App Store Small Business Program's Lower Fees Cost Apple Less Than 5% of Revenue

[69Mustang]

Wasn't the "outrage" that Apple wasn't doing enough, and doesn't it only being 5% support that idea? Or were there a bunch of angry shareholders on the forums?

The funny part is it would have amounted to approximately half of that 5%. Apple's revenue hit would have been 2.7% Google was the one that would have been hit with the claimed 5% hit.

Even funnier, some of the comments in the thread are written as if this corporate generosity actually occurred. This is just a Sense Tower hypothetical, not an actual thing that really happened.

 

[4jasontv]

I'm really so tired of this stupid way of thinking. Without developers (developers, developers, developers!), the iPhone is dead in the water. Just go ask Windows Phone about that.

Apple created a digital store - wow (they already had one). So did Valve in 2003. So did Amazon in 1999. Apple spent 3 years selling iPhones off the back of "there's an app for that" and flexing App Store statistics. So cut the BS, because Apple is not some miracle worker turning arm chair developers into Zuckerburgs. Comprehensive developer tools and an app repository is a minimum viable product.

I haven't seen anyone argue that there should be no fees in the App Store. Any arguments about the cut are also just semantics. The biggest issue is the exclusivity of distribution, as it hurts competition. Because let's say I come to the market and say, "you know what? I can distribute iPhone apps better than Apple can." I'm only going to charge a 15% fee, and only 10% for subscriptions from day one. Tired of these news stories that you see every week about this app getting caught doing X, and that app getting caught doing Y? Well, I'll vet apps much more throughly than Apple does. This will include not bloating my store with all these child-gambling-simulator mobile games. My store will have higher quality apps with less fluff.

What would happen if I did that? Well, that creates competition for the App Store. It may drive Apple to lower fees, provide better service, and increase innovation in App Store features. The consumer wins, because they get a better quality product and lower prices. But that can't happen, now can it.

What would happen is you would divide the iOS ecosystem and decrease its overall value. You would impose unwanted costs on the customer and likey drive app prices up as developers would pursue greater profits over innovation. We would likely see exclusive apps and DLC that would fragment the ecosystem and polarize customers.

We must assume that given the opportunity developers will put their needs ahead of customers. Right now, with a single app store, there are mechanisms to influence their behavior. With multiple app stores, there would less oversight and regulation to how developers manage their products. There would be no privacy report cards and fewer discounted apps. Customers would lose privacy, money, and control from every conceivable direction.

 

[Serban55]

from a business point of view this is excelent for both parties ...Apple keeps the dev "in game" for a longer perioad of time and motivate those who didnt started yet

 

[code-m]

This is something Google actually got right when compared to Apple. Sure Apple initiated the appropriate AppStore drop, but Google simplified the terms.

I initially was under the impression that Apple would have done this simplification vice Google, what a strange world we live in.

 

[gnasher729]

Obviously whatever Apple and Google do is no good until they hand money to Epic.

 

[nexusrule]

But without developers such as yourself, Apple wouldn't have an app ecosystem, or even sell 30% of the phones they do now. Their only other option would be to create every app themselves. This one-sided narrative of Apple perpetually owed something doesn't hold up to scrutiny.

When there is a market, i.e. people that want to buy something, there will be an offer, people that want to buy something, so the idea that without developers an ecosystem would not exist clashes with the fact that there will always be developers for the system, what’s hard is creating a lucrative market more than participating in it. Now, the market could not survive if the sellers’ commission is too high, but it’s not the case of the App Store with it prospering for more than a decad.

 

[m.x]

If you turn the numbers around, it means that 2% of the developers pay 97,3% of the App Store fees. That’s a really interesting look into the App Store business and puts into perspective how consolidated the store has become...

 

[frou]

Tim Cook would probably go to war to save 0.5% on hardware component costs, so that tells you how much they must be scared of impending regulation on the software side.

 

[mw360]

If I'm doing this right it means 98%% of developers are sharing just 5.4% of the total App Store earnings (ignoring the Apple cut). It's not surprising or necessarily wrong, though I imagine the list of top earners is pretty disappointing.

 

[michelb76]

Not surprised, as it is not that easy to get accepted into the program.

 

[flottenheimer]

Good move.

 

[gianpan]

What would happen is you would divide the iOS ecosystem and decrease its overall value. You would impose unwanted costs on the customer and likey drive app prices up as developers would pursue greater profits over innovation. We would likely see exclusive apps and DLC that would fragment the ecosystem and polarize customers.

