and now some developers are saying, "we don't want to pay any percentage, and we don't want Apple to charge us for any other of the services we get from them either."
So I'm trying to win you over to the side of letting Apple charge for fair use of all their services in a way that it deems fair to them. You seem to be straddling the fence.
Straddling the fence on what?
I generally think Apple should be able to charge developers what it wants for the use of its IP and, of course, for the use of its services.
As for the mechanism for developers paying Apple if they sell apps through other stores: That's one of the problems with this proposed legislation. Regardless of who processes the payments, Apple should be entitled (if it wants it) to some portion of the sales from developers who sell apps which use Apple's IP. Apple should of course be able to charge for the various services it provides to developers. But at a minimum, a developer developing iOS apps is using Apple's IP. And Apple should generally get to decide the terms under which it is willing to license the us of that IP.
I'm glad you agree developers should pay, but I asked the question "what is the mechanism for developers to pay Apple if it isn't through a percentage of their sales". I've read your answer several times and didn't see any response. How does Apple know who the developers even are? Do they rely on the honesty of the developer to pay? This is what you aren't answering. I can't figure out how you want Apple to be able to figure out which developers are using which of Apple's IPs. Apple can't see the source code... do you want Apple to decode the app's binary and then do a google search to try to figure out the phone number of the app developer? This is my point, and I don't see any response from you.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
(2) The different 'kits' are in iOS. Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
(2) The "kits" that I mentioned (HomeKit, CloudKit, and many others) are code that COMMUNICATE with Apple's servers and obtain services from Apple's servers. I'd have to go through the list of 50 kits to determine how many are online services and how many are not. And you are implying that Apple's online services need to support apps that communicate with Apple's servers to obtain services but are obtained by users without having paid Apple any fee for doing so. I hope you see how that position is both hilarious and insane. You should be admitting that Apple has not obligation to provide any services to any app that was obtained without paying any fee.
That CNBC report doesn't contradict Apple's quarterly reports. Apple's financial statements don't report the metric which is being estimated in that CNBC article.
Based on Apple's financial reports, it had about $57 billion in Services revenue in calendar year 2020. That includes App Store revenues in addition to, among other things, revenues from Apple Care and Apple Card. But Apple accounts for App Store revenues on a net basis. So $64 billion in gross App Store revenue would translate into something like $19 billion (or less) in net revenues to Apple. Apple generally doesn't count the portion of App Store revenue which goes to developers. Of $57 billion in Services revenue, it seems plausible to me that $19 billion or so is attributable to App Store sales.
I think you are trying to argue that I'm misinterpreting "gross revenue" with "net revenue" (profits). No I'm not confusing these two terms. The annual report and the numbers that I cited for you was talking only about net sales (gross revenue).
I wasn't saying anything other than that the CNBC report doesn't contradict Apple's financial reporting (to include the quarterly report you linked to).
I'm not sure where you got the $12 billion revenue number for all online services in the last quarter from. Apple doesn't report total online services, it reports Services - which includes things such as Apple Card and Apple Care. And the number for Services in the last quarter was about $16 billion, not $12 billion. Regardless, to the extent App Store revenues are included in that number they are counted on a net basis. Apple doesn't, e.g., report as Services revenue the total amount that people pay for apps on the App Store. It only counts the 30% (or, e.g., 15%) that it keeps from those sales. (It, of course, counts the total for sales of its own apps.) The CNBC report referred to gross App Store revenues. IOW, the estimate was for the total amount spent through the App Store, not the portion which Apple kept.
To be clear though, when I referred to reporting revenue on a net basis, I wasn't talking about reporting profits. I wasn't distinguishing between gross revenue and profit. I was talking about only reporting, from certain kinds of sales, the portion of revenues which Apple keeps. That isn't profit. In this context there's revenue reported on a gross basis - that would be the case if Apple counted all of the revenue it received from the sale of third-party apps, which it doesn't do - and then there's revenue reported on a net basis - that's what Apple does when it comes to sales of third-party apps, it only counts as revenue the portion of those sales which it keeps.
Ok, I do admit that I added the word "online" when I shouldn't have. That was a mistake. I agree that some services are not "online" even if they are performed in part using online tech (eg, Apple Card, Apple Care).
When you say "the portion of revenues which Apple keeps" to me that's simply revenue. I don't know what "the portion of revenues which Apple does not keep" even means. To me that's not revenue. I'll tell you what, I won't quibble over $20 Billion or even $50 Billion. I'll say no more.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
On App Store revenue. A quick Google returned this:
No one knows for sure as Apple doesn't reveal that information. I'd guess there's a good reason for that and it's profit related.
The different 'kits' are in iOS.
Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
The $64B in your link is the App store gross sales for 2020, not gross revenue. That number came from Apple reporting that they generated $45B for developers. So Apple estimated gross revenue from the App store is only 30% of that $64B gross sales number. Apple do not count the 70% they pay to developers as their revenue. It's the developer that pays Apple a commission, not the other way around.
So Apple gross revenue from the App store comes in at $19B for fiscal 2020, using these numbers.
To put $19B in perspective. Apple total revenue for fiscal 2020 was $275B. So the App store generated about 6% of Apple's total revenue with that number. Still not too shabby. But no where near $60B. At $60B, the App Store revenue would be about 25% of Apple 2020 revenue.That is totally unrealistic.
