So let me get this right: making a lot of profit by reselling things is bad?
If you're exploiting an exclusive competitive advantage that consumers are locked into, then the argument is that yes it is. That is very much an abuse of a monopolistic position.
So you're suggesting that I should be able to open a rent-free kiosk in Kroger to sell, say, Almond Milk -- because Kroger has a monopoly on the store and who sells from it? So, I can offer the customer the option of "Pay me $1.99 or pay Kroger $2.99"? (And, yeh, much of the product in a grocery store is being sold be third parties paying in various ways for shelf space).
So let me get this right: making a lot of profit by reselling things is bad?
If you're exploiting an exclusive competitive advantage that consumers are locked into, then the argument is that yes it is. That is very much an abuse of a monopolistic position.
Epic is not a consumer. Your statement doesn’t apply in this case.
I wasn't implying they were? You and I are the consumer, and developers are the ones being exploited because of Apple's gatekeeping of the locked-in consumers. That's the argument at least, I'm not sure how much I agree with it.
I presume Epic's point is that Apple is making 80% profit on the [0%-15%-30%] of the sale of each app. The other [70%-85%-100%] of the sale price is entirely taken by the software vendor and their profit ratio could be much higher or lower than Apple's.
Epic conveniently forgets that there's 0% cut on the free apps and Apple has to subsidize those products, which is where some of Apple's profits has to go.
So let me get this right: making a lot of profit by reselling things is bad?
If you're exploiting an exclusive competitive advantage that consumers are locked into, then the argument is that yes it is. That is very much an abuse of a monopolistic position.
There's more to it than that.
I don't ever recall Microsoft ever being forced to lower the cost of Windows, because they have a monopoly with Windows, that consumers are locked into. Why isn't charging $139 for a retail Home version and $199 for a Pro version of Windows10, not considered an abuse of their monopolistic position and exploiting an exclusive competitive advantage?
Back when Windows and MS Office sales accounted for the vast majority of Microsoft revenue, MSFT earnings reported an over 75% profit margin. Now that the cloud account for over half of MSFT revenue, MSFT profit margin has dropped to about 40%. But it's 40% of a much larger pie and thus MSFT is more profitable now, than when the sale of very high margin software accounted for most of their revenue.
What's bad is exploiting products what are considered consumers essentials needed for survival, that consumers are locked into. Charging $10 for a gallon of milk that cost $1.50 to produce is bad. Even if the seller isn't abusing a monopoly. Charging $10 for Fortnight Bucks that buys $20 of virtual products that cost a total of $.15 to produce, is OK. Even if Epic has a monopoly on the sale of Fortnight Bucks.
So let me get this right: making a lot of profit by reselling things is bad?
If you're exploiting an exclusive competitive advantage that consumers are locked into, then the argument is that yes it is. That is very much an abuse of a monopolistic position.
There's more to it than that.
I don't ever recall Microsoft ever being forced to lower the cost of Windows, because they have a monopoly with Windows, that consumers are locked into. Why isn't charging $139 for a retail Home version and $199 for a Pro version of Windows10, not considered an abuse of their monopolistic position and exploiting an exclusive competitive advantage?
Back when Windows and MS Office sales accounted for the vast majority of Microsoft revenue, MSFT earnings reported an over 75% profit margin. Now that the cloud account for over half of MSFT revenue, MSFT profit margin has dropped to about 40%. But it's 40% of a much larger pie and thus MSFT is more profitable now, than when the sale of very high margin software accounted for most of their revenue.
What's bad is exploiting products what are considered consumers essentials needed for survival, that consumers are locked into. Charging $10 for a gallon of milk that cost $1.50 to produce is bad. Even if the seller isn't abusing a monopoly. Charging $10 for Fortnight Bucks that buys $20 of virtual products that cost a total of $.15 to produce, is OK. Even if Epic has a monopoly on the sale of Fortnight Bucks.
Consumers were never really locked into Windows though, there just wasn't very viable competition; consumers could install Linux if they wanted to. And Microsoft did get in trouble for abusive practices where they were trying to stop OEM manufacturers from offering Linux builds, and software bundles that Microsoft didn't like.
Charging a lot is rarely going to be an abuse in and of itself.
So let me get this right: making a lot of profit by reselling things is bad?
If you're exploiting an exclusive competitive advantage that consumers are locked into, then the argument is that yes it is. That is very much an abuse of a monopolistic position.
There's more to it than that.
I don't ever recall Microsoft ever being forced to lower the cost of Windows, because they have a monopoly with Windows, that consumers are locked into. Why isn't charging $139 for a retail Home version and $199 for a Pro version of Windows10, not considered an abuse of their monopolistic position and exploiting an exclusive competitive advantage?
