Apple Execs Discussed Not 'Leaving Money on the Table' When Deciding Apple TV Subscription Fees

[Dan Holmstock]

Not true. Any small business selling to a larger business is used to being told how much to charge, because the large business knows they have the small business by the short and curlies. My two biggest customers regularly demand 5-10% price reductions per year. Doesn’t matter if my costs went up. If I want to stay afloat, I do what they say. This is how big companies (like Walmart and Apple) become big. They have all the stroke.

This, and when i bill my customers, i look at that rate and lower it a bit to make them happy and because its good business to show good will.

 

[jlc1978]

The difference there is that retailers generally have to compete against other retailers, which means that even though there is a markup on wholesale prices, it usually reflects a competitive price once retail costs are factored in (rents, staff, advertising, etc).

Except that's not how all work. WalMart sets prices at the prevailing level generally and avoids price wars. If you want to start one, however, they will happily cut prices until you bleed to death from all the red ink. That's one reason many stores offer price match; it enables them to actually charge higher prices since:
a) the customer feels protected and thus will buy now and not shop around as much
b) it signals to other stores that they will take action if they cut prices, so it's smarter business to not star a price war that results in both sides making less revenue

To some extent Amazon has upended that model but even then most only match Amazon sold items prices, not 3rd party if they match Amazon.

Apple's App Store doesn't compete at a retail level. There isn't a competing app store to undercut them on the 30% margin. Without competition at the app store level, it's very hard to tell if the 30% margin is a fair cut.

There are several on other platforms, if Apple charges too much developers will stop selling via the app store. But the ultimate question is: "is the consumer harmed? I contend no since they are getting apps at low prices compared to what was charged prior to app stores, and there is no indication developers would actually lower app prices if Apple lowered its cut, so all forcing Apple to lower their cut does is transfer consumer money into a different pocket.

Apple could also simply start charging for items it currently offers as part of the app store or as a tool. They could charge for review, placement, CC processing, etc.

 

[M.PaulCezanne]

Breaking News: Business Execs' Decisions Motivated By Profit Maximization.

Also, the sky is blue.

 

[ojobson]

Nothing new, customers are there to bleed money from, nobody bleeds their customers better than Apple.

Er, the app developers are the suppliers, not the customers. Apart from the fact that all the suppliers also have to buy apple equipment to supply apps. So, win-0win for apple I guess.

 

[Analog Kid]

It's amazing to me how many people take no responsibility for their own decisions. People have agency-- Apple isn't doing anything to you. Apple makes a profit because we value their products. If you're paying for something you don't value, then reevaluate your decisions.

 

[Analog Kid]

Bwhahaahah. Bro you’re delusional if you think apples profit margin is 30-35% across the board. Ya because you become a trillion dollar company on 30% margin. Keep drinking that Kool Aid.

Apple gross profit 2005-2025| Statista

As of the first quarter of 2025, Apple’s gross profit amounted to around ***** percent.

www.statista.com

Trillion dollars is the market value (currently $2.4T)-- basically what it would take to buy the company, not what it earns.

 

[bousozoku]

They're a business and they want to make money. They should.

They should lower the percentage to encourage media to join, to give users more choice.

 

[DogHouseDub]

The phraseology in pharma is "What the market will bear"

 

[ValueArb]

Yes. Costco



That's definitely not how Costco works.

How Costco Makes Money

Costco generates the large majority of revenue from merchandise sales, with foods and sundries comprising the largest share of revenue.

www.investopedia.com

Lower Prices Than Grocery Stories

Costco members know that the warehouse store has consistently lower prices when compared to traditional grocery stores. While other stores may have occasionally lower prices on their loss leaders, such as Walmart or Target, Costco has permanently capped its margins to ensure that members can justify paying for a membership.

What are capped margins? A capped margin is a maximum price markup that an item has. Costco doesn’t publish its margin caps but, by looking through the company’s financial statements, we can see that they are operating at a margin of 11.02%. That means for every $100 that Costco spends to buy its products, it’s selling them, on average, for $111.02.

Costco has an extremely profitable business model. It's built around making money off membership fees, while keeping headcount low and breaking even on product sales. Thats good for nearly $4B a year in profits.

 

[H.E. Pennypacker]

Apple gross profit 2005-2025| Statista

As of the first quarter of 2025, Apple’s gross profit amounted to around ***** percent.

www.statista.com

Trillion dollars is the market value (currently $2.4T)-- basically what it would take to buy the company, not what it earns.

I understand that. But you don’t get that valuation at 30% margins.

 

[Kabeyun]

Do these people realise how overpriced Apple stuff is?

The correct price is precisely what the market will bear. Apple just posted insane record profits. Their products are selling like crazy, therefore customers are not having an issue with their prices. So, “overpriced” according to whom? You?

Let’s please not have another “overpriced compared to a different company’s products” back and forth. It’s silly. It’s not an Apple product, which has intrinsic value versus the competition. Haters call it the “Apple tax” but the truth is that the value comes from real things, like design, or quality & materials, or customer service, or ecosystem integration, or privacy/security issues, or the shopping experience, or ease of use, or their bundled software, or their free OS program, or what have you. If Apple’s products cost more for equivalent tech (which itself is really hard to gauge), they cost more because you’re getting all of those things along with the product. People who don’t care about those things will be happy with their cheaper gadgets. But don’t kid yourself that the Apple brand itself has no added value. Last week Apple overtook Amazon, Amazon, to become the worlds most valuable brand. When you buy an Apple thing, you’re buying that.

 

[hans1972]

The take away here is - we need to push back against their 15/30% cut because it is not based on ANY financial analysis regarding costs. It is completely made up with no justification. Developers losing 15/30% just cause DOES have a financial impact on us.

Everyone should be pushing against those fees. They are way too high.

