Apple and Microsoft Reportedly Facing Off Over SkyDrive In-App Subscription Revenues

trekkie604 said:

So Google is giving Apple 30% of all in-app subscription upgrades to Google Drive?

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I believe so, but I think it also depends on whether the subscription is managed through Apple's store. I subscribe to the WSJ online edition and have long before I bought an iPhone / iPad. But now I use the WSJ app quite a bit. BUT - my subscription is still billed via WSJ, not Apple.

I think it depends on how billing occurs. IMHO, I think Apple believes this competes or MAY compete with iCloud - and so are being obstinate. Instigram vs. Twitter anyone?

paul4339 said:

thx... this is interesting, I guess it's a mechanism to prevent companies from leveraging the iOS platform then dragging the user back to their own billing service at a discount. I guess the way around that would to make the services offerings slightly different (??).

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Yes - it would encourage people to use the non in app purchase method. Also, another way to make it harder for people to buy from non in-app purchase is to, of course, prevent links to a website login page.

Personally, I find it iffy that Apple try to control pricing this way. Companies / individuals should have the freedom to set product pricing to whatever suits them - in-app or external...

Stella said:

A retail store differs from a digital store, given your example.

Apple wanting a 30% cut for services that never touch their (Apple's ) servers is taking the p!ss. Its basically free money for Apple. The product seller gave apple its $99 charge that is required for AppStore commission.

For example, Best Buy don't take commission for all future MMO game subscriptions when that product was purchased at its store.

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Apple has to administer the store. It seems reasonable to me to charge a commission in return for that. I don't know if 30% is reasonable or not, but some x% is.

If we agree some x% is reasonable, then suppose Apple were to allow a vendor to divide their services into two classes, called "initial" and "aftermarket" purchases, with different commission rates for each. What would stop a vendor from gaming the system by dividing their services so that they always ended up paying the lower commission rate?

babyj said:

Not paying a dime?

Who do you think pays for the hosting and bandwidth?

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This is the only thing they absolutely have to pay for. Everything else...

Who do you think pays for the card processing

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They do, but they've set themselves up in a situation where they have to. It's a catch22. "You have to pay for us forcing you to use our service we're spending all this money on because we're forcing you to use it".

gift card fees?

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Isn't all that money directly funneled back into the app store and iTunes?

Who do you think pays for the customer support staff?

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For services they don't maintain themselves? Why would I call up Apple because I can't get on Netflix?

Who do you think pays for the staff that maintain the iTunes shop front?

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All the apps they sell through the app store. Not the services.

Who do you think pays for the staff that perform the app approval process?

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Same as above. It's why I support Apple charging 30% for hosted apps. NOT THE SERVICES PROVIDED ELSEWHERE

Claiming Apple charge 30% simply for payment processing is rubbish.

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See above.

Apple have said the margin on iTunes is negligible and there is no reason to disbelieve this. Though I'm sure they pump a fortune in to marketing, advertisements and discount gift cards for example, though that benefits the developers as well.

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Like I said before, the app store is the major gateway towards the iDevices. The apps there are the major reasons why you buy Apple stuff, and eventually upgrade. They might not be making that much off it directly, but they're pulling tons of cash in from it indirectly.

I bet it's at least 2/3rds the reason why you bought an iPad.

Damn...my fingers are getting tired.

Renzatic said:

Okay, then tell me what that 30% goes towards. .

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Evaluating each app to make sure it isn't a. a scam b. virus-ridden c. otherwise violates Apple guidelines? Including all those apps that are free, low-volume, or so little revenue that the commission doesn't come close to paying for the evaluation.

Renzatic said:

Okay, then tell me what that 30% goes towards. Bandwidth cost for hosting the relatively minuscule app? We've already gone on about bandwidth. Apple could charge a buck for it and make that up and then some.

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How much do you think it costs Apple to host a free 20mb app over the course of a year?

I reckon $10k per million downloads is a good ball park figure. Who do you think pays for that?

Judas1 said:

What the App Store has that they want access to are consumers. Do you seriously believe apple owns iOS users?

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No. Do you seriously believe clubbing baby seals is fun?

If not, then let us buy what we want from the stores that we want. Just like in the real world where there are numerous stores to shop from.

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Okay.

And please stop saying they have a choice to either use the AppStore or not.

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No, thanks.

That's not a choice.

