Apple Drops App Store Fees to 15% for All Developers Making Under $1 Million From App Store

[jlc1978]

According to Wikipedia: "Rent-seeking means seeking to increase one's share of existing wealth without creating new wealth".

Read a little further:

Rent-seeking is an attempt to obtain economic rent (i.e., the portion of income paid to a factor of production in excess of what is needed to keep it employed in its current use) by manipulating the social or political environment in which economic activities occur, rather than by creating new wealth.

That is a key point.

Increasing the rent on a property I own increases my wealth without creating new wealth.

You are confusing rent with, well, rent. Increasing the rent on your property gives the tenant the opportunity to decide wether the value they receive from the property is worth the cost or they should move elsewhere. If you are confident the property can be rented at the higher rate then that is the price that needs to be paid to keep it in production (as pointed out in your clip from Wiki); and thus is not rent seeking even if you increase the rent.

Your earlier example of property value increase above inflation is not rent seeking either, as the return needs to be risk adjusted in order to be a viable investment.

 

[manu chao]

Read a little further:

Rent-seeking is an attempt to obtain economic rent (i.e., the portion of income paid to a factor of production in excess of what is needed to keep it employed in its current use) by manipulating the social or political environment in which economic activities occur, rather than by creating new wealth.

That is a key point.



You are confusing rent with, well, rent. Increasing the rent on your property gives the tenant the opportunity to decide wether the value they receive from the property is worth the cost or they should move elsewhere. If you are confident the property can be rented at the higher rate then that is the price that needs to be paid to keep it in production (as pointed out in your clip from Wiki); and thus is not rent seeking even if you increase the rent.

Your earlier example of property value increase above inflation is not rent seeking either, as the return needs to be risk adjusted in order to be a viable investment.

As you cited yourself, "in excess of what is needed to keep it employed in its current use", if you increase the rent beyond what is needed to cover the cost of capital and upkeep, you are extracting an economic rent.

And sure, the people renting from you can move if they don't want to pay the increased rent but in a lot of situations, they know that moving elsewhere wouldn't be cheaper and/or that moving itself is a big enough hassle that they just accept the rent increase. Increasing the rent in this case is transferring wealth from the renter to the landlord without creating additional wealth, again fulfilling the definition of an economic rent.

 

[gnasher729]

No it doesn’t. They just proved it by not charging 30% to everyone. It also shows that they are afraid of regulation because of their anti-competitive practices so they are trying to head them off with these minor changes (and a few others they have recently made).

But my point was people siding with the fees before will now accept the changes just as you have. And when they drop the fees again you will again find a way to rationalize it as a good move where today you are still clinging to 30% as “needed” to run the app store.

What it really proves is that Apple is being nice to small developers. I really wonder what goes on in people's minds when they have to twist anything around and want to see the worst in people.

It reminds me of what I was told when I took a first aid course: "In a civilised country, when you see an accident, you stop your car, and help. In an uncivilised country, when you see an accident, you drive straight past it. In the USA, you can be sure when you help that the victim will find a lawyer to sue you. The USA is not a civilised country".

 

[gnasher729]

For comparison, PayPal and stripe charge around 3-5% per transaction.

Paypal doesn't provide you with the development software that you need. Paypal doesn't provide you with the storage for your applications and doesn't download them securely onto people's devices. Paypal doesn't provide your app with cloud storage for free. Paypal doesn't supply your app with maps. Paypal doesn't provide services to your app like pushing notifications to the phones of users. Paypal doesn't let users find your app on the App Store. Paypal doesn't handle taxes for you in 150 different countries.

So for comparison, your comparison is way off.

 

[gnasher729]

Epic and Spotify not happy. They do have a point when Tim Cook says all developers are treated equally and that’s clearly not the case. This is probably also something that looks good but doesn’t touch the developers generating the majority of App Store revenue so won’t really impact Apple’s bottom line but will make for good PR.

Apple has the same contract for all developers. I pay more income tax than some and less income tax than others every year. Am I treated differently from them? No, because everyone pays taxes according to the exact same tax laws. Same here. Everyone pays according to the same contract.

And Epic, mostly owned by a $750 billion Chinese conglomerate, is not someone that I feel sorry about. Spotify is moaning all the time, while Netflix who is in the exact same situation gets on with it, _within_ their contract with Apple, _without_ complaining, and taking people's money.

 

[nicho]

Paypal doesn't provide you with the development software that you need. Paypal doesn't provide you with the storage for your applications and doesn't download them securely onto people's devices. Paypal doesn't provide your app with cloud storage for free. Paypal doesn't supply your app with maps. Paypal doesn't provide services to your app like pushing notifications to the phones of users. Paypal doesn't let users find your app on the App Store. Paypal doesn't handle taxes for you in 150 different countries.