Back when Windows and MS Office sales accounted for the vast majority of Microsoft revenue, MSFT earnings reported an over 75% profit margin. Now that the cloud account for over half of MSFT revenue, MSFT profit margin has dropped to about 40%. But it's 40% of a much larger pie and thus MSFT is more profitable now, than when the sale of very high margin software accounted for most of their revenue.
What's bad is exploiting products what are considered consumers essentials needed for survival, that consumers are locked into. Charging $10 for a gallon of milk that cost $1.50 to produce is bad. Even if the seller isn't abusing a monopoly. Charging $10 for Fortnight Bucks that buys $20 of virtual products that cost a total of $.15 to produce, is OK. Even if Epic has a monopoly on the sale of Fortnight Bucks.
Consumers were never really locked into Windows though, there just wasn't very viable competition; consumers could install Linux if they wanted to. And Microsoft did get in trouble for abusive practices where they were trying to stop OEM manufacturers from offering Linux builds, and software bundles that Microsoft didn't like.
Charging a lot is rarely going to be an abuse in and of itself.
I was only responding in regards to how much profit or how much of a profit margin a monopoly can have, before it's considered abusive and exploitation. A monopoly that is very profitable does not equate to them exploiting or abusing their monopoly. Even if they were to charge an arm and leg for their products. And you seem to agree by saying ...... "Charging a lot is rarely going to be an abuse in and of itself."
And by any anti-trust definition, a "monopoly" does not mean having NO competition. Anti-trust do not have to wait until a monopoly has no competition, in order to go after them if they were considered to be abusing their monopoly power, in any way.
So you do seem to agree that even if Epic were to convince the judge that Apple have a "monopoly" with their Apple App Store and have absolutely no competition in the "iOS market", that what commission Apple charges, is in no way indicative in itself that they are abusing their "monopoly. No matter how much profit or how high of a profit margin, Apple makes in commissions from the Apple App Store.
And don't forget, it's not Apple that is charging for the apps in their App Store. The developers are charging for their apps and are allowed to charge what they want. The more developers charges for their apps, the more in commission Apple makes.
The margin will be Apple's (revenue-costs)/revenue. Payments to app developers will not be considered part of that equation, as it's neither Apple's revenue or cost, it's just developer revenue that Apple are handling and passing along.
Apple's App Store margin is (Apple's take of app revenue - cost of running the App Store) / Apple's take of app revenue.
Wait, why? That's not how profit has been worked out before. In a brick-and-mortar for example, the Cost Of Goods Sold obviously includes the cost of supplying the goods from the publisher, so why not here?
Apple cannot make a sale without delivering the app licence, and the licence costs them 70%. It seems completely artificial to say that the relevant profit should be based on Apple's 30% cut rather than on total revenue.
How would it change profits in all other industries if supplier costs could be subtracted before calculating profit? It makes no sense to me.
Epic is disgusting beyond belief. Do they not try to get their users to only play Fortnite? They don’t have to use Apples App Store , Epic can spend the money Apple does and make their own App Store just as effective but no, they want to use Apple resources s but don’t want to pay.
What is the difference between what Epic is doing and me doing into Costco and say”Hey listen, I want some space on Aisle 7 and I will just pay you 5 bucks and not the 100 you are asking” . What they are doing is communistic and socialism
I presume Epic's point is that Apple is making 80% profit on the [0%-15%-30%] of the sale of each app. The other [70%-85%-100%] of the sale price is entirely taken by the software vendor and their profit ratio could be much higher or lower than Apple's.
Epic conveniently forgets that there's 0% cut on the free apps and Apple has to subsidize those products, which is where some of Apple's profits has to go.
Epic Doesn’t have to use the Apple APP store!! What part of that is not clear? Epic can use their own resources and sell their games on their own! But no, they want access to Apple user which Apple spent years and billions to secure.
If you think Epic has any reason here, I am sorry to say, but you are a communist .
And the profit on V-bucks after paying store fees I estimate to be 90%. (Full disclosure I pulled that number out of the air but it’s probably close.)
The cost of producing a "V-buck." amortized over the cost of developing the game is very, very close to Zero.
A digital "V-buck" is an invented currency. It is a line of code? A few lines of code? Pure Profit! (Does anyone remember 150 texts per month for $15? Cost to phone company was essentially Zero.)
The Apple App Store provides actual services (come on Epic! payment processing, auto updating apps, etc etc etc).