Prices should not be justified at all. Every business should be allowed to come up with their prices any way they like including using a random number generator.

And requiring financial analysis is ridiculous.

Think about applying that principle to a small business like a florist or a barber shop.

 

[Analog Kid]

I understand that. But you don’t get that valuation at 30% margins.

It depends on what you’re taking 30% of...

Today’s report came in at 40%, FWIW.

 

[UrbanJoe1]

38% gross margins is far from greedy. Check their SEC filings. If they were producing 70% gross margins, then I would agree with you. Apple is far from greedy. I would also point to the number of environmental and social causes they not only support and push from a messaging standpoint, but they are putting dollars behind clean energy and working to make their entire system carbon neutral. If they were "greedy" as you suggest, they would be holding onto those dollars.

That is exactly what I have posted before too. Legally all "corporations" are obligated to provide the most return on investment to the shareholder, as the shareholders are the actual owners of the company. No business owner in their right mind would be willing to "leave money on the table" They can be nice about it and return excellent customer service, but they still need to get every dollar left on the table. I don't think 30% is a crazy amount, given everything on the back end. Most products for sale have way more mark up than that.

 

[Kingstonza]

Forget what the emails actually say. Look at how it's written! That's appalling! It's not properly capitalised! Noteworthy is that "the App Store" isn't even capitalised! And my Mac just automatically capitalised it for me as I wrote it here so there's no excuse for that. And there's even a word missing. "we need to very careful here". "be". Please write full sentences when you're an exec writing emails like this... And "than" is comparative. "Then" is the word you wanted there. God damn

“Look at how *they’re written.”
You’re welcome.

 

[casperes1996]

“Look at how *they’re written.”
You’re welcome.

As a pedant, I appreciate the reciprocally pedantic comment. However, the sentence you're referring to did not reference its objective to the prior sentence. It was not "look at how the emails are written", but rather "look at how the text referenced in the article is written". But keep up the good work of being pedantic online!

 

[playtech1]

38% gross margins is far from greedy. Check their SEC filings. If they were producing 70% gross margins, then I would agree with you. Apple is far from greedy. I would also point to the number of environmental and social causes they not only support and push from a messaging standpoint, but they are putting dollars behind clean energy and working to make their entire system carbon neutral. If they were "greedy" as you suggest, they would be holding onto those dollars.

I just checked Apple's latest SEC filings and it reported a gross margin of 68.4% on all services for the Q4 2020.

It doesn't break it down to the App store level, but the Motley Fool pegged App Store gross margins at about 90% if you calculate it how Apple does, which is net of payments to developers.

 

[ArtOfWarfare]

They go to the App Store because it is a lucrative market that they don't want to forgo and enter some other market and go it alone.

There is no "go it alone" option. You cannot distribute an iOS app without going through the iOS App Store. (Have you not developed iOS apps before? I haven't done it myself in 7 years, but your username seems familiar... I thought you were a regular in the iOS developer forums?)

 

[amartinez1660]

You should see the markup on tangible products to wholesalers or wholesalers to retailers.

EDIT: For the sake of clarity, the average markup of a wholesaler or manufacturer to a retailer or wholesaler is 20-40%. Apple is charging 30% by acting as a middleman. If you reject Apple's 30%, I suggest you reject every retailer where you purchase any services or goods from.

Also, extra fees get added for placement (towards the store’s entrance) or some inside-store advertisement.

It is also my understanding that the likes of Costco also take about a 3 months delay to pay back said sold products.

 

[BlueTide]

Do these people realise how overpriced Apple stuff is?

That I do not know, but it seems that many of them try to rationalise how good deal that Apple stuff is. With... quite mixed results.

 

[doobydoooby]

That's a false statement.

Corporations Don't Have to Maximize Profits - NYTimes.com

www.nytimes.com

There is a common belief that corporate directors have a legal duty to maximize corporate profits and “shareholder value” — even if this means skirting ethical rules, damaging the environment or harming employees. But this belief is utterly false. To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”

The Hobby Lobby case dealt with a closely held company with controlling shareholders, but the Court’s statement on corporate purpose was not limited to such companies. State codes (including that of Delaware, the preeminent state for corporate law) similarly allow corporations to be formed for "any lawful business or purpose,” and the corporate charters of big public firms typically also define company purpose in these broad terms. And corporate case law describes directors as fiduciaries who owe duties not only to shareholders but also to the corporate entity itself, and instructs directors to use their powers in “the best interests of the company.”

Serving shareholders’ “best interests” is not the same thing as either maximizing profits, or maximizing shareholder value. "Shareholder value," for one thing, is a vague objective: No single “shareholder value” can exist, because different shareholders have different values. Some are long-term investors planning to hold stock for years or decades; others are short-term speculators.

Also, most investors care not only about their portfolios, but also about their jobs, their tax burdens, the products they buy and the air they breathe. Which is to say, companies that maximize profits by firing employees, avoiding taxes, selling shoddy products or polluting the environment can harm their shareholders more than helping them.

Okay, I was making it an easy generalisation: taking things more literally it has a legal responsibility to protect its shareholders interests. Its owned by its shareholders, so their wishes are what drives it. So you will see larter in what i wrote originally, if the company's actions get to the point that they become detrimental to future profits (the dominant interest of their shareholders), so if they atarted to take actions for short term gain that impacted long term gain through (eg ) reputation etc, then obviously the shareholders would start to take notice and complain. But the reality is, if they dont look after the shareholders, who are mainly interested in profit, then the shareholders sue. Yes, they have other objectives too, but they play second fiddle. So Blame capitalism. Blame the system, I'm afraid.

 

[hatchettjack]

its not like apple is a non profit! they deserve to make as much profit as the market will bear! people seem to think they are entitled to apples platform and services!