carnegie

gatorguy said:

carnegie said:

gatorguy said:

davidw said:

gatorguy said:

davidw said:

gatorguy said:

foregoneconclusion said:

gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions. 

What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.

Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.

 I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so? 

Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all. 

According to another AI article it did. Just 5% or thereabouts but that equates to millions of dollars. Therefore my original comment "if revenues were reduced at all" applies, correct?

FYI- Apple has not yet reported any revenue from their App Store since they reduced their commission rates. Don't forget, Apple only count their commissions as revenue. They do not count the 70% the developer gets as revenue. 

The last I was aware Apple claims all the gross income from the App Store in their services segment before payouts to developers. Apple collects it and banks it. Apple's money. When you see gross "Services" reported it includes the entirety of app sales, not just the 30% Apple retains. If that has changed somewhat recently I've not found any mention of it, but happy to be brought up to date if you have some source for it.

Apple reports revenue from third-party app sales on a net basis. In other words, it only counts in Services revenue the commission it keeps from such sales. That's part of why Apple's gross margins for Services are so high. Counting the revenue from such sales on a gross basis wouldn't make as such sense because, in essence, Apple is in that context more an agent seller than a reseller.

That is, as far as I'm aware, how Apple has always counted revenue from third-party app sales. At a minimum that's how Apple has counted such revenue for quite a while - at least a decade.

Some source for that would be appreciated Carnegie. On the surface that would make no sense since all revenues are collected and processed by Apple directly. Typically payouts to other parties, in this case a developer, would be reported under "cost of sales", then deducted from gross revenues to determine a net margin. If you see a footnote in Apple financials that indicate the reported service revenues are only the portion retained by Apple a link would be helpful. 

EDIT:
Ah, found it, so no citations needed Carnegie:
"For certain long-term service arrangements, the Company has performance obligations for services it has not yet delivered. For these arrangements, the Company does not have a right to bill for the undelivered services.The Company has determined that any unbilled consideration relates entirely to the value of the undelivered services.Accordingly, the Company has not recognized revenue, and has elected not to disclose amounts, related to these undelivered services.

For the sale of third-party products where the Company obtains control of the product before transferring it to the customer, the Company recognizes revenue based on the gross amount billed to customers. The Company considers multiple factors when determining whether it obtains control of third-party products including, but not limited to, evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product.

For third party applications sold through the App Store ® , Mac App Store, TV App Store and Watch App Store and certain digital content sold through the Company’s other digital content stores, the Company does not obtain control of the product before transferring it to the customer.Therefore, the Company accounts for such sales on a net basis by recognizing in Services net sales only the commission it retains.

The Company has elected to record revenue net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded within other current liabilities until remitted to the relevant government authority."

So Apple only counts the portion of AppStore revenues that it retains, making my understanding at least as it stands today incorrect,  but those revenue numbers are not specifically reported. Thanks for the prompt to investigate sir. 

BTW, another footnote I've missed in the past is "Services net sales also include amortization of the deferred value of Maps, Siri, and free iCloud storage and Apple TV+ services, which are bundled in the sales price of certain products." 

You're welcome.

Yeah, all of Apple's 10-Qs and 10-Ks would report that Apple accounts for third-party app sales this way - i.e., on a net revenue basis. Apple also provided some supplemental reporting a few years back that shed some light on gross app store revenue.

As for accounting for revenues in the way you describe in the first paragraph, that would be more likely when we're talking about a reseller model. Walmart, e.g., would generally count all of the revenue it receives from sales of third-party products. What it paid third parties for those products would then be deducted, as part of cost of sales, to leave gross margins. But as I indicated, Apple isn't really acting as a reseller when it comes to third-party apps. It's acting as an agent seller. It's collecting the money for the developers and then taking out what it's owed (as well as, e.g., taxes) before passing the remaining proceeds along to the developers.

gatorguy said:

davidw said:

gatorguy said:

davidw said:

gatorguy said:

foregoneconclusion said:

gatorguy said: For some of the same reasons Apple decided to do so? Blunting potential antitrust actions. 