The margin will be Apple's (revenue-costs)/revenue. Payments to app developers will not be considered part of that equation, as it's neither Apple's revenue or cost, it's just developer revenue that Apple are handling and passing along.
Apple's App Store margin is (Apple's take of app revenue - cost of running the App Store) / Apple's take of app revenue.
Wait, why? That's not how profit has been worked out before. In a brick-and-mortar for example, the Cost Of Goods Sold obviously includes the cost of supplying the goods from the publisher, so why not here?
Apple cannot make a sale without delivering the app licence, and the licence costs them 70%. It seems completely artificial to say that the relevant profit should be based on Apple's 30% cut rather than on total revenue.
How would it change profits in all other industries if supplier costs could be subtracted before calculating profit? It makes no sense to me.
In this context Apple is an agent not a principal because, e.g., it doesn’t carry inventory risk and doesn’t set prices. So it accounts for revenue on a net basis, only counting the commission it keeps from third-party app sales as revenue.
Other businesses operate differently (as does Apple in other contexts), so based on GAAP they account for revenue differently. Walmart, e.g., is generally a principal seller rather than an agent seller. So it recognizes as revenue all of the sales price of the products it sells and what it pays suppliers for those products is counted as part of the cost of goods.
So it isn’t inappropriate to base an estimated profit margin for Apple’s App Store on, for third-party sales, only the commission Apple keeps. In calculating its gross margins for Services, Apple only counts such commission.
Again, EPIC is not forced by anyone to use Apple App Store. If they chose to have access to the billion Apple users that Apple has spent years and billions building, they have to pay what Apple asks, otherwise, they can go sell to their own base , completely voluntary.
who doesn’t understand that has communist tendencies I am sorry!
And the profit on V-bucks after paying store fees I estimate to be 90%. (Full disclosure I pulled that number out of the air but it’s probably close.)
The cost of producing a "V-buck." amortized over the cost of developing the game is very, very close to Zero.
A digital "V-buck" is an invented currency. It is a line of code? A few lines of code? Pure Profit! (Does anyone remember 150 texts per month for $15? Cost to phone company was essentially Zero.)
The Apple App Store provides actual services (come on Epic! payment processing, auto updating apps, etc etc etc).
Exactly. If I was Apple, I would not mind spending a few billion to make an example out of greedy Epic. I would just ask Epic in court. “ So you want to use our services for essentially free? Do you think we are in communist China?”
And the profit on V-bucks after paying store fees I estimate to be 90%. (Full disclosure I pulled that number out of the air but it’s probably close.)
The cost of producing a "V-buck." amortized over the cost of developing the game is very, very close to Zero.
A digital "V-buck" is an invented currency. It is a line of code? A few lines of code? Pure Profit! (Does anyone remember 150 texts per month for $15? Cost to phone company was essentially Zero.)
The Apple App Store provides actual services (come on Epic! payment processing, auto updating apps, etc etc etc).
Exactly. If I was Apple, I would not mind spending a few billion to make an example out of greedy Epic. I would just ask Epic in court. “ So you want to use our services for essentially free? Do you think we are in communist China?”
Interesting remark, considering that one of the biggest shareholders in Epic is a company going by the name 'Tencent'...
So you do seem to agree that even if Epic were to convince the judge that Apple have a "monopoly" with their Apple App Store and have absolutely no competition in the "iOS market", that what commission Apple charges, is in no way indicative in itself that they are abusing their "monopoly. No matter how much profit or how high of a profit margin, Apple makes in commissions from the Apple App Store.
No I don't really agree with that. The problem here is that the monopoly hasn't been earned by Apple, it's been imposed, by their own policies as manufacturer, platform owner, and store operator. And they've used that monopoly and captive market to charge a 30% rent on a digital storefront, which may have been justified in the early days of the store when it was small and an unknown quantity, but now with Apple's significant market position becomes a lot less easy to excuse. I think there is definitely a good argument that there is a monopolistic abuse going.
The margin will be Apple's (revenue-costs)/revenue. Payments to app developers will not be considered part of that equation, as it's neither Apple's revenue or cost, it's just developer revenue that Apple are handling and passing along.
Apple's App Store margin is (Apple's take of app revenue - cost of running the App Store) / Apple's take of app revenue.
Wait, why? That's not how profit has been worked out before. In a brick-and-mortar for example, the Cost Of Goods Sold obviously includes the cost of supplying the goods from the publisher, so why not here?
Apple cannot make a sale without delivering the app licence, and the licence costs them 70%. It seems completely artificial to say that the relevant profit should be based on Apple's 30% cut rather than on total revenue.
How would it change profits in all other industries if supplier costs could be subtracted before calculating profit? It makes no sense to me.
