U.S. Antitrust Regulators Investigating Apple's App Store Fees and Policies

[TVOR]

And we are back to this debate again because yet another government body has got involved! OK...let's do this...

I’m an app developer... I’ve been so for more than a decade. I had an app on the App Store in the first month of its launch in July 2008.

You have clearly survived for almost 12 years with this 30% cut, so - for you at least - it isn't a business wrecker like some purport it to be. You have managed to survive, but it seems like you want to be making more money...take a number and back of the line buddy...we all want to be making more money!

1. People argue that it’s the “storefront and distribution” and not just the payment processor that developers are paying for. But the reality is that free apps cost developers NOTHING (besides $100/year dev fee) to host on the App Store. And many of them make tons of money from ads within the app. But they own 0% to Apple. So why should paid apps have to subsidize free apps?

Actually, I'm pretty sure that most people realise that it isn't just for storefront, or distribution, or payment processing, or any single factor. And as for your argument that free apps cost developers nothing, but they make tons of money...hmmm...well...why not go down that route with your own app? If that is a way to circumvent Apple's "tax"? Or is it too much of a risk that people won't pay for IAP? Well, guess what, that's the risk you take and those devs that offer up a "Freemium" model are taking a risk, and if they earn proportionally more than you, that's the pay-off for taking the risk!

2. Payment processors typically take 1-3% of a transaction. Apple has a bit more convenience with in-app payments via Touch ID and Face ID, so let’s say 5%. Maybe even 10% if we are being generous. But 30%? Makes no sense except for a cash grab. It’s arbitrary. And when subscriptions are over a year, it’s 15%, which is still arbitrary.

Well...we have already discussed the fact that the 30% isn't just for payment processing, but even if it were, you have said that you feel that the numbers are arbitrary...can I assume that you use a Magic 8 Ball to set your app prices? Or do you set your prices based on an analysis of supply and demand...setting your price at (or near to) the top of what the market will accept while still giving you the overall profit that you are seeking? I am assuming that, as you have been a developer for 12 years (at least), you must be making enough money which means that, presumably, you have set your prices right...not high enough to decimate sales and not low enough to mean that profit percentages are unsustainable...so in the Goldilocks zone! Therefore, anything but arbitrary! If you think Apple have just randomly picked these numbers then I am pretty sure you are very, very wrong! You don't get to be a trillion (plus) dollar company without some of the best financial people in the world working for you.

3. The 30% wouldn’t be an issue if Apple allowed distribution outside of the App Store OR allowed developers to at the very least to advertise a different payment method within the app itself, even if it takes people out of the app for a purchase. Then devs would offer a “discount” to users for using a cheaper processor to save from the 30% rake. Which would in turn force Apple to be competitive in the cut, which is WHY they don’t want to allow outside payments.

This is the point I take the most issue with because it seems (and please do correct me if I'm wrong) like you are advocating for Apple to list the app on the app store, carry out whatever checks it carries out prior to the app going live (presumably for malicious code, things like that), host the app, and then have developers have the opportunity to get people to pay completely outside of Apple and avoid having to pay any commission whatsoever! If that's the case, it would actually most likely end up costing Apple to have your app on the store. Sorry buddy, but if that is what you are getting at then you are way off the mark in terms of what should be allowed!

Even if Apple did reduce their commission to - let's say - 10%, based on your model the app would still be more expensive on the app store so people would buy direct. The only way that it would be a level-playing field is if Apple dropped their commission to whatever the other payment processors were charging. In which case they would be losing money because of hosting costs and all the other things that they provide other than the payment processing. Why should Apple be forced to give you access to hundreds of millions of potential customers and it actually cost them money?

I know that the "bricks and mortar" store analogy is often decried on here as being irrelevant, so I will try to make it a fair comparison. Let's say you made televisions, and your local bricks and mortar store sold televisions but weren't the only store in town to sell them (trying to remove the so-called monopoly situation here and create an analogy where other App Stores or side loading exists), it seems to me that you are saying that Apple should have your televisions o display in their store, alongside a sign saying that the customer can get them at a lower price in the store across town! Why would they continue doing that? They are taking up space and costs and not making a dime off of it. No business would operate like that.

There is a quote in the article that says basically the same thing "...at least one developer was asked if Apple lowering its 30 percent cut would solve concerns, but the developer in question told the DoJ that the problem is not the commission, but the fact that Apple doesn't allow for alternate payment systems." So the issue isn't that Apple is making too much money, it is that it is making any money at all.

