Apple Pays $100 Million to Settle Developer Lawsuit and Agrees to Multiple App Store Changes

[farewelwilliams]

Oh this should be a fun analogy.

suppose I don’t mind, but I demand 30% of your revenue. If you sell $1 MM worth of waffles, so you think it’s reasonable that it cost you $300,000 to rent a lawn?

If I'm able to sell $1million worth of waffles from your lawn but most other lawns can't even dream to have those numbers, obviously you invested huge amounts of money into your lawn that allows for this much foot traffic and therefore that commission is fair.

Oh and by the way, you can’t sell any of your waffles anywhere else, especially a neighbors lawn if (god forbid) they offer to charge you less. So you either sell your waffles on my lawn and on my terms, or you don’t sell at all. Aren’t you grateful to me?

What? I should be able to take my waffles to Mr Android's lawn. Except his lawn is concrete so I need to make adjustments to my waffle stand to be suitable for that environment.

And also the Safari trail behind your backyard is free for me to setup a machine with zero commission where customers can buy tickets to redeem for waffles in front of the lawn. I'm not allowed to tell people from the front lawn to go in the back, but there's still plenty of traffic back there.

 

[jgreg728]

So is Fortnite coming back to the App Store or....?

 

[Rogifan]

Has anyone ever estimated what percentage of the cost of an iOS device goes towards maintraining the App Store? If we saw a breakdown of a $1000 iPhone how would the cost be allocated between BOM, everything else and what’s left for profit?

 

[jimbobb24]

As a developer, not surprised, still sounds brutal everytime anyone points how difficult it is to make a living in the App Store

Still, the general public is pretty ignorant about it

Do you know about the % of people who are successful per field? Why would average people give a seconds thought to the proportion or developers who are successful. Most people dont know that the majority of restaurants fail either.

 

[usagora]

Not every developer deserves to get rich. I made a ton of money selling apps on the App Store, and am thankful to Apple for giving me the opportunity - without their app distribution, ecosystem, sdks, etc., I wouldn’t have made a dime.

What are your apps?

@cmaier Seems like you missed sirozha's question earlier. Yes, I'd like to know what apps you developed as well - if they made a "ton of money", I'm guessing many here would recognize the names. Btw, I agree with you regarding the App Store.

No developer is ever going to reveal the identity of their Apps on any forum like MR.
Not without expecting some questionable ratings/reviews for those apps in the days after doing so.

Nonsense. And plus, he was stating everything in the past tense, so apparently they're no longer being sold/developed anyway.

EDIT 8/28/2021 11:40 AM: seeing he he's continued to post but ignored these questions, I'm starting to think either he never had any apps in the App Store or was exaggerating about the amount of money he made.

 

[Analog Kid]

I think very often the key reason why there are such disputes of whether Apple should open up their ecosystem or not is because people want iOS to be more like Android. What they often neglect / overlook is that if they think that way, then they are probably not the target market that Apple is trying to sell to. Hence, many think that Apple is seeking to increase its market share when interestingly, iPhones has never been the best selling phone worldwide. It has never been Apple's plans.

Apple's target market is for people who want that walled garden. People who wants that security; people who wants that lack of customisation; people who want lesser options. If you belong into this group, then you are going to purchase an iPhone. If you don't belong to this group, then you should not be purchasing an iPhone (and perhaps consider an Android instead). This way, everyone ends up happy and going their own way.

This whole thing only becomes an issue when one group wants the other to adjust to fit them (when it is never the intention of the company to do so). Therein lies the frustration. It is like telling your local coffee joint to start selling handbags. It is not that they can't, but it is not their plan to do so. They are aiming for coffee customers, not handbag customers.

I would only add one point to this: I think that in addition to wanting iOS to be more like Android, they believe they’ll wind up with the best of both worlds— that they will keep everything they love about iOS, but also get some particular imagined benefit.

It's a mistaken belief that you can change a part of a thing without changing the whole of it.

