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

[BaldiMac]

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.

I'm following you completely. I just think you are oversimplifying the situation. Your assumption is that if they made an additional $1 million dollars from subscriptions, they would simply take it as profit. The evidence to date suggests that they would actually invest most of it in supporting and improving the App Store.

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.

It also benefits users and developers.

Tell me why they need to charge for services too?

Do I need to list the same three reasons again?
1) Support and improve App Store
2) Prevent abuse of subscription pricing
3) Improve security of iOS platform by limiting payment method to iTunes Store (with the exception of Safari and other web browsers.)

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

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?

Exactly! The obvious answer being that Apple's terms are better than the alternative!

 

[linuxcooldude]

Probably what has already been mentioned the 30% cut also subsidizes the cost of hosting free applications that does benefit the customers.

 

[Lucky736]

Let's be serious, how many copies of this app have even been sold/download......... 43?

 

[Renzatic]

I'm following you completely. I just think you are oversimplifying the situation. Your assumption is that if they made an additional $1 million dollars from subscriptions, they would simply take it as profit. The evidence to date suggests that they would actually invest most of it in supporting and improving the App Store.

Not completely. I do think that that, up front, it'd be more profit, that doesn't necessarily mean that Apple will pocket it and move on. I'm saying that as much as Apple potentially needs it, so do the companies they're siphoning from. For instance...

Netflix is $8 a month. I'm sure there's a good reason for that. They make money, are able to cover all the fees required to run their service, while remaining relatively cheap. Apple takes 30% of that, and suddenly Netflix is no longer able to make as much money or cover their costs. They'll have to raise prices.

Apple, in turn, takes that money and converts it to better their own service. At Netflix's expense.

This is the biggest problem I have with it. Anything hosted by or supported directly by Apple they have a right to charge for. Anything outside, like subscription services, only hurts the company they're charging.

Apple could find other ways to make up that money without directly harming their 3rd parties. And it is harming them. Hence why most go out of their way to avoid paying that 30%. Not because they don't like Apple, but because they have their own bills to pay and profits to make.

 

[viacavour]

Let's be serious, how many copies of this app have even been sold/download......... 43?

It is probably more about the upcoming Office subscription more than this sky drive thing. MS is just trying to use us for their negotiation.

 

[Renzatic]

Eh. I'll get into it later. I gotta head, and I've already spent way too much time arguing on here as it is.

 

[viacavour]

Not completely. I do think that that, up front, it'd be more profit, that doesn't necessarily mean that Apple will pocket it and move on. I'm saying that as much as Apple potentially needs it, so do the companies they're siphoning from. For instance...

Netflix is $8 a month. I'm sure there's a good reason for that. They make money, are able to cover all the fees required to run their service, while remaining relatively cheap. Apple takes 30% of that, and suddenly Netflix is no longer able to make as much money or cover their costs. They'll have to raise prices.

Apple, in turn, takes that money and converts it to better their own service. At Netflix's expense.

This is the biggest problem I have with it. Anything hosted by or supported directly by Apple they have a right to charge for. Anything outside, like subscription services, only hurts the company they're charging.

Apple could find other ways to make up that money without directly harming their 3rd parties. And it is harming them. Hence why most go out of their way to avoid paying that 30%. Not because they don't like Apple, but because they have their own bills to pay.

Apple improves the iOS platform not in NetFlix's expense. They work together to deliver html5 streaming. It also provides a blooming platform for mobile tv viewing, beyond what NetFlix had done with home consoles and PCs.

 

[paul4339]

....

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...

Only barely profitable won't do, it has to be as profitable as their hardware. They have to ramp up another profit stream before their hardware commoditizes. Once commoditization starts, they will get margin squeeze on the iPhone.

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.

I think iTunes and Appstore and services have the same P&L. The cost to run iTunes/Appstore/iCloud is approaching $1.5-2B per year (and growing fast from data center build-outs) and earlier this year Apple said they paid $6.5B to developers over the *lifetime* of appstore.