Even the $19B estimate seems too high. Apple services revenue, that Apple do report and includes the revenue from the App Store, is about 17% of Apple total revenue. That would be about $47B in 2020. And the Apple App Store is not the service that generate the most revenue in Apple services. Apple Care generate the most and Apple Music alone generate over $6B a year now. Apple services includes iTunes Music Store, e-books, Apple TV+ subscriptions, Apple TV movie rentals and sales and licensing. Tough to imagine that if at $19B, Apple App Store revenue accounts for 40% of Apple services revenue.
There's no competition for the 70% ($45B) developers got. No third party store is going to survive by giving developers less than 70%. So $45B of Apple App Store gross sales is off the table when it comes to a third party app store competing for some of Apple App Store gross sales.
So the only money a third party app store would be competing for is a piece of the 30% commission Apple charges.
Here's a break down of the app store revenue generated by Google and Apple app stores.
There's no doubt that Apple App Store generate more revenue than Google Play Store. There's no doubt that the Apple App Store generate much more revenue for developers than the Google Play Store. How much revenue developers generate using Android is an unknown. But developers are are their own when they sell their Android software outside of the Google Play Store. And Google neither get or claim any credit for it.
Notice that subscriptions and games with in-app purchases are by far the biggest revenue generators for Apple in their App Store. Without them, I doubt that even the Apple App Store would be profitable.
All Apple has to do is to not offer any support to subscription services that put their free apps in a third party store. If a third party app store app runs into trouble, it's up to the third party store owner to fix it. After all, they are the ones that got the commission. Apple will only support the apps that are in the Apple App Store. Subscription services will not put up with their subscribers having trouble getting access to their paid subscription with a third party app store app.
Apple do not have to allow a third party app store to accept iTunes account as a form of payment. This alone will make most third party app store unprofitable, as every iOS user has an iTunes account. Most iOS users don't use their iTunes account to pay for purchases because it's the only way to pay. They use their iTunes account to pay because it's the only way they want to pay.
Even Epic would not put their games in a third party app store. They want to have their games in their own app store. Where they don't have to pay a commission at all.
Let's face it. The only third party app store that will be profitable are the ones that big developers like Epic wants to open. And they are only interested in selling their own software in their app stores, to save on the 30% "tax". They couldn't careless about small time developers selling $1.99 app. The big money for them is not having to pay the 30% "tax" on their own software, not making a maybe a 12% commission on some $1.99 fart app.
And here's why Epic is not trying to force Google to allow third party app stores on Android devices. And it's not because Google allows downloading app from the internet.
And that's just the saving they could realize from not having to pay the Apple 30% 'tax" on just one game, Fortnight.
I think you lost track of the point along the way.
Apple is making billions running the app store. Put the actual numbers aside for a moment. Do you doubt that a competing store would be able to offer the same infrastructure to developers for far less and still make a huge profit?
You put a lot speculation in there, too.
It would be nice to see alternative stores on iDevices. A Play Store, an AppGallery or a new entry into the field. Competition is a must unless the purchaser wilfully accepts the limitations involved in a single Apple App Store model - and at the time of purchase.
That is the only way I see Apple getting through this unscathed (especially with EU investigations) and even that might be unacceptable to some government bodies.
Apple is already only charging 15% commission for ongoing subscription after the first year and to developers that sells less than $1M in apps. No third party app store is going to be highly profitable with subscription services in their app store. Remember, the only money up for grab is the commission Apple charges. So how low can a third party go with their commission rate for a big developer like Netflix or Spotify or Hulu or HBO and small developers, when they are already paying only a 15% commission for a significant portion of their subscribers paying in-app or for the sale of an app, in order still to make a huge profit? Would big subscription services even care to save 5% on the commission, to be in a third party app store that's charging only a 10% commission? Without iTunes payment, a lot of developer that don't already have a payment system in place, are not going to put their app in a third party app store and lose customers that wants to pay with iTunes. And the third party store will incur at least a 3-5% charge for processing CC payment.
Apple is already responding to possible completion by maybe being forced to allow third party app stores in iOS and they are making it very unlikely that any third party app store will be hugely profitable. Unless the big developer like Epic can open one, to save the 30% commission on their sales. Don't believe Sweeney when he say that he's looking after the small developers. Why would Sweeney sell his highly profitable apps in a third party app store with even 15% commission , when he can open his own and pay 0%? And this goes for nearly all the highly profitable subscription services. You don't think Amazon will open their own third party store, just to avoid the 15% -30% "tax" on digital goods sale in the Apple App Store?
This remind me of when ATT was broken up to the "Baby Bells", that took control of local calls from ATT. The average consumers ended paying a lot more for phone services because ATT retained their long distance services. And ATT was charging less for local calls when they had control of those because the money they made with from long distance calls subsidized the cost of the local calls. Without being able to rely on highly profitable long distance calls, the "Baby Bells" had to raise the price of local calls for the consumers.
I remember not only was my local phone service more expensive, i had to contract separately with ATT, or MCI or Sprint, if I wanted long distance as part of my phone service. And this would cost about an extra $5 a month, even if I never made a long distance call. Otherwise, I would need to dial some 10 to 16 digital code of one of dozens of long distance providers, in front of the long distance number, to make a long distance call. Plus long distance calls was now any where over 100 miles(?), not out of State. Competition is always great for the consumers...right? Most of the "Baby Bells" were never highly profitable, even when the infrastructure was already in place for them.
Expect the developers that offer free apps or depend on free apps to make money and the iOS users that uses a lot of free apps (that makes up 75% of the apps in the App Store), to be tossed under the bus, like the consumers with local calls in the ATT breakup, if third party app stores were to be allowed and they don't have to pay Apple anything to support iDevices and the iOS infrastructure.