So for comparison, your comparison is way off.

Don't forget that paypal is a payment option on the itunes store for customers.

If Paypal is taking 5% of the sale for doing basically nothing, that's a huge chunk of Apple's cut.

 

[laptech]

I have no dobut Apple have taken this action as a way to stave off the law suit from Epic because one of the main arguments in the law suit is how badly Apple treated developers. Now when the court case begins, Apple will be able to say that they have addressed one of the major issues. Apple is not the good guy here because they could have done this years ago. The fact they didn't and have only done so whilst in the midst of a law suit that specifically derides Apple on how it treats developers shows Apple is doing this out of necessity, not out of choice or playing the good guy.

 

[gnasher729]

This is great. I’m a dev that doesn’t earn even close to that limit so very nice indeed.
Imagine getting near the end of the year and sitting at 990k income. Surely it would be better to pull the app and lose a bit to get the next year at 15%?
Wouldn’t it make sense to make the first 1m 15% and 30% for everything earned over 1m?

In that situation, what you should worry about is how to get your revenue up to 2 million in the next year.

I think Apple is quite in their rights to say "small developers pay 15% on everything, large developers pay 30% on everything". Being a bit of a mathematician, I would do it on a sliding scale, so as you go from $1,000,000 to $2,000,000 your rate goes up continuously from 15% to 30%. So at any point, more revenue = more cash in your pocket, but at $2,000,000 you pay the full "large developer" rate.

 

[nicho]

In that situation, what you should worry about is how to get your revenue up to 2 million in the next year.

I think Apple is quite in their rights to say "small developers pay 15% on everything, large developers pay 30% on everything". Being a bit of a mathematician, I would do it on a sliding scale, so as you go from $1,000,000 to $2,000,000 your rate goes up continuously from 15% to 30%. So at any point, more revenue = more cash in your pocket, but at $2,000,000 you pay the full "large developer" rate.

That would mean paying 45% commission on every dollar between $1m and $2m. I'm not sure about the optics of that.

 

[gnasher729]

That would mean paying 45% commission on every dollar between $1m and $2m. I'm not sure about the optics of that.

If you worry about optics: There was a website showing how in the USA, a single mother with one child making $27,000 a year ended up with $X in her pocket, based on various benefits that she got. If she made more money, she lost benefits. It was so bad that this woman had to make about $65,000 _to have the exact same amount of money in her pocket_. Effective tax rate of 100%. But worse than that: For any amount between $27,000 and $65,000, she had _less_ money in her pocket. Effect tax rate more than 100%. Frankly, this is a huge disincentive to trying to improve her situation.

But why do you worry about optics? Which developer is going to complain, if Apple tells them "if you complain about it, we give you the choice to pay 30% on everything instead"?

 

[jlc1978]

As you cited yourself, "in excess of what is needed to keep it employed in its current use", if you increase the rent beyond what is needed to cover the cost of capital and upkeep, you are extracting an economic rent.

You left out a key point: by manipulating the social or political environment

And sure, the people renting from you can move if they don't want to pay the increased rent but in a lot of situations, they know that moving elsewhere wouldn't be cheaper and/or that moving itself is a big enough hassle that they just accept the rent increase. Increasing the rent in this case is transferring wealth from the renter to the landlord without creating additional wealth, again fulfilling the definition of an economic rent.

No, it is economic profit; the surplus created by choosing between risk adjusted alternatives for the investment. Absent government intervention, such as rent controls, which give economic rent to the renters; prices adjust to market conditions. There is no economic rent to be had as competition determines the price, and thus producers are unable to extract rent. Granted, there is no perfect competition, especially since the government tends to tip the scales one way or the other; but rising rents are indicative of the productive value of the property.

Ultimately, someone faced with a choice has to decide where they get the greatest value; staying or leaving.

 

[PickUrPoison]

Developers don’t pay taxes?

It goes into the dev’s pocket vs. Apple’s pocket. 100% of revenue goes to one or the other, as it’s a revenue sharing agreement.

Of course devs have expenses, everything they get from Apple isn’t profit. Salaries, electricity, insurance, marketing, hardware/software and hundreds or thousands of other expenses. Oh, and taxes. Lots and lots, or not so much, depending.

 

[Peperino]

No it doesn’t. They just proved it by not charging 30% to everyone. It also shows that they are afraid of regulation because of their anti-competitive practices so they are trying to head them off with these minor changes (and a few others they have recently made).