I think it's Apple's hope to make lots money on their ecosystem, but it's not hugely profitable (...yet).

 

[BaldiMac]

Not completely. I do think that that, up front, it'd be more profit, that doesn't necessarily mean that Apple will pocket it and move on. I'm saying that as much as Apple potentially needs it, so do the companies they're siphoning from. For instance...

Netflix is $8 a month. I'm sure there's a good reason for that. They make money, are able to cover all the fees required to run their service, while remaining relatively cheap. Apple takes 30% of that, and suddenly Netflix is no longer able to make as much money or cover their costs. They'll have to raise prices.

Apple, in turn, takes that money and converts it to better their own service. At Netflix's expense.

This is the biggest problem I have with it. Anything hosted by or supported directly by Apple they have a right to charge for. Anything outside, like subscription services, only hurts the company they're charging.

Apple could find other ways to make up that money without directly harming their 3rd parties. And it is harming them. Hence why most go out of their way to avoid paying that 30%. Not because they don't like Apple, but because they have their own bills to pay.

That's all just theoretical, socialist crap. Almost every retailer takes of a cut from sales. That technically "hurts the company they're charging." You seem to think subscriptions are special, just because.

How much Netflix pays Apple is between Netflix and Apple. It seems like you are saying that Netflix doesn't use IAP. Fantastic. That's what works best for them given the options that Apple allows.

 

[vandeetz]

the big problem with this whole thing is stated in the original article.

"if a user signed up for a few additional gigabytes on their iOS device, and then moved to Android or Windows Phone or not phone at all, for the length of their account, Apple would collect 30% of their fee for storage."

that's complete garbage there is no reason apple should be continuing to collect on that account even if the person moves on from an apple device to Android or Windows Phone.

and not allowing an update to go through that does away with the subscription when others have done so just doesn't make sense. The only reason to do it is to hold back the competitors to their own iCloud service

 

[viacavour]

the big problem with this whole thing is stated in the original article.

"if a user signed up for a few additional gigabytes on their iOS device, and then moved to Android or Windows Phone or not phone at all, for the length of their account, Apple would collect 30% of their fee for storage."

that's complete garbage there is no reason apple should be continuing to collect on that account even if the person moves on from an apple device to Android or Windows Phone.

and not allowing an update to go through that does away with the subscription when others have done so just doesn't make sense. The only reason to do it is to hold back the competitors to their own iCloud service

That's probably because there is no way to tell when he's stopped using the app short of terminating the account, preventing the user from using the service.

We will need to see the full language. The devil is in the details. Since ms runs the service fully, Apple can't audit easily.

 

[Al Muhammed]

Apple so disgusting nowadays. But its biting the nose off its own face. No company is an island. What Apple does unto others others will do unto Apple. Right now its Apple customers who are suffering but one day those customers will be with Apple no more and it will be Apple who suffers.

 

[vandeetz]

That's probably because there is no way to tell when he's stopped using the app short of terminating the account, preventing the user from using the service.

We will need to see the full language. The devil is in the details.

true, but lets not pretend that Microsoft can't see where the traffic is coming from to their service and if people are paying 30% to apple when not using IOS to access the service it is wrong and unethical to continue to charge that fee.

Microsoft and Apple may need to come to some kind of an agreement, but any subscription based IAP should not be forced to pay apple when Apple is no longer the avenue used to consume the service.

 

[viacavour]

true, but lets not pretend that Microsoft can't see where the traffic is coming from to their service and if people are paying 30% to apple when not using IOS to access the service it is wrong and unethical to continue to charge that fee.

Microsoft and Apple may need to come to some kind of an agreement, but any subscription based IAP should not be forced to pay apple when Apple is no longer the avenue used to consume the service.

It's the standing policy. MS should work around it like others if they don't want to pay. MS can see the traffic, but someone will need to audit it.

Should Apple updates its policies, it will apply to everyone -- not just MS.

Sneaking in in-app payment, hoping that Apple doesn't notice is stupid. And wrong way to start the negotiation. What do they hope to achieve ?