Once again, there are a lot of questions you are asking that don't have clear answers - yet.
What is crystal clear is that without competition (or even the threat of competition) Apple would not change anything and would still be raking in many billions in App Store profits. Be it at 30% or 15% commission.
More App Stores would bring possible fragmentation and therefore change the dynamics of the market but that is necessary IMO. That isn't to say having one, Apple controlled, App Store is necessarily illegal. I just think it will be deemed anti-competitive in its current setup.
Like I said, set aside actual numbers for a moment, forget speculation on comissions, CC processing fees etc, and focus on the reality. The current reality. At 30% commission we're talking many, many billions. At 15%, we are still talking billions and you can probably slash that 15% and still be talking in the billions. That is the point.
But what's in it for the consumer? All Apple did was to take money out of their pocket and put it into the pockets of their developers. Who mostly will not pass on any of it to their customers. Is that what you think having more "competition" should be about? Distributing the huge profit of a big profitable business to a bunch of smaller profitable businesses, without any guarantee what-so-ever, that any of it is going to the consumers?
Have you heard of any of the subscription services lowering the price of their subscription to their subscribers that has stayed with them for over a year, on any platform? Nearly all platforms lower their commission from 30% to 15% after year. Where is the saving for consumers that subscribes to these services for over a year? If anything, by lowing their commission, Apple might attract more developers to sell apps on iOS or have the developers already selling apps, to offer more apps for sale in the Apple App Store, as it would be more profitable for them. Which will translate to more commission for Apple. That will eventually more than make up for the lowing of their commission rate.
No matter how much competition Apple have from allowing third party app stores, Apple can not lower the price of apps or in-app purchases of the apps that are in their App Store. That's because they are not the ones that set the price of the apps or in-app purchases. It is up to the developers to lower the price of their apps. And right now, I'm not hearing much about any the developers that stands to gain the most from this "competition, lowering the price of their apps or in-app purchases. All I'm hearing is about how much more profit they will be making. Profits that they considered theirs in the first place, if they didn't have to pay some platform owner a commission for making money using their platform.
Competition should lead to the lowering of prices for consumers or at least more choices. Not lead to businesses making more profit off other businesses. Anti-completive in anti-trust laws, should not be about leveling the playing field because one business might be making 10's of billions of dollars, while the others might only be making billions of dollars.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
On App Store revenue. A quick Google returned this:
No one knows for sure as Apple doesn't reveal that information. I'd guess there's a good reason for that and it's profit related.
The different 'kits' are in iOS.
Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
The $64B in your link is the App store gross sales for 2020, not gross revenue. That number came from Apple reporting that they generated $45B for developers. So Apple estimated gross revenue from the App store is only 30% of that $64B gross sales number. Apple do not count the 70% they pay to developers as their revenue. It's the developer that pays Apple a commission, not the other way around.
So Apple gross revenue from the App store comes in at $19B for fiscal 2020, using these numbers.
To put $19B in perspective. Apple total revenue for fiscal 2020 was $275B. So the App store generated about 6% of Apple's total revenue with that number. Still not too shabby. But no where near $60B. At $60B, the App Store revenue would be about 25% of Apple 2020 revenue.That is totally unrealistic.
Even the $19B estimate seems too high. Apple services revenue, that Apple do report and includes the revenue from the App Store, is about 17% of Apple total revenue. That would be about $47B in 2020. And the Apple App Store is not the service that generate the most revenue in Apple services. Apple Care generate the most and Apple Music alone generate over $6B a year now. Apple services includes iTunes Music Store, e-books, Apple TV+ subscriptions, Apple TV movie rentals and sales and licensing. Tough to imagine that if at $19B, Apple App Store revenue accounts for 40% of Apple services revenue.
There's no competition for the 70% ($45B) developers got. No third party store is going to survive by giving developers less than 70%. So $45B of Apple App Store gross sales is off the table when it comes to a third party app store competing for some of Apple App Store gross sales.
So the only money a third party app store would be competing for is a piece of the 30% commission Apple charges.
Here's a break down of the app store revenue generated by Google and Apple app stores.
There's no doubt that Apple App Store generate more revenue than Google Play Store. There's no doubt that the Apple App Store generate much more revenue for developers than the Google Play Store. How much revenue developers generate using Android is an unknown. But developers are are their own when they sell their Android software outside of the Google Play Store. And Google neither get or claim any credit for it.
Notice that subscriptions and games with in-app purchases are by far the biggest revenue generators for Apple in their App Store. Without them, I doubt that even the Apple App Store would be profitable.
All Apple has to do is to not offer any support to subscription services that put their free apps in a third party store. If a third party app store app runs into trouble, it's up to the third party store owner to fix it. After all, they are the ones that got the commission. Apple will only support the apps that are in the Apple App Store. Subscription services will not put up with their subscribers having trouble getting access to their paid subscription with a third party app store app.
Apple do not have to allow a third party app store to accept iTunes account as a form of payment. This alone will make most third party app store unprofitable, as every iOS user has an iTunes account. Most iOS users don't use their iTunes account to pay for purchases because it's the only way to pay. They use their iTunes account to pay because it's the only way they want to pay.
Even Epic would not put their games in a third party app store. They want to have their games in their own app store. Where they don't have to pay a commission at all.