While I don't think they'll get the kinds of benefits they expect to (I don't think we'll see prices change in any real way, for example), I also think that it will fundamentally change an experience I'm quite happy with.

Imagine if Apple users ask Google to make Android a walled garden. There would be a huge uproar in the Android community. People who wants a walled garden should purchase an iPhone, and people who wants more freedom (to side load or have alternative payment modes) should buy an Android phone.

No, imagine if Apple users sued Google to make Android a walled garden and, failing that goal in individual suits, engaged the power of government to legislate that it be so.

 

[Analog Kid]

Has anyone ever estimated what percentage of the cost of an iOS device goes towards maintraining the App Store? If we saw a breakdown of a $1000 iPhone how would the cost be allocated between BOM, everything else and what’s left for profit?

I'd guess they don't account for the AppStore costs as part of the hardware revenue, it should be paid for out of their cut of sales.

As far as what's left for profit, it's about 20-ish% across all products. I don't know if they break it down by product line anywhere and I wouldn't trust most random analyses-- the Apple's engineering, production, IP, and supply chain situation is way to complex for someone on YouTube to dissect.

 

[AMH0829]

Everybody wants everything for free. It's not a charity, it's a business. Developers don't maintain the Apple ecosystem, devices, returns & customer service issues, payment processing, or pay for hosting fees. How do they think the App Store and every Apple employee that maintains all of this is paid for? The $99 program membership and commission does. Name any other tech company that you get all of this for less, let alone free.

 

[jlc1978]

Just be fair, Apple. Let developers earn their paycheck what they really deserve.

Considering a developer was lucky to get 30% of a sale, and had to front all the cost of getting the product out the door upfront before one sale was made, Apple's 70% seems to be a really fair deal.

Will developers be "fair" to their users and cut their prices 30% for non-IAP? Why should they all of a sudden get a free revenue boost at the expense of consumers?

"From the beginning, the App Store has been an economic miracle”

It’s been an economic miracle for Apple; not for most developers.

It's not Apple's fault some apps don't sell. Even so, getting an app distributed costs a fraction of what it once did.

Flawed analogy. The lawn (the phone) does not belong to Apple. It belongs to a phone owner. It's the phone owner who needs to agree to install and app or an alternative app store. It should not have anything to do with Apple.

The app store belongs to Apple. If you want to reach people on a specific lawn, you pay a price to access it, even if those who buy from you are strangers to the lawn owner.

 

[Rogifan]

I'd guess they don't account for the AppStore costs as part of the hardware revenue, it should be paid for out of their cut of sales.

As far as what's left for profit, it's about 20-ish% across all products. I don't know if they break it down by product line anywhere and I wouldn't trust most random analyses-- the Apple's engineering, production, IP, and supply chain situation is way to complex for someone on YouTube to dissect.

So you’re saying when I buy a $1000 iPhone none of the sale of that phone goes towards running the App Store? Or am I misunderstanding what you‘re saying?

 

[Analog Kid]

So you’re saying when I buy a $1000 iPhone none of the sale of that phone goes towards running the App Store? Or am I misunderstanding what you‘re saying?

Money is fungible. So at a most basic sense, Apple makes money and spends some of it on running the AppStore-- those dollars aren't a different color than the money made selling apps or selling hardware.

But yes, I'm saying I'd expect that hardware sales are accounted for separately than the AppStore operations.

From an internal accounting perspective, I obviously don't know how Apple tracks it, but I'd imagine the AppStore was meant to pay for itself. Things get a little fuzzy around the edges, I'm sure-- the hardware must run an OS, that OS includes APIs to run applications, those APIs drive integration with the AppStore, so what bits are Store versus hardware support versus application layer might be detailed in internal accounting or, more likely, are largely ignored because everyone's making money and no one cares at the moment.

 

[Rogifan]

Considering a developer was lucky to get 30% of a sale, and had to front all the cost of getting the product out the door upfront before one sale was made, Apple's 70% seems to be a really fair deal.