But my point was people siding with the fees before will now accept the changes just as you have. And when they drop the fees again you will again find a way to rationalize it as a good move where today you are still clinging to 30% as “needed” to run the app store.

Exactly, the only reason Apple is doing this is because they are scared of regulation. It is just a marketing scam so they can keep the 30% both for big developers and small developers after 1M.

 

[jimbobb24]

This is great. I’m a dev that doesn’t earn even close to that limit so very nice indeed.
Imagine getting near the end of the year and sitting at 990k income. Surely it would be better to pull the app and lose a bit to get the next year at 15%?
Wouldn’t it make sense to make the first 1m 15% and 30% for everything earned over 1m?

The US tax code has tons of these situations where the marginal tax rate goes to a 100% in some scenarios. It is a crazy result.

 

[I7guy]

This is great. I’m a dev that doesn’t earn even close to that limit so very nice indeed.
Imagine getting near the end of the year and sitting at 990k income. Surely it would be better to pull the app and lose a bit to get the next year at 15%?
Wouldn’t it make sense to make the first 1m 15% and 30% for everything earned over 1m?

You might lose your customers by doing so. Risky strategy.

 

[I7guy]

This will force developers to act more like Apple to find loopholes.

If you're coming close in on $1 million, you're about to lose an additional $150,000 to Apple in addition to the $150,000 Apple is already taking.

Would they then pull the app for the rest of the year?

Set up a shell corporation (who does that sound like?) to have another "developer" submit the app(s) and funnel the money back?

This would make much more sense as a marginal tax (anything earned over $1 million pays 30%). Even that, I think, is stupid, but it would at least be more fair.

One would need a different apple id and another ($99) and there would have to be two apps, since presumably a new apple id couldn't release an app with the same name as an existing app. (you could pull the app, but the name stays with the old apple id for a period of time) And this would confuse customers and I'm sure Apple would catch on.

 

[I7guy]

Exactly, the only reason Apple is doing this is because they are scared of regulation. It is just a marketing scam so they can keep the 30% both for big developers and small developers after 1M.

It's entirely possible Apple is "scared" of regulation. But this was a brilliant move move in the chess game of corporate America. Stave off regulations, give a universe of app developers a break and get accolades from across the internet. (except of course from some larger developers who want Apple to provide their services for free and have complete control of an experience that Apple built from scratch)

 

[Abazigal]

This is great. I’m a dev that doesn’t earn even close to that limit so very nice indeed.
Imagine getting near the end of the year and sitting at 990k income. Surely it would be better to pull the app and lose a bit to get the next year at 15%?
Wouldn’t it make sense to make the first 1m 15% and 30% for everything earned over 1m?

My guess is that this would cost Apple too much money, since you are effectively taking $150k less from every developer who earns over 1 million.

I continue to maintain that the 30% revenue share for the giants is fair and should remain in place. Point being that Apple is likely not able to lower the 30% revenue share by much unless it is OK with running the App Store at a loss from an operating income perspective.

Apple probably looked at the data and realised there is a huge gulf between the few developers who are raking in all the cash (usually your mobile gaming titles) and the majority of developers who are making ends meet. Reducing the cut from the latter doesn’t really cost Apple much, and nets them a huge amount of goodwill. And the shortfall can still be made up by the larger players.

There is also likely some truth that the pandemic has pushed some businesses online, and Apple is reducing its cut in recognition of this.

Which is why I view claims by companies like Epic very dangerous. The vitality and visibility of the App Store is dependent on them paying their share. But they are not against some App Store rules, they are against any rules. They want to remove App Store completely from the equation.

Companies like Epic aren’t interested in helping independent iOS developers find sustainability. They just want to burn the App Store model to the ground in order to earn a little more money.

Which is why I say Epic (and their supporters) will ultimately find themselves on the wrong side of history.

 

[firewood]

It's a great deal for developers like me. I've been seeing a 30% cut taken from my mobile app sales since the PalmPilot days, years before Apple copied the idea of App stores from PalmGear/et.al. And 15% to 30% of my current app sales is far less than I would have to pay for enough marketing to drive the same amount of traffic to my own web site as I get from Apple's App Store.

But since my this year's and next year's app revenue projections are 99.9% likely to be well below $1M, this new rate is equivalent to a 21.42% pay raise for me and other small devs.

 

[reedster]

Well I certainly didn’t see any regulatory action that forced it, so yes, I’ll believe this voluntary action on Apple’s part was voluntary.