Because we're talking about a digital store here. Apple doesn't carry digital inventory, and it doesn't pay for stock. It literally takes an order, delivers it instantly from an infinite pool, and passes the money on to developers in a monthly acculumated transfer. Apple doesn't pay for apps advance and resell them to consumers, so there is no implicit cost of the app to Apple, it just handles the transfer of money from consumer to developer.
So while this may be a little different from how other industries account for margin, it doesn't make any sense to think of it in any other way because of the absence of inventory and the relationship between Apple and the relevant parties.
And the profit on V-bucks after paying store fees I estimate to be 90%. (Full disclosure I pulled that number out of the air but it’s probably close.)
The cost of producing a "V-buck." amortized over the cost of developing the game is very, very close to Zero.
A digital "V-buck" is an invented currency. It is a line of code? A few lines of code? Pure Profit! (Does anyone remember 150 texts per month for $15? Cost to phone company was essentially Zero.)
The Apple App Store provides actual services (come on Epic! payment processing, auto updating apps, etc etc etc).
Exactly. If I was Apple, I would not mind spending a few billion to make an example out of greedy Epic. I would just ask Epic in court. “ So you want to use our services for essentially free? Do you think we are in communist China?”
Interesting remark, considering that one of the biggest shareholders in Epic is a company going by the name 'Tencent'...
Tencent has very close ties to the Chinese government
Comments
So you're suggesting that I should be able to open a rent-free kiosk in Kroger to sell, say, Almond Milk -- because Kroger has a monopoly on the store and who sells from it? So, I can offer the customer the option of "Pay me $1.99 or pay Kroger $2.99"?
(And, yeh, much of the product in a grocery store is being sold be third parties paying in various ways for shelf space).
Epic conveniently forgets that there's 0% cut on the free apps and Apple has to subsidize those products, which is where some of Apple's profits has to go.
I don't ever recall Microsoft ever being forced to lower the cost of Windows, because they have a monopoly with Windows, that consumers are locked into. Why isn't charging $139 for a retail Home version and $199 for a Pro version of Windows10, not considered an abuse of their monopolistic position and exploiting an exclusive competitive advantage?
Back when Windows and MS Office sales accounted for the vast majority of Microsoft revenue, MSFT earnings reported an over 75% profit margin. Now that the cloud account for over half of MSFT revenue, MSFT profit margin has dropped to about 40%. But it's 40% of a much larger pie and thus MSFT is more profitable now, than when the sale of very high margin software accounted for most of their revenue.
What's bad is exploiting products what are considered consumers essentials needed for survival, that consumers are locked into. Charging $10 for a gallon of milk that cost $1.50 to produce is bad. Even if the seller isn't abusing a monopoly. Charging $10 for Fortnight Bucks that buys $20 of virtual products that cost a total of $.15 to produce, is OK. Even if Epic has a monopoly on the sale of Fortnight Bucks.
Charging a lot is rarely going to be an abuse in and of itself.
And by any anti-trust definition, a "monopoly" does not mean having NO competition. Anti-trust do not have to wait until a monopoly has no competition, in order to go after them if they were considered to be abusing their monopoly power, in any way.
So you do seem to agree that even if Epic were to convince the judge that Apple have a "monopoly" with their Apple App Store and have absolutely no competition in the "iOS market", that what commission Apple charges, is in no way indicative in itself that they are abusing their "monopoly. No matter how much profit or how high of a profit margin, Apple makes in commissions from the Apple App Store.
And don't forget, it's not Apple that is charging for the apps in their App Store. The developers are charging for their apps and are allowed to charge what they want. The more developers charges for their apps, the more in commission Apple makes.
What is the difference between what Epic is doing and me doing into Costco and say”Hey listen, I want some space on Aisle 7 and I will just pay you 5 bucks and not the 100 you are asking” . What they are doing is communistic and socialism
If you think Epic has any reason here, I am sorry to say, but you are a communist .
A digital "V-buck" is an invented currency. It is a line of code? A few lines of code? Pure Profit! (Does anyone remember 150 texts per month for $15? Cost to phone company was essentially Zero.)
The Apple App Store provides actual services (come on Epic! payment processing, auto updating apps, etc etc etc).
So it isn’t inappropriate to base an estimated profit margin for Apple’s App Store on, for third-party sales, only the commission Apple keeps. In calculating its gross margins for Services, Apple only counts such commission.
who doesn’t understand that has communist tendencies I am sorry!
So while this may be a little different from how other industries account for margin, it doesn't make any sense to think of it in any other way because of the absence of inventory and the relationship between Apple and the relevant parties.