Will developers be "fair" to their users and cut their prices 30% for non-IAP? Why should they all of a sudden get a free revenue boost at the expense of consumers?



It's not Apple's fault some apps don't sell. Even so, getting an app distributed costs a fraction of what it once did.



The app store belongs to Apple. If you want to reach people on a specific lawn, you pay a price to access it, even if those who buy from you are strangers to the lawn owner.

When you download an app to your phone is it still considered part of Apple’s store? Is there a difference between going to the App Store, buying a drawing app and once the app is downloaded to your device using the app to buy additional functionality? When you purchase that additional functionality in the app should Apple be allowed to say you can only do that via our payment system and we will take a percentage of the sale? If I bought a blender at Target and the manufacturer had a service whereby you could purchase ingredients to make healthy shakes should target get a cut of that sale or should they get nothing once you walk out of the store with that blender? Obviously software is different and developers are using tools/resources Apple develops and maintains but I’m talking about specifically what Apple deserves from a customer acquisition stand point. To me customer acquisition and developer tools/support are two separate things and should be accounted for differently.

 

[Rogifan]

Money is fungible. So at a most basic sense, Apple makes money and spends some of it on running the AppStore-- those dollars aren't a different color than the money made selling apps or selling hardware.

But yes, I'm saying I'd expect that hardware sales are accounted for separately than the AppStore operations.

From an internal accounting perspective, I obviously don't know how Apple tracks it, but I'd imagine the AppStore was meant to pay for itself. Things get a little fuzzy around the edges, I'm sure-- the hardware must run an OS, that OS includes APIs to run applications, those APIs drive integration with the AppStore, so what bits are Store versus hardware support versus application layer might be detailed in internal accounting or, more likely, are largely ignored because everyone's making money and no one cares at the moment.

Right. The reason I ask is one could argue it’s not just the developer fee and Apple’s IAP commission that pays for the App Store, software SDK, developer support etc. One could argue everyone who buys Apple hardware contribute to the cost of running/maintaining those things. Back in 2008 in an interview with the WSJ Steve Jobs said they weren’t expecting the App Store to be a profit center, basically that they were going to run it as a break even business. Of course that was before IAP existed and certainly before there was a slowdown iOS device sales. Once Apple saw how much money could be made from IAP and when wall street was obsessed with growing ’services revenues’ I think the company really did focus on the App Store as a profit center in and of itself. Though interestingly in 2011 Phil Schiller sent an email to Steve Jobs wondering whether the 30% commission was sustainable and if Apple should consider cutting it once the App Store got to a certain annualized revenue rate (I think the figure he used was $1B).

 

[Cosmosent]

Right. The reason I ask is one could argue it’s not just the developer fee and Apple’s IAP commission that pays for the App Store, software SDK, developer support etc. One could argue everyone who buys Apple hardware contribute to the cost of running/maintaining those things. Back in 2008 in an interview with the WSJ Steve Jobs said they weren’t expecting the App Store to be a profit center, basically that they were going to run it as a break even business. Of course that was before IAP existed and certainly before there was a slowdown iOS device sales. Once Apple saw how much money could be made from IAP and when wall street was obsessed with growing ’services revenues’ I think the company really did focus on the App Store as a profit center in and of itself. Though interestingly in 2011 Phil Schiller sent an email to Steve Jobs wondering whether the 30% commission was sustainable and if Apple should consider cutting it once the App Store got to a certain annualized revenue rate (I think the figure he used was $1B).

It wasn't until AFTER Apple had noticed that iPhone Unit Sales were beginning to stall-out (after the release of the Xs family, I believe, if memory serves me) that they began to prioritize the App Store.

Before then, it was just Free Running !

And, I think it was Apple's obsession with Netflix's projected P/E ratio that was The Catalyst.