We must assume that given the opportunity developers will put their needs ahead of customers. Right now, with a single app store, there are mechanisms to influence their behavior. With multiple app stores, there would less oversight and regulation to how developers manage their products. There would be no privacy report cards and fewer discounted apps. Customers would lose privacy, money, and control from every conceivable direction.

what unwanted costs? and how would you drive prices up as developers pursue greater profits over innovation? Where are you getting all these from?

How do you also get that there would be no privacy report cards or fewer discounted apps. Especially the latter makes no sense at all as lower developer fees => more opportunities for discounts.
You are just saying things with like zero evidence to back them up.

 

[bobbie424242]

I’m looking forward to the day where I think 600 million dollars is “not much money”

It's relative. It's not much money compared to 20x that amount which is the total Apple makes.

 

[paulsydaus]

I’m not convinced this move will free Apple from the scrutiny of regulators which let’s face it is what this is all about. Apple isn’t doing this because they care about the little guy. If they did they would have done it already and not waited for a lawsuit by EPIC which spurred a ton of anti-trust interest.
The reason I think this will not quell the interest by regulators is that because for the bigger developers like EPIC they can still argue that the fees Apple are charging are not proportional to the cost of providing the App hosting service. And without the option of another provider to provide competition, Apple are still profiting from the lack of competition. You can argue that it’s Apples eco-system blah blah but you’d be not understanding how and why competition and anti-trust laws work.
The only solution that would probably quell the regulators would be a fair and reasonable fee model based on megabytes of downloaded content. Apple will not go there unless forced because it ruins their cash cow. But if you look at the facts and the law that’s what should happen. If Apple doesn’t want to open up the device to other stores/payment methods then there have to be consequences such as not profiteering from being a monopoly.
You could also consider cost of storing and backing up the data but I think these costs are relatively minimal by comparison and probably captured by the annual developer fee...

 

[steve09090]

I haven't seen anyone argue that there should be no fees in the App Store.

Epic comment

 

[Cyprusian]

This is great for all smaller scale developers other than, perhaps, those who are just about to cross the $1 million earnings threshold when their App Store fees will double.... There's always that issue with thresholds, so that they will need to either push really hard to increase their income to make the fee increase viable, or hold back to stay at 15%.

 

[whichweather]

I'm really so tired of this stupid way of thinking. Without developers (developers, developers, developers!), the iPhone is dead in the water. Just go ask Windows Phone about that.

Apple created a digital store - wow (they already had one). So did Valve in 2003. So did Amazon in 1999. Apple spent 3 years selling iPhones off the back of "there's an app for that" and flexing App Store statistics. So cut the BS, because Apple is not some miracle worker turning arm chair developers into Zuckerburgs. Comprehensive developer tools and an app repository is a minimum viable product.

I haven't seen anyone argue that there should be no fees in the App Store. Any arguments about the cut are also just semantics. The biggest issue is the exclusivity of distribution, as it hurts competition. Because let's say I come to the market and say, "you know what? I can distribute iPhone apps better than Apple can." I'm only going to charge a 15% fee, and only 10% for subscriptions from day one. Tired of these news stories that you see every week about this app getting caught doing X, and that app getting caught doing Y? Well, I'll vet apps much more throughly than Apple does. This will include not bloating my store with all these child-gambling-simulator mobile games. My store will have higher quality apps with less fluff.

What would happen if I did that? Well, that creates competition for the App Store. It may drive Apple to lower fees, provide better service, and increase innovation in App Store features. The consumer wins, because they get a better quality product and lower prices. But that can't happen, now can it.

Thanks for writing this. The Apple apologists are out in ever stronger form here on MR...

 

[svanstrom]

I think a lot of people would be surprised with just how small some of us devs are.

If you don't believe me, ask my wife, she'll sigh and confirm.

I've seen ads promising to fix that… 😁

But without developers such as yourself, Apple wouldn't have an app ecosystem, or even sell 30% of the phones they do now. Their only other option would be to create every app themselves. This one-sided narrative of Apple perpetually owed something doesn't hold up to scrutiny.

What doesn't hold up is people attacking Apple as if they'd die without developers, only to completely ignore the financial risks Apple took to create this market; as well as ignoring that basically all businesses (outside of a few international megabrands) almost completely works simply by selling something that someone else made.