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Yes, it is. Unless you are going to make up your own definition of the word.

There are no other ways for them to sell ios apps to consumers. And vice versa, there's no other way for us to get these apps from them.

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Yep. Well, except for Cydia.

Your implication seems to be that developers have some sort of right to sell iOS apps. Not sure where you are getting that from.

The way the system is supposed to work is that if Apple terms are too onerous, developers flee the platform. And then users follow the apps. But that's not happening. In fact, the iOS platform is apparently working out better for developers than the more flexible alternative.

Renzatic said:

This is the only thing they absolutely have to pay for. Everything else...



They do, but they've set themselves up in a situation where they have to. It's a catch22. "You have to pay for us forcing you to use our service we're spending all this money on because we're forcing you to use it".



Isn't all that money directly funneled back into the app store and iTunes?



For services they don't maintain themselves? Why would I call up Apple because I can't get on Netflix?



All the apps they sell through the app store. Not the services.



Same as above. It's why I support Apple charging 30% for hosted apps. NOT THE SERVICES PROVIDED ELSEWHERE



See above.



Like I said before, the app store is the major gateway towards the iDevices. The apps there are the major reasons why you buy Apple stuff, and eventually upgrade. They might not be making that much off it directly, but they're pulling tons of cash in from it indirectly.

I bet it's at least 2/3rds the reason why you bought an iPad.

Damn...my fingers are getting tired.

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think some posters would understand if you did a finger painting of it for them

babyj said:

How much do you think it costs Apple to host a free 20mb app over the course of a year?

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Considerably less than it costs Valve to host a free 15GB app for the same amount of time. And Apple makes more moeny overall than Valve does, I'm sure.

I reckon $10k per million downloads is a good ball park figure. Who do you think pays for that?

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$10k per million downloads? Makes you wonder how Apple could afford supporting iCloud.

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uknowimright said:

think some posters would understand if you did a finger painting of it for them

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Gasu E. said:

Evaluating each app to make sure it isn't a. a scam b. virus-ridden c. otherwise violates Apple guidelines? Including all those apps that are free, low-volume, or so little revenue that the commission doesn't come close to paying for the evaluation.

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Also expanding store footprint to more countries (over 100 now) and maintaining them. e.g., bandwidth, equipments, manpower, and power costs.

Marketing, including local ads to tell people about iOS apps.

Continual security update of iOS devices to fight piracy and malware.

Legal fees for establishing overseas app marketplace (e.g., they got sued in China because of rogue apps)

Integration needs and QA.

It's 30%, but it is also 30% of a very small number, like $1.99.

In the old PC model, software were like $49.95 and up, and shareware were $10-20.

Judas1 said:

Because of the massive amount of iOS users. Not because the App Store is so wonderfully designed. And you do realize there's hundreds of thousands of apps in the App Store, while the AppStore itself is just one big app?

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Yeah the App Store is just "One Big App" because you hate Apple so much have to downplay their POS system. What's true is I'm sure you yourself wouldn't be able to create the system they have and built it up to be as successful as it is. Takes more than just "One Big App". Nice.

viacavour said:

Also expanding store footprint to more countries and maintaining them.

Marketing, including local ads to tell people about iOS apps.

Continual security update of iOS devices to fight piracy and malware.

Legal fees for establishing overseas app marketplace (e.g., they got sued in China because of rogue apps)

Integration needs and QA.

It's 30%, but is is also 30% of a very small number, like $1.99.

In the old PC model, software are like $49.95, and shareware were $10-20.

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Shareware was free, man.

Okay, think of it like this. Apple offers up all this stuff, right? Do you think it costs them 1/3rd of all the money they make in a year to perform all this themselves?

Now imagine all these services using the app store having to pay 1/3rd of what they make just to gain access to it. They have their own costs which they maintain with their subscriptions. Subscriptions they have to give up a huge chunk of just to reach the iDevice market.

Don't you think Apple is charging just a little too much for a bunch of services they don't even run?

Renzatic said:

Okay, then tell me what that 30% goes towards.

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I already did. Supporting and improving the App Store. You keep saying the "vast majority is pure profit" even though we have a direct statement from Apple that they operate a bit over break even.

Hell, why should developers have to be forced into Apple's payment system?

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Again. Saying that they are forced into something is FUD.

And you seem to have ignored the answer to this question. Here you go:

BaldiMac said:

Because they need to support the App Store platform. Paid apps and subscription support all the free ones.