Let's face it. The only third party app store that will be profitable are the ones that big developers like Epic wants to open. And they are only interested in selling their own software in their app stores, to save on the 30% "tax". They couldn't careless about small time developers selling $1.99 app. The big money for them is not having to pay the 30% "tax" on their own software, not making a maybe a 12% commission on some $1.99 fart app.
And here's why Epic is not trying to force Google to allow third party app stores on Android devices. And it's not because Google allows downloading app from the internet.
And that's just the saving they could realize from not having to pay the Apple 30% 'tax" on just one game, Fortnight.
I think you lost track of the point along the way.
Apple is making billions running the app store. Put the actual numbers aside for a moment. Do you doubt that a competing store would be able to offer the same infrastructure to developers for far less and still make a huge profit?
You put a lot speculation in there, too.
It would be nice to see alternative stores on iDevices. A Play Store, an AppGallery or a new entry into the field. Competition is a must unless the purchaser wilfully accepts the limitations involved in a single Apple App Store model - and at the time of purchase.
That is the only way I see Apple getting through this unscathed (especially with EU investigations) and even that might be unacceptable to some government bodies.
Apple is already only charging 15% commission for ongoing subscription after the first year and to developers that sells less than $1M in apps. No third party app store is going to be highly profitable with subscription services in their app store. Remember, the only money up for grab is the commission Apple charges. So how low can a third party go with their commission rate for a big developer like Netflix or Spotify or Hulu or HBO and small developers, when they are already paying only a 15% commission for a significant portion of their subscribers paying in-app or for the sale of an app, in order still to make a huge profit? Would big subscription services even care to save 5% on the commission, to be in a third party app store that's charging only a 10% commission? Without iTunes payment, a lot of developer that don't already have a payment system in place, are not going to put their app in a third party app store and lose customers that wants to pay with iTunes. And the third party store will incur at least a 3-5% charge for processing CC payment.
Apple is already responding to possible completion by maybe being forced to allow third party app stores in iOS and they are making it very unlikely that any third party app store will be hugely profitable. Unless the big developer like Epic can open one, to save the 30% commission on their sales. Don't believe Sweeney when he say that he's looking after the small developers. Why would Sweeney sell his highly profitable apps in a third party app store with even 15% commission , when he can open his own and pay 0%? And this goes for nearly all the highly profitable subscription services. You don't think Amazon will open their own third party store, just to avoid the 15% -30% "tax" on digital goods sale in the Apple App Store?
This remind me of when ATT was broken up to the "Baby Bells", that took control of local calls from ATT. The average consumers ended paying a lot more for phone services because ATT retained their long distance services. And ATT was charging less for local calls when they had control of those because the money they made with from long distance calls subsidized the cost of the local calls. Without being able to rely on highly profitable long distance calls, the "Baby Bells" had to raise the price of local calls for the consumers.
I remember not only was my local phone service more expensive, i had to contract separately with ATT, or MCI or Sprint, if I wanted long distance as part of my phone service. And this would cost about an extra $5 a month, even if I never made a long distance call. Otherwise, I would need to dial some 10 to 16 digital code of one of dozens of long distance providers, in front of the long distance number, to make a long distance call. Plus long distance calls was now any where over 100 miles(?), not out of State. Competition is always great for the consumers...right? Most of the "Baby Bells" were never highly profitable, even when the infrastructure was already in place for them.
Expect the developers that offer free apps or depend on free apps to make money and the iOS users that uses a lot of free apps (that makes up 75% of the apps in the App Store), to be tossed under the bus, like the consumers with local calls in the ATT breakup, if third party app stores were to be allowed and they don't have to pay Apple anything to support iDevices and the iOS infrastructure.
Once again, there are a lot of questions you are asking that don't have clear answers - yet.
What is crystal clear is that without competition (or even the threat of competition) Apple would not change anything and would still be raking in many billions in App Store profits. Be it at 30% or 15% commission.
More App Stores would bring possible fragmentation and therefore change the dynamics of the market but that is necessary IMO. That isn't to say having one, Apple controlled, App Store is necessarily illegal. I just think it will be deemed anti-competitive in its current setup.
Like I said, set aside actual numbers for a moment, forget speculation on comissions, CC processing fees etc, and focus on the reality. The current reality. At 30% commission we're talking many, many billions. At 15%, we are still talking billions and you can probably slash that 15% and still be talking in the billions. That is the point.
But what's in it for the consumer? All Apple did was to take money out of their pocket and put it into the pockets of their developers. Who mostly will not pass on any of it to their customers. Is that what you think having more "competition" should be about? Distributing the huge profit of a big profitable business to a bunch of smaller profitable businesses, without any guarantee what-so-ever, that any of it is going to the consumers?
Have you heard of any of the subscription services lowering the price of their subscription to their subscribers that has stayed with them for over a year, on any platform? Nearly all platforms lower their commission from 30% to 15% after year. Where is the saving for consumers that subscribes to these services for over a year? If anything, by lowing their commission, Apple might attract more developers to sell apps on iOS or have the developers already selling apps, to offer more apps for sale in the Apple App Store, as it would be more profitable for them. Which will translate to more commission for Apple. That will eventually more than make up for the lowing of their commission rate.
No matter how much competition Apple have from allowing third party app stores, Apple can not lower the price of apps or in-app purchases of the apps that are in their App Store. That's because they are not the ones that set the price of the apps or in-app purchases. It is up to the developers to lower the price of their apps. And right now, I'm not hearing much about any the developers that stands to gain the most from this "competition, lowering the price of their apps or in-app purchases. All I'm hearing is about how much more profit they will be making. Profits that they considered theirs in the first place, if they didn't have to pay some platform owner a commission for making money using their platform.
