Judge Says Apple Has Until December 9 to Make App Store Change Letting Developers Link to Alternate Payment Methods

[Abazigal]

That would be implying that nearly 2/3rds of the commissions they take is needed for break-even. You really think it costs Apple $14.75 BILLION PER YEAR to run the App Store? Because that's what 67% of their commissions would come out to.

That's what my math came out to.

Minnesota and Arizona Bills Aim to Let Developers Skirt Apple's In-App Purchase Rules

Here's my thinking. App Store profits is derived from two areas. The cost of running the App Store (which doesn't change, because the number of developers is assumed to be fairly constant), and the revenue from games and IAPs (which is variable in nature). We also know that about 85% of...

forums.macrumors.com

Apple's App Store revenue was estimated to be about $64 billion in 2020. This is close enough to Neil Cybart's own estimates, so we will roll with that. He also estimates that the App Store has around 40% gross margins. This is because Apple has margins of about 65% for services. This includes the money from Google (which is basically pure profit), and more lucrative ones like iCloud and AppleCare. So App Store margins would be lower to balance out.

So you can see that if Apple were to reduce their App Store cut to 15%, my estimates show that the App Store would effectively be run at a loss, which in turn means that Apple would be effectively subsidising it using profits from elsewhere. To break even, we take (12/64*100%) which gives us 18.75%.

I admit I also don't know just what the costs involved in running the App Store are, but it's definitely not the 80% the experts are suggesting. It's possible that there are other costs associated with the App Store, like new software tools and APIs, which get charged there as well.

Granted, I am no financial expert myself, but something about all these fanciful numbers being tossed around just feel off to me.

 

[Abazigal]

Anyone that can't actually admit that Apple & Google now have a monster DUOPOLY in the smartphone market isn't being honest. The argument that "there are plenty of other types of smartphones people have the option to buy!" doesn't hold water.

That's not actually the argument I would make, honestly.

The crux of the matter is that in the US at least, antitrust law looks at harm done to the customer. You are focusing on harm done to businesses, which may have a legal standing in the EU, but currently doesn't apply to the US. And if you were to poll consumers, I am willing to bet that the majority actually do not dislike walled gardens, meaning they see the closed App Store model as having more benefits than drawbacks.

So the only realistic way the US can rein Apple in (assuming Apple even needs to be reined in) is for congress to come up with new laws, which I feel is extremely unlikely given the current deadlock between both houses. The republicans sure don't seem to think this is an issue (their attention is more geared towards social media companies whom they are accusing of actively censoring them).

So Apple is safe in the US. For now.

It's a bit more of a crap shoot outside of the US, and that's where Apple's iPhone market share pales in comparison with Android, making any argument of Apple being a monopoly even harder to justify. Since Apple is the only company that makes iPhones, they are a monopoly regardless of whether they have sold just 1 iPhone or 1 billion iPhones.

So long as Apple is not forced by the courts to open up their App Store and allowing side loading, I venture that any court ruling will have minimal impact on their business model and bottom line,

 

[Ceed]

All it takes is one country.

 

[1129846]

How do they expect Apple to code this so quickly?

In this case there is relatively little if any coding they need to do as it is mostly a guideline update. Also they already had a fair amount of time to finish complying to the order. This was an appeal Apple lost. If Apple had not started the update process on the backend just in case that is poor planning on their part. The correct response from Apple was start the work on if they loose the appeal.

 

[1129846]

That's not actually the argument I would make, honestly.

The crux of the matter is that in the US at least, antitrust law looks at harm done to the customer. You are focusing on harm done to businesses, which may have a legal standing in the EU, but currently doesn't apply to the US. And if you were to poll consumers, I am willing to bet that the majority actually do not dislike walled gardens, meaning they see the closed App Store model as having more benefits than drawbacks.

So the only realistic way the US can rein Apple in (assuming Apple even needs to be reined in) is for congress to come up with new laws, which I feel is extremely unlikely given the current deadlock between both houses. The republicans sure don't seem to think this is an issue (their attention is more geared towards social media companies whom they are accusing of actively censoring them).

So Apple is safe in the US. For now.