4. But despite all of this, Apple does make exceptions to these rules to large companies with hidden contract terms no one knows about. “Reader” apps, for some reason, don’t have to follow these rules, such as Netflix. Why? Who knows. Apple just make up some rule to make them happy so they could be on their store. But the Hey email app wasn’t a “Reader” app so screw them right? Technologically there is no reason one should get hit with 30% and Netflix with 0%.

If you believe that Apple is the only company offering preferential pricing to certain clients then you need to get out more! It happens all the time, all over the world, in every industry. I have built websites for clients before where they have specifically asked for there to be the option for the prices in their eCommerce store to be automatically adjusted by a certain percentage for certain logged-in clients. It happens all...the...time!

Anyway, I personally hope that all of these Anti-trust cases come to nothing because there is no justification in my mind for them. But hey, I know I am in a minority...

 

[PinkyMacGodess]

It's working better than the 'Google Store', so it must die? It's not perfect, but there does need to be *someone* helping to keep users safe from the crap companies want to pull on unwitting users.

 

[LeeW]

So when these stores started launching were developers satisfied with the share?

Well for those that have been developing across a longer timeline than most today, yes.

You went from getting 30-40%, sometimes less if you were a poor negotiator, most developers were. Publishing companies had one goal, get the best products at the lowest possible cost to maximise their profit, not yours.

Moving to an app store you knew you were getting the lions share, 70% minimum of the revenue.

Sure, you had to do more of the marketing yourself to get an app noticed within the store but you still got to focus more on the important part, building a good quality app that people would want to use, buy and recommend whilst someone else provided the audience and the headache of payment processing and all the issues associated with it.

Part of the issue I see today is that app developers, for the most part, don't understand how much harder it was before to even get as much for themselves as Apple want today. That is because most of today's app developers were not around before app stores and don't realise just how easy they have it compared to life before them.

Appreciate times have changed, I am relegated to the dinosaur league

 

[Alan Wynn]

How about just allowing customers to download apps from safari...just like on a Mac. That would allow competition in the payment field too

It would also screw any developer that did not have a subscription by making piracy a big problem (as it is on Android). Apple has 40% of the market. Any one who does not like their business model is free to develop for the dominant platform where they can deliver their product anyway they wish, with any payment processing they wish. As a user, I like the convenience of knowing that I can purchase an app or subscription through the App Store and not need to go create an account with some third party processor, etc. - that is a big part of what I like on the platform.

 

[swm]

not sure with usa style, but here we not like that.

define 'we'. I am from europe.
and book is a good example here. this is probably one of the dirtiest markets. say a book costs 100 units for the customer. (kinda MSRP)
usually a wholesaler will take from the publisher roughly at 35-40% of the MSRP.
wholesaler is responsible for _stocking_ the books and operates a wholesaler store for retailers only.
the retailer usually gets the book at a price ~50-70% of the MSRP. depends whether its sold as is or if a book cannot be sold they take it back. the more flexible, the higher the cut.
then the retailer has some room to play with the price and can essentially offer discounts like 10% for web orders, or a specific discount to get rid of the unsold copies, at 70% of MSRP. there might be shortcuts if the publisher is big enough and has contracts with larger retailers. but that's likely not the case.

the publisher has to manage stuff, like:
- pay the author
- editor to get the final 'manuscript'
- DTP folks to do publishing preparation
- printing it somewhere (might be even done overseas to cut down the costs further)
- logistics to get the books to the wholesaler
- marketing
- 'shelf price' to get the books to the best places so they will be sold
- take back damaged copies from wholesaler

all this for up to 40% of the MSRP.
authors might only get a fixed contract, or if they are extremely lucky, a commission on sales after a certain number of copies are sold. that puts them in the range of 10-15% of the MSRP.
the barrier of entry is extremely high. i did try this myself, it just doesn't work. even if you do all the stuff yourself - except the printing - you have to invest too much. and look, book prices are going up, continuously, albeit most of the printed copies are already sold online, so essentially the retailer is ousted from the big picture, no storefront costs, no retail employees. still the prices are fixed, you can get maybe a 10%off with loyalty whatsoever.

whereas you have all the tools and all the infrastructure at your disposal for 30% of MSRP and can totally publish through apple books, alone, without any middleman. i know, publishing e-books is a lot simpler than printing them, and the prices shouldn't be equal, but even if you don't consider all the DTP/print/logistics stuff, you'll be still around ~40-50% of MSRP in the best case. and your stuff will be sold _in_a_single_country_ only.

and meanwhile record companies be like, meh.