Competition should lead to the lowering of prices for consumers or at least more choices. Not lead to businesses making more profit off other businesses. Anti-completive in anti-trust laws, should not be about leveling the playing field because one business might be making 10's of billions of dollars, while the others might only be making billions of dollars.
Consumers, to a degree, are irrelevant here. The investigations have consumer protections mind at the end of the day but what is relevant are protectionist, anti-competitive practices and how they may, or may not fit in with legislation in the different parts of the world where they are being carried out.
Some of the investigations will also surely provide a basis from modified laws are passed later on.
Profit doesn't have to go to consumers who simply bought an app.
Competition is necessary to avoid precisely what these investigations are having to establish. Without competition the whole process is skewed from the get go.
iOS is not an isolated, self contained platform. It has business deals with the world beyond the walled garden. It actually depends on that business to exist.
In that world there are rules and regulations to be complied with. These investigations are proceeding, to determine how well, or not, Apple is doing that.
That said, I do doubt that apps would for the most part be sold for less - at least, for substantially less - through a competing app store. A competing app store might itself charge the developers less for, e.g., hosting apps and processing payments. But developers would still need to pay Apple for the use of its IP. That's part of what the 30% or 15% is for. If developers wanted to develop iOS apps and distribute them through a different app store, Apple should still be entitled collect a licensing fee - e.g., 25% of the cost of iOS apps or of digital goods sold through iOS apps - as a condition of allowing developers to use its IP. Developers don't just have an innate right to use that IP.
I presume you meant there to include apps sold through non-Apple app stores. Okay, and what is the mechanism for developers to pay Apple if it's not through a percentage of their sales? Does Apple have to read through the binaries of each of the 2 million apps available to iOS to figure out which ones are using Apple's IP and then send them a letter containing a bill even though Apple doesn't have access to their address because they may have registered only through a third party app store?
By the way, it's not just Apple's IP. Among other things, it's also the fact that different apps rely differently on Apple's online servers. I have an iOS app which transmits up to 1 GB of data per day to an Apple server. If I had bought this app from a third party app store, doesn't this cost more to Apple than if my app never contacted Apple's servers for any services? So it's not just the IP that need to get compensated. It's several dozen different things that Apple does for apps and developers. Apple graciously simplified its charges to a single percentage of sales, and now some developers are saying, "we don't want to pay any percentage, and we don't want Apple to charge us for any other of the services we get from them either."
So I'm trying to win you over to the side of letting Apple charge for fair use of all their services in a way that it deems fair to them. You seem to be straddling the fence.
Straddling the fence on what?
I generally think Apple should be able to charge developers what it wants for the use of its IP and, of course, for the use of its services.
As for the mechanism for developers paying Apple if they sell apps through other stores: That's one of the problems with this proposed legislation. Regardless of who processes the payments, Apple should be entitled (if it wants it) to some portion of the sales from developers who sell apps which use Apple's IP. Apple should of course be able to charge for the various services it provides to developers. But at a minimum, a developer developing iOS apps is using Apple's IP. And Apple should generally get to decide the terms under which it is willing to license the us of that IP.
I'm glad you agree developers should pay, but I asked the question "what is the mechanism for developers to pay Apple if it isn't through a percentage of their sales". I've read your answer several times and didn't see any response. How does Apple know who the developers even are? Do they rely on the honesty of the developer to pay? This is what you aren't answering. I can't figure out how you want Apple to be able to figure out which developers are using which of Apple's IPs. Apple can't see the source code... do you want Apple to decode the app's binary and then do a google search to try to figure out the phone number of the app developer? This is my point, and I don't see any response from you.
I'm not sure how Apple would collect what it would be owed on such sales. That was part of my point: This kind of legislation would (if it went into effect) complicate the tracking and collecting of fees due based on such sales.
That said, there are ways of collecting such fees. This kind of thing happens a lot with intellectual property. IP owners grant licenses which require licensees to report certain, e.g., sales information and then based on what's reported licensing fees are calculated. Sometimes the licensing agreements give the IP owners rights to audit reports in certain ways. But that, of course, leaves IP owners relying to some extent on licensees' reporting their use of the IP. Court orders can also require IP users to make periodic reports to IP owners and allow for audits.
Relying on licensees to report how much they use certain IP isn't ideal. But that's often what has to happen. As it is, it's much easier for Apple to track who owes what based on app sales. But if it were no longer allowed to require certain kinds of sales to go through the App Store, Apple could offer licensees that required the reporting of certain information and the paying of certain fees. Could developers cheat? Of course. Again, that was part of my point. To the extent Apple became aware of cheating, it might be able to block the use of its IP or it might have to file lawsuits.
Maybe Android is already more profitable but that wasn't my point. I was referring to the costs involved in running an App Store.
If Apple is generating billions for App developers, it's part of the pie is surely in the billions too. Some estimates put 2020 App Store revenue at over 60 billion dollars. I'd say there is plenty of margin there for competition.
Are you aware that apps sold on the App Store use Apple's APIs like HomeKit, CloudKit, and 50 other "Kits"? Do you think that apps sold on third party store should still be allowed to use all these Kits? Basically, people on your side of the argument want apps to be able to use Apple's services without paying for them.
By the way, that 60 billion figure you float refers to all Apple online services, not just app store revenue. And you're also talking revenue, not profit. By comparison, Walmart makes 500 billion revenue in its stores (ten times as much as all Apple's services combined) and I don't see you using that argument to set up third party stores inside Walmart.