And as someone pointed out earlier, if Apple were not going to take a cut for subscriptions, why wouldn't every app move to a subscription model? Leaving Apple no money to support the App Store platform.

"This app requires a one day subscription for the same amount that it used to cost, but continues to function normally after the subscription expires."

And then there's the issue of security. By standardizing the payment method within the App Store and IAPs, Apple has increased the security of the iOS platform tremendously.

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Renzatic said:

Makes you wonder how Apple could afford supporting iCloud.

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Most likely from subsidising it from other revenue streams such as iTunes.

Same as Google pay for Gmail and other loss making services with income from adwords and Microsoft cover all their loss making ventures with Office and Windows.

You can't take a single case (in app purchases of a non hosted app) in isolation, you have to view it as part of the bigger eco-system that Apple operate.

gotluck said:

Because there is no other choice. If you want to access iOS users you must go through Apple, unless customers can access your product through safari.

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Oh there is so another choice, it's called Windows Phone and Android. Nobody is forcing developers to create for iOS.

Renzatic said:

Shareware was free, man.

Okay, think of it like this. Apple offers up all this stuff, right? Do you think it costs them 1/3rd of all the money they make in a year to perform all this themselves?

Now imagine all these services using the app store having to pay 1/3rd of what they make just to gain access to it. They have their own costs which they maintain with their subscriptions. Subscriptions they have to give up a huge chunk of just to reach the iDevice market.

Don't you think Apple is charging just a little too much for a bunch of services they don't even run?

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Freeware were free. Shareware may not be free. You are obviously one of those who never contributed.


You are wrong to assume that pricing is cost based. Business people price goods based on the value. The cost is much lower. MS's cost is lower since the service is simple and invokes no manpower.

And you are only looking at the server side needs. Continual client side improvement also contribute to the app ecosystem even if they are subscription based. Plus there are common services like login, notification, update services, etc for the developers to use freely.

To get an indication of how much, look at MS. $30-50K for a patch from small time developers, assuming not everyone on XBL applies the patch. Twitter has to gimp and limit the tweets for apps too, if I were free. 30% sounds big, but for a small number it is not a lot.

Renzatic said:

Apple has rigged the game so third parties have no other choice.

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Plenty of alternate third party choices.

What's it costing us? Practically nothing. What's it costing you? 30% flat rate. Don't call it extortion. Call it an agreement between two individuals. We've got a popular platform you want to take advantage of, so we're going to take advantage of you".

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Long term it cost them a lot up to this point in present time. From the first iPod to structuring/restructuring the iTunes store. They were detrimental in removing DRM from music to getting music to be sold by individual songs vice albums. Working deals with record companies, media outlets for TV / movies for content.

Apple hard work is now paying off after investment of all these years in the making. All you seem to see is the end result, not all these years hard work it took them to get to this point.

All this work has value. Now developers/apps want to tap into a large user base. But its not for free, its a business by the way.

If you feel its unfair, they can start from scratch, just like Apple did. Put in the time, effort and money and maybe in 10 years time they can make it big like they did.

Marketing ?

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What kind of marketing apple does about app?

Integration needs and QA.

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QA ? really!! Did you forget that updated facebook app constantly crashed?

And as someone pointed out earlier, if Apple were not going to take a cut for subscriptions, why wouldn't every app move to a subscription model? Leaving Apple no money to support the App Store platform.

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Then they don't need X%? they just need fixed amount for subscription 30% of $50 subscription? It's not like apple is giving these skydrive storage.

We've got a popular platform you want to take advantage of

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It is no longer most popular.

BaldiMac said:

I already did. Supporting and improving the App Store. You keep saying the "vast majority is pure profit" even though we have a direct statement from Apple that they operate a bit over break even.

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You're not quite following me. Apple hits just above even without relying on the major players offering their services via IAP. The only thing Apple has done by charging 30% is making it inconvenient for everyone, users and developers alike.

There is no reason for them to gouge these companies for services they themselves don't provide. They're already doing fine without it, and using it would only cost Netflix ect. et al. more money at the direct detriment to themselves, and the complete benefit for Apple.

Yes, they use this money to improve the app store. That benefits apple. They improve the store front, makes it easier to buy more apps, which Apple collects 30% off of. Apple isn't losing any money. They're making literal tons of it. Tell me why they need to charge for services too?