 

[Stella]

Because that would be an abject disaster stability wise and Apple would bear the brunt of the horribly bad PR as a result.

Strange - I don’t find non Mac App Store apps any less stable than those found in the App Store.

 

[spymousetruck]

I’m an app developer... I’ve been so for more than a decade. I had an app on the App Store in the first month of its launch in July 2008.

Here is why the 30% cut is a problem:

1. People argue that it’s the “storefront and distribution” and not just the payment processor that developers are paying for. But the reality is that free apps cost developers NOTHING (besides $100/year dev fee) to host on the App Store. And many of them make tons of money from ads within the app. But they own 0% to Apple. So why should paid apps have to subsidize free apps?

2. Payment processors typically take 1-3% of a transaction. Apple has a bit more convenience with in-app payments via Touch ID and Face ID, so let’s say 5%. Maybe even 10% if we are being generous. But 30%? Makes no sense except for a cash grab. It’s arbitrary. And when subscriptions are over a year, it’s 15%, which is still arbitrary.

3. The 30% wouldn’t be an issue if Apple allowed distribution outside of the App Store OR allowed developers to at the very least to advertise a different payment method within the app itself, even if it takes people out of the app for a purchase. Then devs would offer a “discount” to users for using a cheaper processor to save from the 30% rake. Which would in turn force Apple to be competitive in the cut, which is WHY they don’t want to allow outside payments.

4. But despite all of this, Apple does make exceptions to these rules to large companies with hidden contract terms no one knows about. “Reader” apps, for some reason, don’t have to follow these rules, such as Netflix. Why? Who knows. Apple just make up some rule to make them happy so they could be on their store. But the Hey email app wasn’t a “Reader” app so screw them right? Technologically there is no reason one should get hit with 30% and Netflix with 0%.

Apple has complete control and are using it to take arbitrary cuts of money for no real reason. There are millions and millions of iOS devices, WAY more than what Microsoft had with Windows when they got in trouble, and Apple owns large chunks of market share especially in North America and Europe.

I hope they are forced to change something.

I'm an app developer too, and have been providing free updates for over 12 years for an app that charges once (i.e. no subscription). The Subscription model does not scale and I don't believe it it as a consumer or a developer.

There's another problem with the 30% cut - why should I be punished for providing free updates for 12 years with a 30% fee when some other app developer decided to go down the subscription route with the exact same app (in general)? They're not only saving 15% on their second year, but also supposedly making a lot more. There's also no way to charge users for an "update", which leaves you with the only option of releasing it as new app - no longer feasible with millions of other similar apps. You lose your ratings, stats, rankings and everything else, leaving you to pay for marketing.

In the early years, there weren't many apps and Apple taking 30% was seen as "marketing fee". Now, they charge you for adverts. Makes no sense.

 

[LeeW]

Strange - I don’t find non Mac App Store apps any less stable than those found in the App Store.

Well, I sometimes do, but then that is not a reflection of Apple software/hardware

 

[spymousetruck]

Strange - I don’t find non Mac App Store apps any less stable than those found in the App Store.

Especially when you talk about the same app from the same developer sold outside of the store.

 

[Stella]

For the same app? You need to compare the same version of the app for this to make any sense.

Not totally.... OP was suggesting that non iOS App Store apps would be less stable than those found on the App Store, if Apple would allow it. The closest comparison we have are Mac Apps. I have no stability issues with Mac apps that I've got from outside the Mac App Store. In fact, the Non Mac App Store apps have had more functionality because they don't have to abide by restrictive Appstore rules..

As an app developer, our app store version and the direct copy we sell is equally stable as it's the exact same code.

I would fully expect that to be the case...

 

[4jasontv]

I'm an app developer too, and have been providing free updates for over 12 years for an app that charges once (i.e. no subscription). The Subscription model does not scale and I don't believe it it as a consumer or a developer.

There's another problem with the 30% cut - why should I be punished for providing free updates for 12 years with a 30% fee when some other app developer decided to go down the subscription route with the exact same app (in general)? They're not only saving 15% on their second year, but also supposedly making a lot more. There's also no way to charge users for an "update", which leaves you with the only option of releasing it as new app - no longer feasible with millions of other similar apps. You lose your ratings, stats, rankings and everything else, leaving you to pay for marketing.