(2) The different 'kits' are in iOS. Apps are made using Apple's IDE. Developers pay for that. It has nothing to do with the App Store per se.
(2) The "kits" that I mentioned (HomeKit, CloudKit, and many others) are code that COMMUNICATE with Apple's servers and obtain services from Apple's servers. I'd have to go through the list of 50 kits to determine how many are online services and how many are not. And you are implying that Apple's online services need to support apps that communicate with Apple's servers to obtain services but are obtained by users without having paid Apple any fee for doing so. I hope you see how that position is both hilarious and insane. You should be admitting that Apple has not obligation to provide any services to any app that was obtained without paying any fee.
That CNBC report doesn't contradict Apple's quarterly reports. Apple's financial statements don't report the metric which is being estimated in that CNBC article.
Based on Apple's financial reports, it had about $57 billion in Services revenue in calendar year 2020. That includes App Store revenues in addition to, among other things, revenues from Apple Care and Apple Card. But Apple accounts for App Store revenues on a net basis. So $64 billion in gross App Store revenue would translate into something like $19 billion (or less) in net revenues to Apple. Apple generally doesn't count the portion of App Store revenue which goes to developers. Of $57 billion in Services revenue, it seems plausible to me that $19 billion or so is attributable to App Store sales.
I think you are trying to argue that I'm misinterpreting "gross revenue" with "net revenue" (profits). No I'm not confusing these two terms. The annual report and the numbers that I cited for you was talking only about net sales (gross revenue).
I wasn't saying anything other than that the CNBC report doesn't contradict Apple's financial reporting (to include the quarterly report you linked to).
I'm not sure where you got the $12 billion revenue number for all online services in the last quarter from. Apple doesn't report total online services, it reports Services - which includes things such as Apple Card and Apple Care. And the number for Services in the last quarter was about $16 billion, not $12 billion. Regardless, to the extent App Store revenues are included in that number they are counted on a net basis. Apple doesn't, e.g., report as Services revenue the total amount that people pay for apps on the App Store. It only counts the 30% (or, e.g., 15%) that it keeps from those sales. (It, of course, counts the total for sales of its own apps.) The CNBC report referred to gross App Store revenues. IOW, the estimate was for the total amount spent through the App Store, not the portion which Apple kept.
To be clear though, when I referred to reporting revenue on a net basis, I wasn't talking about reporting profits. I wasn't distinguishing between gross revenue and profit. I was talking about only reporting, from certain kinds of sales, the portion of revenues which Apple keeps. That isn't profit. In this context there's revenue reported on a gross basis - that would be the case if Apple counted all of the revenue it received from the sale of third-party apps, which it doesn't do - and then there's revenue reported on a net basis - that's what Apple does when it comes to sales of third-party apps, it only counts as revenue the portion of those sales which it keeps.
Ok, I do admit that I added the word "online" when I shouldn't have. That was a mistake. I agree that some services are not "online" even if they are performed in part using online tech (eg, Apple Card, Apple Care).
When you say "the portion of revenues which Apple keeps" to me that's simply revenue. I don't know what "the portion of revenues which Apple does not keep" even means. To me that's not revenue. I'll tell you what, I won't quibble over $20 Billion or even $50 Billion. I'll say no more.
That's what I explained in the previous posts, but if needed I can explain it a little further.
When you sell third-party goods or services, there are different ways you might count revenue. Walmart, e.g., generally counts revenue from sales on a gross basis. When it sells a frying pan made by ABC corporation, it records the $20 sales price as revenue. It doesn't just record the $5 gross margin that it realizes, subtracting out the $15 it pays ABC corporation for the frying pan. The $15 is counted as, e.g., cost of goods sold. Walmart is, generally speaking, a reseller rather than an agency seller.
A different business might sell products or services as an agent for third parties rather than as a reseller. In that case, it might only count - as its revenue - the portion of sales prices which it keeps as its fee. It might, e.g., count $5 from the sale of a frying pan as revenue rather than counting $20 as revenue and $15 as cost of goods sold. That's counting revenue on a net basis. That's what Apple does with certain digital goods sales - e.g., third-party apps sold through the App Store. For other goods it counts revenue on a gross basis.
The point was that the CNBC report was, in the estimate it referred to, counting App Store revenue on a gross basis. It wasn't saying that Apple realized $X in revenue from App Store sales, it was saying effectively that Apple collected $X in revenue from App Store sales. A large portion of that revenue was passed on to developers. Apple reports (for GAAP purposes) the portion it keeps, something quite different from what was estimated in that CNBC report. That's part of why its Services margins are so high.
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(1) I would rather believe Apple's quarterly reports than a contradictory report from CNBC. https://www.apple.com/newsroom/pdfs/FY21 Q1 Consolidated Financial Statements.pdf says that Apple's total revenues from all online services was only $12 billion in the last quarter.
What is crystal clear is that without competition (or even the threat of competition) Apple would not change anything and would still be raking in many billions in App Store profits. Be it at 30% or 15% commission.
More App Stores would bring possible fragmentation and therefore change the dynamics of the market but that is necessary IMO. That isn't to say having one, Apple controlled, App Store is necessarily illegal. I just think it will be deemed anti-competitive in its current setup.
Like I said, set aside actual numbers for a moment, forget speculation on comissions, CC processing fees etc, and focus on the reality. The current reality. At 30% commission we're talking many, many billions. At 15%, we are still talking billions and you can probably slash that 15% and still be talking in the billions. That is the point.