Go ahead and attack Apple for the sh*t they're absolutely doing to not make webapps more functional (like implementing notifications, as they already have on MacOS); but attacking them for their pricing in their AppStore just shows ignorance about how the world works.

 

[4jasontv]

what unwanted costs? and how would you drive prices up as developers pursue greater profits over innovation? Where are you getting all these from?

How do you also get that there would be no privacy report cards or fewer discounted apps. Especially the latter makes no sense at all as lower developer fees => more opportunities for discounts.
You are just saying things with like zero evidence to back them up.

Having to manage purchases from multiple stores is stressful and is therefore a cost to the consumer.

Developers won’t pass savings onto customers but rather they will pocket the difference. And why tell people you are stealing their data unless you have to?

 

[threesixty360]

Apple in November launched the App Store Small Business Program, which drops App Store fees from 30 percent to 15 percent for all developers who earn less than $1 million from the App Store, and it turns out the price drop isn't costing Apple much money.

According to estimates from app analytics company Sensor Tower shared by CNBC, had Apple's program been in place for all of 2020, Apple would have missed out on $595 million, or approximately 2.7 percent of the estimated $21.7 billion in App Store fees in 2020. The apps that earn the most money in the App Store are still subject to the full 30 percent fee and make up most of the money that Apple collects.

Google today also announced a similar price drop for developers, and starting on July 1, Google will collect 15 percent in Play Store fees from developers earning under $1 million. Google too stands to lose little money. Sensor Tower estimates that if Google's lowered fees had been available across 2020, Google would have missed out on $587 million, or about five percent of the $11.6 billion in Google Play fees for the year.Neither Apple nor Google share specific data on App Store sales, so Sensor Tower's data is based on estimates and is a rough calculation rather than an exact number. Apple lumps revenue collected from the App Store alongside other services, and Apple collected $54.76 billion in fiscal 2020.

All developers who earn less than $1 million from the App Store in a calendar year are eligible for reduced fees, which applies to approximately 98 percent of developers. Developers who exceed $1 million in sales will face the standard 30 percent fees. The fee reduction applies to app purchases, in-app purchases, and subscriptions.

Sensor Tower in January estimated that 2020 App Store spending hit $72 billion, with users spending the most on games and entertainment.

Article Link: App Store Small Business Program's Lower Fees Cost Apple Less Than 5% of Revenue

It just goes to show that the people really upset about the model were companies making tons of of money anyway!
It's just like normal life when rich people are lobbying for tax cuts that they claim will help everybody but only really help the rich.
Its a joke really.

 

[Mike_Trivisonno]

Apple could provide the App Store as a free basic Apple Ecosystem service and not even notice. Apple used to charge for OS updates and then stopped; it didn't affect their profits at all.

 

[Substance90]

I guess developers earning between 900k and 1 million per year are in a weird situation right now, where they're incentivised to earn slightly less so they don't go over 1 million.

Reminds me of all the small bars and restaurants that didn't want to offer deliveries because they would earn less than if they just stay closed and get the government Covid relief. (EDIT: talking about Germany).

 

[svanstrom]

Apple could provide the App Store as a free basic Apple Ecosystem service and not even notice. Apple used to charge for OS updates and then stopped; it didn't affect their profits at all.

Not charging for OS updates is an investment in having a more homogenous platform; saving money in not having to update old versions, as well as making it much more attractive and easy to work with for developers.

Having "free" updates like that is financed in part by the cost of hardware, and, to a greater extent, by the fee/cut that Apple takes from developers; it's part of that 15%/30% that people find so outrageously expensive.

 

[svanstrom]

I guess developers earning between 900k and 1 million per year are in a weird situation right now, where they're incentivised to earn slightly less so they don't go over 1 million.

And if they shutdown their business like that they'll never hit 2 million.

It's sort of like not starting a business at all because you do the math and realise that it'll cost you X amount of monies/month to run, and you think that not starting it will save you those X amount of monies. False math based on fear.

I (almost) had a client like that not that long ago. They absolutely required my expertise to get going, and they easily had the monies to pay for it; but they were so afraid of running out of money that they refused to pay/owe me or anyone else for the help they needed. Instead they slowly bled themselves into bankruptcy as no-one wanted to work for free helping people that could, but didn't want to, pay.

 

[Abazigal]

Obviously whatever Apple and Google do is no good until they hand money to Epic.

I am amazed that there are still people rooting for Epic, considering how it’s become increasingly clear that they are not doing this for the benefit of developers or consumers.