 

[Stella]

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?

Agreed - a lower %.

Apple's sky high percentage In-app purchase destroys usability - for example, I can't buy Kobo books for the iOS app... its long winded to have to go to the website on mobile device and purchase this way.

I can understand why Kobo won't want 30% of the cost going to Apple - its just not profitable.

 

[vandeetz]

It's the standing policy. MS should work around it like others if they don't want to pay. MS can see the traffic, but someone will need to audit it.

Should Apple updates its policies, it will apply to everyone -- not just MS.

Sneaking in in-app payment, hoping that Apple doesn't notice is stupid. And wrong way to start the negotiation. What do they hope to achieve ?

and from what the article states they did try to work around it by removing the IAP, but Apple has still not approved any updates to their app.

if anyone has a better answer than trying to hold back the competition for that one I'd like to hear it.

I understand there is an agreement and they can choose to walk away from the service, but Apple seems to feel that they can walk all over everyone as long as they have the market share. That's not an ethical way to do business and everyone from the Large corporations to the indie developers know it

 

[BaldiMac]

and from what the article states they did try to work around it by removing the IAP, but Apple has still not approved any updates to their app.

if anyone has a better answer than trying to hold back the competition for that one I'd like to hear it.

I understand there is an agreement and they can choose to walk away from the service, but Apple seems to feel that they can walk all over everyone as long as they have the market share. That's not an ethical way to do business and everyone from the Large corporations to the indie developers know it

You are making a few assumptions. Here is a reply from another poster earlier in the thread.
https://forums.macrumors.com/showthread.php?p=16468024#post16468024

 

[Renzatic]

That technically "hurts the company they're charging." You seem to think subscriptions are special, just because.

You're arguing how it benefits Apple, while completely ignoring how it costs everyone else. There's no socialist crap about it. Apple is eating into their subscription fees just because they can. It doesn't benefit the company toiling under it whatsoever (you could argue iOS exposure, but that's pretty weak), so why should they pay for it?

It's gouging, plain and simple. Yeah, it helps pay for Apple's up front cost for running the store, but hell, they do that already. Everyone else has their own up front costs too. If you're having to give a goodly chunk of your monthly fees for something, you better get some immediate benefits in return. Something worth 1/3rd of what you'd make elsewhere without any problem. Right now, Apple doesn't do that. All they do is provide them with a payment setup they've already got set up themselves, and...well...not much more.

Assuming Netflix has 20,000,000 subscribers all paying at least $8 a month. that's $160,000,000 right there. 1/3rd of that is roughly 53,000,000 a month they're paying simply for the privilege of being hosted in the app store. Yeah, I'm sure the $636,000,000 Netflix will be paying per year all goes towards the bandwidth fees required to host a 30-odd meg file and a little 300k .png advertisement that says "Netflix!". But that's the cost of doing business with Apple. It benefits everyone involved.

Let me say, if it cost nearly a quarter of a billion dollars to host a 30 meg file, even one downloaded millions of times a year, the internet would've died years and years and years ago. But wait. It benefits everyone, not just Netflix. It goes towards the good of the app store!

...wait. What was that about socialist crap again?

It's like having someone run up to you and kick you square in the nuts once a day. But it's alright. It's good for you. Builds character. That nut kicker cares you deep down. Here's a cookie.

How much Netflix pays Apple is between Netflix and Apple. It seems like you are saying that Netflix doesn't use IAP. Fantastic. That's what works best for them given the options that Apple allows.

Yeah, and I hope it remains that way.

 

[BaldiMac]

You're arguing how it benefits Apple, while completely ignoring how it costs everyone else.

No, I'm not. I pointed out that it benefits users and developers.

There's no socialist crap about it.

Your whole argument is that Apple shouldn't charge so much so other companies can make more money.

Apple is eating into their subscription fees just because they can. It doesn't benefit the company toiling under it whatsoever (you could argue iOS exposure, but that's pretty weak), so why should they pay for it?