The apps hook into Apple services wherever they may be. Using 'services' as an excuse to defend against competition in the app store is a failed defence.
I believe things will have to change somewhere in the current setup.
I have stated, and on many occasions, that I believe Apple's current setup is anti-competitive and will need to change. That's just my opinion. I can't say how the different competition bodies will rule on the subject. That's why investigations are in progress.
That said, I also believe that Apple could introduce a system that would not allow for competition and still be considered legal (again, just my opinion). That would require users to tacitly concede to the regulations of the current system but prior to purchase. Users would be made aware of Apple's commissions, the lack of competition etc and sign their complete understanding of the situation.
By reading many of the comments here you would think that iDevice users would jump at the prospect. After all, there would be zero material change in anything at all for users. Everything would continue 'as is' and all the competition investigations would possibly be history.
So why not do just that?
Well, for starters, some people here are simply wrong with their claims.
Apple would probably never go down that route because it's very likely it would change the image people have of the company and kill sales.
Remember, we're taking about making zero material changes here. Simply requiring users to understand what is happening NOW, and has been happening forever in iPhone land.
What could go wrong? Everything really.
So, with that option ruled out, it would be the moment to allow for alternative approaches.
Let's take your stance on the iOS 'kits'.
Developers are already complying with Apple's requirements by using Apple APIs to make calls to the different services, wherever they may be. The apps themselves are built using Apple's IDE.
Apple needs apps for the success of the platform. If you are worried about Apple losing monetisation for anything, that is a problem for Apple to resolve, not developers. Remember, I'm speaking from a competition perspective.
Apple could start charging for OS updates. It could charge developers for certain aspects (like it already does with developer subscriptions).
What it cannot do is create an unfair playing field in the process.
I think your everyday user has no problems with how things are working from a client perspective. Not too many complain about it either. For them things have always been the same. They could even be considered satisfied customers.
The problems arise when perspectives change, and marketing people are very capable of swaying perspective and opinion.
Very slowly, Apple has been making changes to App Store policies, commissions, agreements etc. Those changes were largely due to increased scrutiny and many increasing numbers of investigations into its business practices. It is also lobbying very hard to protect its interests but away from the front line of public opinion.
It's almost like a game of chicken. Apple doesn't want wholesale change to be forced onto how it does business but doesn't want to voluntarily make enough changes to make the investigations less of a threat.
I think it has chosen to wait and see what conclusions are drawn by the investigations. If no major wrongdoing is found, Apple would breathe a collective sigh of relief and continue more or less as it is.
If it is found to be using (or have used anti-competitive practices) it would have two major choices.
One, would be to not open up its platform and instead make potential buyers aware (in clear and concise terms) of the situation they are buying into. When Spanish mortgage 'floor' clauses were challenged, the issue went right to the highest courts in the EU. Even though the clauses were clearly present in the mortgage contracts the banks still had to reimburse customers who had been affected by the clauses. Strangely though, the clauses themselves were not considered illegal. It was the lack of clarity in how they were communicated to bank clients. Just putting the clause in the contract and having a public notary read it aloud was not enough. The customer had to comprehend the clause and the banks had to be able to demonstrate this.
I think, on paper at least, Apple would be able to continue as it does now but on the understanding that users fully comprehend what the situation entails.
Now, as I said above, in reality there would be no material change in anything from a consumer perspective. Nothing at all would change.
The problem is perspective itself. I have no formal training in marketing but I could instill serious doubts into any iDevice user, should any investigation go the wrong way with its findings.
Put into the hands of professionals and part of a campaign, the damage to the App market in general could be devastating.
People accept many things without question but the moment you tell them that they are signing away choice, things change dramatically.
I don't see Apple taking that risk.
Far better would to simply allow for third party stores and let people choose which one to use. In that scenario, perspective isn't widely altered, and users have choice.
But everything is moot to a degree until conclusions from these investigations are revealed.
That said, I do doubt that apps would for the most part be sold for less - at least, for substantially less - through a competing app store. A competing app store might itself charge the developers less for, e.g., hosting apps and processing payments. But developers would still need to pay Apple for the use of its IP. That's part of what the 30% or 15% is for. If developers wanted to develop iOS apps and distribute them through a different app store, Apple should still be entitled collect a licensing fee - e.g., 25% of the cost of iOS apps or of digital goods sold through iOS apps - as a condition of allowing developers to use its IP. Developers don't just have an innate right to use that IP.
There could be competition when it comes to processing payments or hosting apps for download. But there can't be competition, for Apple, when it comes to the licensing of its IP. That's the nature of intellectual property rights; they represent legal monopolies. Apple has, or should have, the right to decide who gets to use its IP and under what conditions. Another app store can't give iOS developers the right to use Apple's IP.
Based on Apple's financial reports, it had about $57 billion in Services revenue in calendar year 2020. That includes App Store revenues in addition to, among other things, revenues from Apple Care and Apple Card. But Apple accounts for App Store revenues on a net basis. So $64 billion in gross App Store revenue would translate into something like $19 billion (or less) in net revenues to Apple. Apple generally doesn't count the portion of App Store revenue which goes to developers. Of $57 billion in Services revenue, it seems plausible to me that $19 billion or so is attributable to App Store sales.