 

[Analog Kid]

Right. The reason I ask is one could argue it’s not just the developer fee and Apple’s IAP commission that pays for the App Store, software SDK, developer support etc. One could argue everyone who buys Apple hardware contribute to the cost of running/maintaining those things. Back in 2008 in an interview with the WSJ Steve Jobs said they weren’t expecting the App Store to be a profit center, basically that they were going to run it as a break even business. Of course that was before IAP existed and certainly before there was a slowdown iOS device sales. Once Apple saw how much money could be made from IAP and when wall street was obsessed with growing ’services revenues’ I think the company really did focus on the App Store as a profit center in and of itself. Though interestingly in 2011 Phil Schiller sent an email to Steve Jobs wondering whether the 30% commission was sustainable and if Apple should consider cutting it once the App Store got to a certain annualized revenue rate (I think the figure he used was $1B).

Jobs also called AppleTV a hobby. I think that was mainly expectations setting for Wall Street. Apple didn't go into this hoping to break even, but they obviously didn't want Wall Street to go crazy with their expectations.

Apple has always low balled expectations and has worked particularly hard to not do things to hype up their stock price.

As far as "who pays for what", like I said it's all fungible but internally I expect they track the numbers as I described. The "pay for itself" view doesn't cover everything obviously-- my hardware and app purchases are helping fund the Apple Car development (sorry, rumored Apple Car), but I don't expect a free lease when it ships.

 

[Michael Scrip]

The $99/year fee prevented a lot of open source projects from porting plug-ins to Safari and iOS apps from making it to the app store, as no one is there to pay the fees. For the ones that did, they had to charge a fee, which is not charged for any other platforms. Oftentimes, you are free to download the source code and compile and sign it yourself, but they are just not in the app store.

A good pair of examples would be Keepa and Dark Reader, one canceled Apple platform support, the other was forced to charge a fee to cover their Apple fees. Also, note that if you charge a fee, you need business reporting and accounting with the IRS, which amplifies the barrier to entry.

Yeah I can understand that.

I guess I'm looking at it from the standpoint of the million apps that are in the App Store. They all managed it somehow.

But sure... there are some developers where the App Store is too costly or not worth the trouble. Thank you for explaining it.

 

[CthuluLemon]

After over a year of reading Apple apologists commenting negatively about developers and calling their lawsuits a joke, it’s pretty satisfying to see its Apple making such a huge concession.

If Apple’s marketing about privacy and security is to be believed, their IAP platform has a market advantage, it will remain successful among users, developers will find value in continuing to use it, and there is nothing for Apple to worry about. If users and developers find there is no advantage and begin to abandon it, Apple will have to improve their product. That is competition.

 

[Rogifan]

Jobs also called AppleTV a hobby. I think that was mainly expectations setting for Wall Street. Apple didn't go into this hoping to break even, but they obviously didn't want Wall Street to go crazy with their expectations.

Apple has always low balled expectations and has worked particularly hard to not do things to hype up their stock price.

As far as "who pays for what", like I said it's all fungible but internally I expect they track the numbers as I described. The "pay for itself" view doesn't cover everything obviously-- my hardware and app purchases are helping fund the Apple Car development (sorry, rumored Apple Car), but I don't expect a free lease when it ships.

When you buy an app you see one price. You don’t see here’s the price of the app and here’s the app store fee. I don’t think the commission is really about the cost of running the app store because it’s clear Apple is taking in way more than they need to cover that. The app store commission is Apple saying to developers we’re the reason you’re successful, we’re the ones bringing you the customers thus we deserve a cut of your business. I wish Apple would just admit that instead of coming up with all these other reasons only they can supply the method of IAP.

 

[I7guy]

After over a year of reading Apple apologists commenting negatively about developers and calling their lawsuits a joke, it’s pretty satisfying to see its Apple making such a huge concession.

If Apple’s marketing about privacy and security is to be believed, their IAP platform has a market advantage, it will remain successful among users, developers will find value in continuing to use it, and there is nothing for Apple to worry about. If users and developers find there is no advantage and begin to abandon it, Apple will have to improve their product. That is competition.