If it doesn't benefit them, they don't pay it. It's not a hard concept.

It's gouging, plain and simple.

Unless you know what gouging is. What we normally call it is "agreeing to a fee".

Yeah, it helps pay for Apple's up front cost for running the store, but hell, they do that already. Everyone else has their own up front costs too. If you're having to give a goodly chunk of your monthly fees for something, you better get some immediate benefits in return. Something worth 1/3rd of what you'd make elsewhere without any problem. Right now, Apple doesn't do that. All they do is provide them with a payment setup they've already got set up themselves, and...well...not much more.

According to you and no evidence whatsoever. Funny how developers continue to sell their apps through the App Store despite all of your concerns. Maybe they no more about the equation than you do. And, again, you ignore the other reasons to require IAP for subscription purchases within apps.

Let me say, if it cost nearly a quarter of a billion dollars to host a 30 meg file, even one downloaded millions of times a year,

Pricing isn't based on cost. It's based on value. Basic economics.

 

[Renzatic]

Pricing isn't based on cost. It's based on value. Basic economics.

...and Apple isn't offering anywhere near enough value to justify that cost.

 

[skaertus]

Do you think that all the Microsoft retailers, resellers and partners actually sell their products for them without being paid? I believe that resellers of Microsoft online services get something like a 15% commission and they get a lot of support from Microsoft and do a lot less than Apple do.

Whilst 30% is pretty much standard for retail margin, plus you can argue it's actually a better deal as there is no wholesaler / distributor sat in the middle taking a decent margin as well. I used to run a record shop and can say for a fact that 10 years ago a record label would have got no more than 50% of the selling price, which makes the 70% Apple give them look pretty good.

Of course resellers of Micosoft get something. But Microsoft is on a much better position to negotiate with resellers than a smaller company with a lesser known software.

In fact, it turns out, as MacRumors is reporting (https://www.macrumors.com/2012/12/1...e-for-ios-subscription-revenues-not-skydrive/), that Microsoft and Apple are discussing exactly these terms. Microsoft is no small developer, and Office is much better known than any software which is available at App Store. And Apple is apparently not willing to make any concessions.

 

[BaldiMac]

...and Apple isn't offering anywhere near enough value to justify that cost.

For some developers, that's true (Netflix, Microsoft). For other developers, that's not true (all the developers that use IAP for subscriptions). There is that choice that you claim doesn't exist.

 

[Judas1]

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



Okay.



No, thanks.



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



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.

Seriously? You're citing Cydia? A service you can only get by going against apple and jail breaking your device. That doesn't make any sense whatsoever.

----------

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.

Almost every store in the whole world has an online shop. It's not that hard to program a shop compared to say a video game or any other programs out there. So yeah, the AppStore is just a big app.

 

[BaldiMac]

Seriously? You're citing Curia? A service you can only get by going against apple and jail breaking your device. That doesn't make any sense whatsoever.

Cydia. Sure. Why not? It's a legal way to distribute an app such as SkyDrive to iOS users. Do we have to pretend that it doesn't exist? Not very important to my point either way. I can pretend with you if you like.

 

[Renzatic]

For some developers, that's true (Netflix, Microsoft). For other developers, that's not true (all the developers that use IAP for subscriptions). There is that choice that you claim doesn't exist.

I can't think of a single scenario where nearly $650,000,000 a year for the simple honor of having your app available on a platform would be considered worthwhile.

Specially not when the competition does it for so much less, and has done so since the dawn of the OS.

...hell, it'd cost less for Netflix to build a rocket, launch it into space, and have it explode into the company logo for no other reason than "oh well, we've got money to burn" than it would be for them to let Apple let them use their IAP setup. It's ridiculous.

Though to be fair, you are half right. If you're a small company without the infrastructure, going with Apple is a good thing. You'll make money while they handle the back end. But as I've said before, it should be a choice, not a requirement. With Netflix, Dropbox, MS, and the rest, they're paying tons for pointless redundancy.