Again. Saying that they are forced into something is FUD.

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They're not forced yet. But considering the implications of this article...there is potential it could happen.

And you seem to have ignored the answer to this question. Here you go:

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And as someone pointed out earlier, if Apple were not going to take a cut for subscriptions, why wouldn't every app move to a subscription model? Leaving Apple no money to support the App Store platform.

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Why haven't they yet? Apple already provides them plenty of reason to do so. They offer up apps for free, and you can sign up for a sub outside of the app. Why hasn't this doom and gloom scenario already occurred?

HenryDJP said:

Oh there is so another choice, it's called Windows Phone and Android. Nobody is forcing developers to create for iOS.

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Abandoning your customers that use iOS is not really a choice, It's more of a flipping the bird.

bagyidaw said:

What kind of marketing apple does about app?


QA ? really!! Did you forget that updated facebook app constantly crashed?



Then they don't need X%? they just need fixed amount for subscription 30% of $50 subscription? It's not like apple is giving these skydrive storage.


It is no longer most popular.

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Apples does the top X apps, advertising, and promote them selectively. Sweeney from Epic Games said so.

The developers obviously need to do their own QA. Apple's QA focus more on the softer issues, like compliance and appropriateness. E.g. privacy.

It is still the most popular and makes developers money. Marketshare are just device sales.

linuxcooldude said:

Plenty of alternate third party choices.

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The only true 3rd party choice is Cydia, which is not available on all Apple devices and requires a certain amount of knowhow to get installed. All in all it's a pain in the arse.

That or a webapp.

babyj said:

Most likely from subsidising it from other revenue streams such as iTunes.

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So 15 million people streaming their iTunes library over iCloud is subsidized, but 15 million people downloading a free 30 meg app is costing Apple money?

How does that make sense?

Everyone keeps telling me to look at the big picture. How about I turn the tables on you all and ask you the same question.

The app store is profitable. Only barely, but still profitable. This is without the big service players going directly through Apple's IAP setup.

At the big big picture, Apple is one of, if not the, most profitable companies in the world, with more money than any single one of us could conceivably count within our lifetime. Billions upon billions upon billions of dollars. Tim Cook probably owns 10 planes, and he doesn't even know how to fly, I bet. He bought them just because he could.

So why do they have to charge Dropbox and Netflix 1/3rd of their gross through the app store? Marketing? Bandwidth? Hasn't that already covered 10 times over? They're not charging them now, and it hasn't cost Apple a single cent to their bottom line. All it would be is pure profit. Profit that would, in turn, be used to benefit Apple even more.

...at the expense of choice and cost for us.

THERE. IS. NO. REASON.

Renzatic said:

Yes, they use this money to improve the app store. That benefits apple. They improve the store front, makes it easier to buy more apps, which Apple collects 30% off of. Apple isn't losing any money. They're making literal tons of it.

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Just like baldiMac said, they make very little profit directly from software sales. Either they break even or slightly ahead.

Apple makes the majority of its money through hardware sales. Its just the applications & content are what give that hardware added value.

Makes no sense them loosing money on its iTunes store which should at least break even as long as its hardware is selling good.

Renzatic said:

So 15 million people streaming their iTunes library over iCloud is subsidized, but 15 million people downloading a free 30 meg app is costing Apple money?

How does that make sense?

Everyone keeps telling me to look at the big picture. How about I turn the tables on you all and ask you the same question.

The app store is profitable. Only barely, but still profitable. This is without the big service players going directly through Apple's IAP setup.

At the big big picture, Apple is one of, if not the, most profitable companies in the world, with more money than any single one of us could conceivably count within our lifetime. Billions upon billions upon billions.

So why do they have to charge Dropbox and Netflix 1/3rd of their profits? Marketing? Bandwidth? Isn't that already covered? They're not charging them now, and it hasn't cost Apple a single cent to their bottom line. All it would be is pure profit. Profit that would, in turn, be used to benefit Apple even more.

...at the expense of choice and cost for us.

THERE. IS. NO. REASON.

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Those variable expenses are covered as part of the 30% proceeds. The more successful an app does, the more it uses up resources.

iTunes business should cover its own P&L.
App business should cover its own P&L.

As for how they use the profits...

If Tim Cook bring more hardware innovation and manufacturing back to US, it would be great for that sector. Since it's more than just low cost, cutthroat labor.