What legal reason would anyone have for believing that would blunt antitrust actions? Apple and Google both still charge 30% to developers that make over one million and Epic is obviously one of the developers in the 30% group.

Why did Apple cut their rate, what do you think their impetus was? Something about it should be in the best interests of shareholders, and if revenues are reduced at all the there must be another potential benefit to Apple's business involved.

 I don't think Apple would do so without concerns over competition regulators and what legal avenues they might use to compel Apple to change business practices. Otherwise why would they do so? 

Apple cutting their commission rates under certain conditions will not reduce their App Store revenue at all. 

According to another AI article it did. Just 5% or thereabouts but that equates to millions of dollars. Therefore my original comment "if revenues were reduced at all" applies, correct?

FYI- Apple has not yet reported any revenue from their App Store since they reduced their commission rates. Don't forget, Apple only count their commissions as revenue. They do not count the 70% the developer gets as revenue. 

The last I was aware Apple claims all the gross income from the App Store in their services segment before payouts to developers. Apple collects it and banks it. Apple's money. When you see gross "Services" reported it includes the entirety of app sales, not just the 30% Apple retains. If that has changed somewhat recently I've not found any mention of it, but happy to be brought up to date if you have some source for it.

Apple reports revenue from third-party app sales on a net basis. In other words, it only counts in Services revenue the commission it keeps from such sales. That's part of why Apple's gross margins for Services are so high. Counting the revenue from such sales on a gross basis wouldn't make as such sense because, in essence, Apple is in that context more an agent seller than a reseller.

That is, as far as I'm aware, how Apple has always counted revenue from third-party app sales. At a minimum that's how Apple has counted such revenue for quite a while - at least a decade.

roake said:

Can Apple just turn off developer accounts in Arizona?  That would suck for the developers, but it would contain the problem.

As written the law would also require that alternative payment processing was allowed for apps purchased (or in-app purchases) by Arizona users. So it wouldn't just be a matter of not allowing developers from Arizona to sell through the App Store.

That said, these proposals are really just for show. This Arizona proposal, e.g., probably wouldn't pass constitutional muster. States generally don't get to decide what conditions federal copyright holders can place on the licensing of their copyrighted material. Federal law preempts state law in this area. If federal law - and federal judicial interpretations thereof - allow Apple to condition the use of its iOS IP on licensees selling only through the App Store with Apple handling payments, then states don't get to prohibit such a condition.

Apple's response to this might be to change its developer licensing agreements to explicitly separate fees for processing payments from fees for using Apple's IP. As it is those things, and others, are effectively covered by the 30% or 15%. But Apple could say something like... you have the right to use our IP under these conditions but if you sell iOS apps or sell digital goods through iOS apps then you have to pay us 25% of the revenue generated from that monetization of our IP. If we process payments for you we will charge you an additional 5%.

States might be able to require Apple to allow other payment systems in some circumstances. But they wouldn't be able to tell Apple that it can't do more or less what I described above. States are effectively preempted by federal law when it comes to copyright issues. Generally speaking they can't, e.g., prohibit companies from exercising their copyrights in ways which are allowed by federal law - e.g., by applying a licensing fee as a condition of using their IP in certain ways.

What Berkshire has effectively done with its Apple holdings over the last 2 years, intentionally or not, is convert most of Apple's share buybacks into dividends. And, based on timing, it's likely done that at a favorable conversion rate.

That's one of the good things about buybacks as compared to dividends. If a given shareholder would have preferred dividends rather than buybacks (i.e., they'd have preferred cash instead of more equity in the company), they can recreate the effect of having dividends instead of buybacks.

That may not have been Berkshire's intent. But it's gone from owning about 5.398% of Apple at the end of 2018 to owing about 5.395% of Apple at the end of 2020. If it hadn't net sold Apple shares, it would have owned about 6.070% of Apple at the end of 2020. So, proportionally as compared to the number of Apple shares it owns, it's sold about as many shares as Apple has bought back minus the amount of new shares Apple has issued (through, e.g., RSUs).