Apple being forced to change commission rates is about the least likely outcome from any conceivable regulatory action. States don’t step in to cut five or ten points from a company’s profit margin. That’s not a thing 🙂

Voluntary, sure, just like forfeiting your queen is voluntary when your chess opponent forks your king. You can always volunteer to lose.
Apple felt compelled to make this “voluntary” PR move because of the lawsuits and anti-trust investigation they are facing. No, they weren’t guaranteed to lose, but you’re out of your mind if you think Apple would have offered this change without regulatory and legal pressure.

 

[I7guy]

Voluntary, sure, just like forfeiting your queen is voluntary when your chess opponent forks your king. You can always volunteer to lose.
Apple felt compelled to make this “voluntary” PR move because of the lawsuits and anti-trust investigation they are facing. No, they weren’t guaranteed to lose, but you’re out of your mind if you think Apple would have offered this change without regulatory and legal pressure.

It's an amazing thing, these online forums. People spout words that are clearly opinions, that they seem to believe are facts and to those who are not on that page, throw out a few ad-homs to ensure that future people reading the post equate opinion = fact. One is so steadfast in their biases they can't see other possibilities.

It's quite possible that Apple thought this through and decided tiering the app store fee structure could incentivize a new generation of developers with long term benefits to Apple and the app store. A side effect is putting pressure on the existing fee structures that have been in place for years.

 

[jlc1978]

It's a great deal for developers like me. I've been seeing a 30% cut taken from my mobile app sales since the PalmPilot days, years before Apple copied the idea of App stores from PalmGear/et.al. And 15% to 30% of my current app sales is far less than I would have to pay for enough marketing to drive the same amount of traffic to my own web site as I get from Apple's App Store.

Great point that many overlook or refuse to understand. Apple's cut, in actual dollars, is less than what it would cost to get the same revenue if someone did all the marketing, web setup, payment processing, etc. themselves. Apple's App Store significantly reduced the barriers to entry for small developers.

But since my this year's and next year's app revenue projections are 99.9% likely to be well below $1M, this new rate is equivalent to a 21.42% pay raise for me and other small devs.

Good for you. Best wishes for the future.

 

[jlc1978]

Voluntary, sure, just like forfeiting your queen is voluntary when your chess opponent forks your king. You can always volunteer to lose.

Unless of course, you want your opponent to fork your King because taking the Queen results in Mate in 2.

Apple felt compelled to make this “voluntary” PR move because of the lawsuits and anti-trust investigation they are facing. No, they weren’t guaranteed to lose, but you’re out of your mind if you think Apple would have offered this change without regulatory and legal pressure.

Regulatory pressure may have contributed; but I would not be surprised if this was under consideration before the increased scrutiny. PR benefits aside, there are some very real startggic benefits from this move:

1. It forces competitors to follow suit and if their revenue share breakdown is less favorable hurts them financially
2. Raises barrier to entry as anyone who would start a competing App Store, if Apple is forced to open up access, would at best be able to charge 15% and probably need to charge less to lure developers to their store; while having to spread costs over a smaller sales base.

 

[Maximara]

Unless of course, you want your opponent to fork your King because taking the Queen results in Mate in 2.

Regulatory pressure may have contributed; but I would not be surprised if this was under consideration before the increased scrutiny. PR benefits aside, there are some very real startggic benefits from this move:

1. It forces competitors to follow suit and if their revenue share breakdown is less favorable hurts them financially
2. Raises barrier to entry as anyone who would start a competing App Store, if Apple is forced to open up access, would at best be able to charge 15% and probably need to charge less to lure developers to their store; while having to spread costs over a smaller sales base.

I agree. Apple needed developers to get on board with the M1 and this was a good way to do it. Suspect that in the long run Epic and Spotify will wish they had kept their mouths shut as this may be the thing that causes everybody else to reduce their fees as what happened when Apple came out with the App store.

 

[Tech198]

incentive to keep under 1 million then.

Unless of course, you want your opponent to fork your King because taking the Queen results in Mate in 2.

Regulatory pressure may have contributed; but I would not be surprised if this was under consideration before the increased scrutiny. PR benefits aside, there are some very real startggic benefits from this move:

1. It forces competitors to follow suit and if their revenue share breakdown is less favorable hurts them financially
2. Raises barrier to entry as anyone who would start a competing App Store, if Apple is forced to open up access, would at best be able to charge 15% and probably need to charge less to lure developers to their store; while having to spread costs over a smaller sales base.

I don't reckon..... Its competitive, but the bigger picture is those like Stotify and developers never wanted a fee to go to Apple "at all"

It'll help developers earn more,