It's a bit more of a crap shoot outside of the US, and that's where Apple's iPhone market share pales in comparison with Android, making any argument of Apple being a monopoly even harder to justify. Since Apple is the only company that makes iPhones, they are a monopoly regardless of whether they have sold just 1 iPhone or 1 billion iPhones.

So long as Apple is not forced by the courts to open up their App Store and allowing side loading, I venture that any court ruling will have minimal impact on their business model and bottom line,

I can argue harm done to the custom in the grounds of higher prices. Safe to say prices are increased to cover the Apple tax. The question is how much but it sure as hell is not zero. Any one claiming it is zero is either lying to themselves, lying to us or are willfully ignorant.

 

[Abazigal]

I can argue harm done to the custom in the grounds of higher prices. Safe to say prices are increased to cover the Apple tax. The question is how much but it sure as hell is not zero. Any one claiming it is zero is either lying to themselves, lying to us or are willfully ignorant.

Actually, for IAPs at least, the price would be the same regardless of whether there was a 30% tax or not, because they incur zero marginal cost of production, and IAPs are priced to maximise revenue.

So consumers are not going to care about a 30% fee they will never see.

 

[I7guy]

I can argue harm done to the custom in the grounds of higher prices. Safe to say prices are increased to cover the Apple tax. The question is how much but it sure as hell is not zero. Any one claiming it is zero is either lying to themselves, lying to us or are willfully ignorant.

Cost of doing business, which does not result in harm to the consumer. It’s not safe to say that prices have been increased to cover the “apple” tax. This entire post is one supposition based on another.

 

[1129846]

Actually, for IAPs at least, the price would be the same regardless of whether there was a 30% tax or not, because they incur zero marginal cost of production, and IAPs are priced to maximise revenue.

So consumers are not going to care about a 30% fee they will never see.

Spoken like someone with a more limited understanding of how things are interconnected. So if some companies where able to offer a lower price in non App Store purchases then it would drive down the price. Also a company can offer hey here is a cheaper option to pay that is say 20-30% cheaper to not use the App Store people would take it.
It would cause the App Store cut to drop as some could do it and over all we all win. The only loser would be Apple’s greed. Cry me a river over apple greed getting hurt.

 

[Ceed]

Even the most ardent supporters must know that if enabling sideloading somehow made Apple more money instead of less, they would take that option. Your security is important, but not that important. Worry not, the marketers can still spin it up as world-class security like the way they describe macOS, yeah, get those guys on it.

 

[rhemy123]

Please see my earlier post here. I don't pretend that there is no such thing as judicial bias, but if you are saying 'the judge is biased because she didn't agree with Apple', just wow. The rule of law matters. Respect for the law matters. I don't know how to characterise your position other than as one of contempt.

The idea of the rule of law is ridiculous. The Justice system is designed around allowing bias to infiltrate in multiple ways. It has always been this way. Respect for it is laughable. It’s frightening to think anyone would find a shred of respect in it. The entire system creates a perceptible imbalance between the rich and the poor, white and black, small and big business. Anyone who believes in Justice should have nothing but contempt for it.

the judge said she didn’t see any harm in apple doing what she wanted them to do. How has she determined that? that is her bias coming in to play. I guess we will see on appeal.

 

[rhemy123]

It’s her. And ok. ??

Pronouns are irrelevant.

 

[vipergts2207]

Pronouns are irrelevant.

Perhaps, but it’s certainly indicative about how familiar you are with the case, which is apparently not very. It’s also hilarious that you accuse the judge of bias when you apparently know not a single thing about them. It’s safe to say your accusations of bias clearly come from a place of ignorance.

 

[Abazigal]

Spoken like someone with a more limited understanding of how things are interconnected. So if some companies where able to offer a lower price in non App Store purchases then it would drive down the price. Also a company can offer hey here is a cheaper option to pay that is say 20-30% cheaper to not use the App Store people would take it.
It would cause the App Store cut to drop as some could do it and over all we all win. The only loser would be Apple’s greed. Cry me a river over apple greed getting hurt.

And I am trying to say - this is not how things are going to work.

 

[1129846]

And I am trying to say - this is not how things are going to work.