By the way, it's not just Apple's IP. Among other things, it's also the fact that different apps rely differently on Apple's online servers. I have an iOS app which transmits up to 1 GB of data per day to an Apple server. If I had bought this app from a third party app store, doesn't this cost more to Apple than if my app never contacted Apple's servers for any services? So it's not just the IP that need to get compensated. It's several dozen different things that Apple does for apps and developers. Apple graciously simplified its charges to a single percentage of sales, and now some developers are saying, "we don't want to pay any percentage, and we don't want Apple to charge us for any other of the services we get from them either."
So I'm trying to win you over to the side of letting Apple charge for fair use of all their services in a way that it deems fair to them. You seem to be straddling the fence.
I gave a couple of examples, from charging for OS updates or increasing developer fees.
I don't know how the investigations will play out but I do believe some of the complainants have a point. Yes, they may have vested interests but the investigations won't look at them. They will look at things from a competition perspective.
I'm not sure where you got the $12 billion revenue number for all online services in the last quarter from. Apple doesn't report total online services, it reports Services - which includes things such as Apple Card and Apple Care. And the number for Services in the last quarter was about $16 billion, not $12 billion. Regardless, to the extent App Store revenues are included in that number they are counted on a net basis. Apple doesn't, e.g., report as Services revenue the total amount that people pay for apps on the App Store. It only counts the 30% (or, e.g., 15%) that it keeps from those sales. (It, of course, counts the total for sales of its own apps.) The CNBC report referred to gross App Store revenues. IOW, the estimate was for the total amount spent through the App Store, not the portion which Apple kept.
To be clear though, when I referred to reporting revenue on a net basis, I wasn't talking about reporting profits. I wasn't distinguishing between gross revenue and profit. I was talking about only reporting, from certain kinds of sales, the portion of revenues which Apple keeps. That isn't profit. In this context there's revenue reported on a gross basis - that would be the case if Apple counted all of the revenue it received from the sale of third-party apps, which it doesn't do - and then there's revenue reported on a net basis - that's what Apple does when it comes to sales of third-party apps, it only counts as revenue the portion of those sales which it keeps.
I generally think Apple should be able to charge developers what it wants for the use of its IP and, of course, for the use of its services.
As for the mechanism for developers paying Apple if they sell apps through other stores: That's one of the problems with this proposed legislation. Regardless of who processes the payments, Apple should be entitled (if it wants it) to some portion of the sales from developers who sell apps which use Apple's IP. Apple should of course be able to charge for the various services it provides to developers. But at a minimum, a developer developing iOS apps is using Apple's IP. And Apple should generally get to decide the terms under which it is willing to license the us of that IP.
Ok, I do admit that I added the word "online" when I shouldn't have. That was a mistake. I agree that some services are not "online" even if they are performed in part using online tech (eg, Apple Card, Apple Care).
When you say "the portion of revenues which Apple keeps" to me that's simply revenue. I don't know what "the portion of revenues which Apple does not keep" even means. To me that's not revenue. I'll tell you what, I won't quibble over $20 Billion or even $50 Billion. I'll say no more.
Have you heard of any of the subscription services lowering the price of their subscription to their subscribers that has stayed with them for over a year, on any platform? Nearly all platforms lower their commission from 30% to 15% after year. Where is the saving for consumers that subscribes to these services for over a year? If anything, by lowing their commission, Apple might attract more developers to sell apps on iOS or have the developers already selling apps, to offer more apps for sale in the Apple App Store, as it would be more profitable for them. Which will translate to more commission for Apple. That will eventually more than make up for the lowing of their commission rate.
No matter how much competition Apple have from allowing third party app stores, Apple can not lower the price of apps or in-app purchases of the apps that are in their App Store. That's because they are not the ones that set the price of the apps or in-app purchases. It is up to the developers to lower the price of their apps. And right now, I'm not hearing much about any the developers that stands to gain the most from this "competition, lowering the price of their apps or in-app purchases. All I'm hearing is about how much more profit they will be making. Profits that they considered theirs in the first place, if they didn't have to pay some platform owner a commission for making money using their platform.
Competition should lead to the lowering of prices for consumers or at least more choices. Not lead to businesses making more profit off other businesses. Anti-completive in anti-trust laws, should not be about leveling the playing field because one business might be making 10's of billions of dollars, while the others might only be making billions of dollars.
Some of the investigations will also surely provide a basis from modified laws are passed later on.
Profit doesn't have to go to consumers who simply bought an app.
Competition is necessary to avoid precisely what these investigations are having to establish. Without competition the whole process is skewed from the get go.
iOS is not an isolated, self contained platform. It has business deals with the world beyond the walled garden. It actually depends on that business to exist.
In that world there are rules and regulations to be complied with. These investigations are proceeding, to determine how well, or not, Apple is doing that.
That said, there are ways of collecting such fees. This kind of thing happens a lot with intellectual property. IP owners grant licenses which require licensees to report certain, e.g., sales information and then based on what's reported licensing fees are calculated. Sometimes the licensing agreements give the IP owners rights to audit reports in certain ways. But that, of course, leaves IP owners relying to some extent on licensees' reporting their use of the IP. Court orders can also require IP users to make periodic reports to IP owners and allow for audits.
Relying on licensees to report how much they use certain IP isn't ideal. But that's often what has to happen. As it is, it's much easier for Apple to track who owes what based on app sales. But if it were no longer allowed to require certain kinds of sales to go through the App Store, Apple could offer licensees that required the reporting of certain information and the paying of certain fees. Could developers cheat? Of course. Again, that was part of my point. To the extent Apple became aware of cheating, it might be able to block the use of its IP or it might have to file lawsuits.