What huge concessions? Seems like they gave up virtually nothing. The critics didn't really get what they wanted....did they? A few cents here and there and some grants... Notice, they didn't really get anywhere on the monopoly thing.

 

[Analog Kid]

When you buy an app you see one price. You don’t see here’s the price of the app and here’s the app store fee. I don’t think the commission is really about the cost of running the app store because it’s clear Apple is taking in way more than they need to cover that. The app store commission is Apple saying to developers we’re the reason you’re successful, we’re the ones bringing you the customers thus we deserve a cut of your business. I wish Apple would just admit that instead of coming up with all these other reasons only they can supply the method of IAP.

I’m pretty sure they’ve been saying this from the beginning. “We’re putting you in front of every iPhone user” was part of Jobs’ initial presentation. The growth in services revenue has been the headline after most earnings calls, so I don’t think they’re hiding (or should be embarrassed by) the fact that they’re earning a profit…

Maybe you’re being confused by the fact that people in the comment section keep trying to make Apple appear way shadier than they are?

 

[CthuluLemon]

What huge concessions? Seems like they gave up virtually nothing. The critics didn't really get what they wanted....did they? A few cents here and there and some grants... Notice, they didn't really get anywhere on the monopoly thing.

Sure, Apple paid all those legal fees and fought this tooth and nail when they could have just conceded “virtually nothing” Sound logic 🙄🤣

 

[DoubleJ2119]

Deleted.

 

[DoubleJ2119]

Deleted.

 

[I7guy]

Sure, Apple paid all those legal fees and fought this tooth and nail when they could have just conceded “virtually nothing” Sound logic 🙄🤣

Imo, they fought the principle of it, even though in the concessions weren’t all that great and the issue of monopoly wasn’t addressed.

 

[Abazigal]

Oh this should be a fun analogy.

suppose I don’t mind, but I demand 30% of your revenue. If you sell $1 MM worth of waffles, so you think it’s reasonable that it cost you $300,000 to rent a lawn?

Oh and by the way, you can’t sell any of your waffles anywhere else, especially a neighbors lawn if (god forbid) they offer to charge you less. So you either sell your waffles on my lawn and on my terms, or you don’t sell at all. Aren’t you grateful to me?

I am not a developer, so maybe I could share how I would see all this from the perspective of a consumer who is entrenched in the apple ecosystem.

First off - are your waffles going to be any cheaper if Apple didn’t charge that 30%, or charged lower (like 15%?). I don’t see this happening with many apps. Take Fantastical for example. I am subscribed through iTunes, and just renewed my subscription for the second year, meaning the developer keeps 85% instead of 70%. I am also still paying the same S$55 a year.

Second, I like that everything is in one store, which in turn allows me to to track my purchases and subscriptions all within one app. I like that Apple is able to use their leverage to get developers to implement features like ATT and Sign In with Apple.

Would you have been willing to do the same of your own volition?

Third, the App Store is the reason why I have purchased as many apps as I have over the years, even if I didn’t end up using all of them, because the process is just so frictionless. I don’t have to navigate to an external website, I don’t have to sign up for additional accounts or leave my payment details with third parties, it’s all just there.

I like that apple forces app developers to update their apps for new features. I like that they force apps to support their privacy protecting authentication. I like that they are strick about background usage. I like that they audit UIs, and enforce quality standards. I like that I can rely on apple pay working in every app. It is why I paid for an iphone over a cheaper alternative.

I could go on, but I think you are starting to see the point here.

In the midst of all this argument between Apple and developers, it feels like the voice of the consumer has been largely left unheard, and I think companies like Epic and Spotify are hesitant to bring in our voices for one very simple reason - we don’t actually hate walled gardens, because of the benefits they bring to us end users.

To me, buying an iphone is like joining a union. There are annoying parts, but as a whole it gives users a collective voice to force app makers to behave. If there are rival app stores then the user base can be divided, losing power to app developers.

After all, the App Store exists just as much for consumers as it does for developers, does it not?

And that, I feel, is the real problem for developers. From an end user's perspective, Apple is correct.