True but then again I have zero faith in the USA government trying to protect the people from abuse. Apple is abusing it power and position. Apple should be damn glad that back in the 90’s they did our otherwise Microsoft would of ground them into ground with zero fear.

You originally argument was that the consumer is not being harmed. That is 100% false. We are paying higher prices and more than likely getting worse service much like our boardband internet and cell service compared to the rest of the world.

 

[I7guy]

[…]

You originally argument was that the consumer is not being harmed. That is 100% false. We are paying higher prices and more than likely getting worse service much like our boardband internet and cell service compared to the rest of the world.

How is the consumer being harmed? And can you prove it?

 

[turbotech]

I admit I also don't know just what the costs involved in running the App Store are, but it's definitely not the 80% the experts are suggesting. It's possible that there are other costs associated with the App Store, like new software tools and APIs, which get charged there as well.

Granted, I am no financial expert myself, but something about all these fanciful numbers being tossed around just feel off to me.

Yeah your math is way off because you probably fail to realize they can fully analyze Apple's financials because they're a publicly traded company and Apple reports all their numbers in different categories as well as how the accounting is clarified for operating expenses, etc. etc. While the App Store itself is combined with some other stuff into more vague numbers, they CAN still extrapolate and reasonable range of what the actual costs are. They know Apple's margins and other estimated expenses of their other product divisions, so they can get pretty close with the estimates by analyzing all the data.

 

[turbotech]

The crux of the matter is that in the US at least, antitrust law looks at harm done to the customer. You are focusing on harm done to businesses, which may have a legal standing in the EU, but currently doesn't apply to the US. And if you were to poll consumers, I am willing to bet that the majority actually do not dislike walled gardens, meaning they see the closed App Store model as having more benefits than drawbacks.

WUT??? Anti-competitive behavior is anti-competitive because it directly affects consumers! Consumers can't be given alternative payment options (which would lower prices).

 

[turbotech]

That's what my math came out to.

Minnesota and Arizona Bills Aim to Let Developers Skirt Apple's In-App Purchase Rules

Here's my thinking. App Store profits is derived from two areas. The cost of running the App Store (which doesn't change, because the number of developers is assumed to be fairly constant), and the revenue from games and IAPs (which is variable in nature). We also know that about 85% of...

forums.macrumors.com

Just so you know, there are an estimated 500,000 'active' App developers on the App Store. That "10 million" number is way off. Several million have registered as developers and paid $99 but never created Apps and/or didn't continue.

 

[turbotech]

Actually, for IAPs at least, the price would be the same regardless of whether there was a 30% tax or not, because they incur zero marginal cost of production, and IAPs are priced to maximise revenue.

So consumers are not going to care about a 30% fee they will never see.

This is FALSE LOGIC. A lower commission can allow Developers to test lower prices which *will* increase conversion rates of IAP purchases, leading to higher Net Revenue for Developers by charging less; and with lower commission rates, depending on how much lower and the correlation to the conversion rate, their Net Profit can go UP by offering IAPs for less.

 

[turbotech]

How is the consumer being harmed? And can you prove it?

Lower prices increase conversion rates for Developers allowing for higher Net Revenue. Lower commissions, based on the correlation of higher conversion rates, can provide for higher Net Profit for Developers -- ultimately leading to many to lower their IAP prices, which provides consumer LOWER PRICES.

Lower prices will increase conversion rates of purchases. It's a Universal Truth of of business today.

 

[Abazigal]

WUT??? Anti-competitive behavior is anti-competitive because it directly affects consumers! Consumers can't be given alternative payment options (which would lower prices).

The courts have ruled that Apple is still entitled to a percentage of all revenue, even if developers use third party payments to skirt around iTunes billing. Depending on how this pans out, developers could actually end up paying more getting users to pay via some other option, and I doubt there is much wriggle room for them to lower the price noticeably (not forgetting that smaller developers are currently paying 15% under the new programme).

I have reason to believe that a lot of the proposed benefits the supporters keep trumpeting will simply not trickle down to the end user. For example, developers could well choose to keep the difference (eg: app pricing has not fallen despite developers transitioning to 15% for apps or paid subscriptions after the first year).

Which brings me back to the core of my argument - this is a move initiated by larger developers like Epic, intended to benefit themselves and themselves alone. They are not doing this to benefit consumers or empower (smaller) developers.

 

[I7guy]

Lower prices increase conversion rates for Developers allowing for higher Net Revenue.

Do you think this will lead to lower prices? I highly doubt it. IAP fees are a cost of doing business, there is no law that says COB has to be zero.

Lower commissions, based on the correlation of higher conversion rates, can provide for higher Net Profit for Developers -- ultimately leading to many to lower their IAP prices, which provides consumer LOWER PRICES.

Except it may not be that way. Nobody knows.

Lower prices will increase conversion rates of purchases. It's a Universal Truth of of business today.

Maybe, maybe not. But of course Apple could hike other fees, they aren't obligate to give away their platform. And in the US, even if the anti-steering provision prevails on Dec 9, Apple is still entitled to collect their commissions.

 

[rhemy123]

Perhaps, but it’s certainly indicative about how familiar you are with the case, which is apparently not very. It’s also hilarious that you accuse the judge of bias when you apparently know not a single thing about them. It’s safe to say your accusations of bias clearly come from a place of ignorance.

Actually you’re assuming too much from a pronoun. Knowing the judges gender is irrelevant to the discussion. Knowing about the judge is irrelevant to the discussion. I infer bias from the judge’s ruling and reasoning. Anyone who believe’s they can tell a private company what to allow and not to allow in their private store is clearly dealing with a high degree of bias. Where does stuff like this end.

The gist is that developers don’t like having to pay a fee to apple. They want to be able to provide links within their apps to other payment portals to get around paying apple’s fee. Is this correct?

The judge sites apple’s anti-steering provisions yada yada yada saying it goes against consumer choice. but wait, if apple doesn’t get to choose payment processing for its store. Why should the developer get to choose the payment processing for its apps. If consumer choice is at issue why can’t the consumer chooose anyone he/she would prefer? This isn’t about consumer choice it’s about developer choice. To wrap your decision around protecting consumers is ridiculous on its face and speaks to something else going on in this decision. Developers already have a choice to make apps for iPhone or to not make apps for iPhone. Consumers have a choice, to buy an iPhone or to not buy an iPhone.

The judge’s ruling and subsequently the refusal to extend until all appeals are final clearly demonstrates bias on the part of the judge. His ruling doesn’t make sense in any other market place in America. Stores regularly have limitations on where and how you can buy their wares. There are some stores that only accept American Express. There are some that don’t accept American Express at all. The iPhone is a platform that delivers controlled experiences to its customers. This experience includes the closed nature of the App Store. If the developer or consumer don’t like it both of them can walk away, and at that time apple will either respond to the market or it won’t.

 

[rhemy123]

Perhaps, but it’s certainly indicative about how familiar you are with the case, which is apparently not very. It’s also hilarious that you accuse the judge of bias when you apparently know not a single thing about them. It’s safe to say your accusations of bias clearly come from a place of ignorance.

You have to understand the App Store is an app. The developers app is an app. They are fundamentally the same thing. A place to provide data for purchase. If the developer of an app wants to be able to choose the way they handle payments. Fine. That is exactly what apple is doing. There are multiple places online that sell things. And of those stores don’t link to the individual payment processing app of the manufacture or creator of the object.

 

[turbotech]

The courts have ruled that Apple is still entitled to a percentage of all revenue, even if developers use third party payments to skirt around iTunes billing. Depending on how this pans out, developers could actually end up paying more getting users to pay via some other option, and I doubt there is much wriggle room for them to lower the price noticeably (not forgetting that smaller developers are currently paying 15% under the new programme).

Where has this been clearly defined? I don't recall the judge in the Epic trial, that said Apple must allow developers to steer their users to alternate payment methods, stating that "but Apple can still collect a % of all revenue" I.e. implying they can charge for a % of any revenue processed by 3rd party processors. That pretty much defeats the purpose of having 3rd party processing that's outside of Apple's control and that won't be collecting from to give users other options that can bring down prices in the market. That would make ZERO sense if that was the implication in anyway.