In the early years, there weren't many apps and Apple taking 30% was seen as "marketing fee". Now, they charge you for adverts. Makes no sense.

Im confused. How are you being charged 30% on free updates? If your competitor does an app subscription are they not simply charging more?

As far as the update goes, my take on iOS updates go as follows: most apps start off as shallow incomplete apps and don’t deserve to be paid for must updates because they are basically just fixes to broken, outdated, empty apps.

In some cases, like DayOne, they are actively trying to steal from the consumer and in others, like Things, they are trying to charge more for something that could easily have been a plug-in.

I applaud you for suppoting your app so long but most developers are not like you. Most apps are poor quality, single use cash grabs.

Apples terms are great for consumers. Low cost of entry to make an app means anyone with a good idea can take a shot at it but the 30% cut encourages development and support of apps to maintain new customer attention. Lower fees would decrease the number of apps sold for scam apps to justify being made. This would increase the Number of apps on the App Store that are bad. The compromise needs to be where the developers have more opportunity to do what you are doing and not releasing NotePad3 with subscriptions and IAP.

This sort of behavior also exists on desktops, both Mac and PC, and I worry it’s just a part of the development culture. Developers need to support the work they already sold before they try to find new ways to charge more.

 

[amartinez1660]

The vast majority of users see the app store and the way it works as a good thing, not sure that even given the choice, most would choose anything other than the app store to make payment. It's convenient and that is the way users want it.

Not saying it's being done right by Apple in relation to developers, but it does not change the fact that it works for users.

Again, people only see 30%, it is that in the 1st year then 15% in all others.

I’m in this userbase bandwagon. Even on the Mac if there’s an app I would like to try, I check first if it is on the Mac App Store, it’s just so convenient, feels safe and easy to get back if a full wipe system wipe out is needed, updating is a breeze, etc

However 30% on the first year... I have no clue how things work with apps, but if they share any similarity with games, games tend to do like 80% of its lifetime revenue close to the first 20% of life, sometimes even more extreme like 95% vs 5%... so cashing in 30% of that when the revenue is at it’s peak would be doubly abusive.

Can’t get fully behind for the books case though, them overcharging the same 30% in the books category just makes it competitive for other services to flourish, in that case they are making it easier for other businesses.

 

[jinnj]

How about just allowing customers to download apps from safari...just like on a Mac. That would allow competition in the payment field too

Malware like the google play store

 

[m11rphy]

Your statement is not as rhetorical as you think.



In a hypothetical scenario where Apple prevents Netflix and Spotify in its App store, I guarantee 100% that the pitchforks and backlash wouldn't be on Netflix and Spotify.

Apple needs Netflix and Spotify more than you think.

Scratch that, Apple needs apps more than you think.

Apple need them in their App Store now agreed, but if apple had never let them in the App Store in the first place would they be anywhere near as big and relevant now thats what these companies seem to forget

 

[jinnj]

Remember when Apple didn't like the rates Qualcomm was charging them? Some people will defend them no matter what.

Wrong! It would be like Apple charging you extra for an Apple than anyone else because you enjoy it more. That is what Qualcomm did.
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i think if people want to take the "security" risk, they should be allowed.

30 percent on distribution sales is one thing, but 30 percent on subscriptions is pretty steep considering they don't take responsibility in giving costumer support specific to those apps.

Just allow apps to be sideloaded and this goes away. Then an app is free to do whatever it wants. The ones that want greater distribution will use the app store. The ones that really want all the income will offer an app externally. That way, Apple isn't taking a cut for managing the distribution and it isn't a monopoly lockout anymore.

Even Google regrets this move. Expect their new OS (not the next Android OS) will have a lockdown.

 

[2010mini]

I think people tend to forget the Apple has an obligation to make money for its shareholders. They are not a non-profit company, so why are we trying to force a business to make less profit? Apple's AppStore is not the only game in town, devs are free to only develop for more profitable platforms.

 

[4jasontv]

However 30% on the first year... I have no clue how things work with apps, but if they share any similarity with games, games tend to do like 80% of its lifetime revenue close to the first 20% of life, sometimes even more extreme like 95% vs 5%... so cashing in 30% of that when the revenue is at it’s peak would be doubly abusive.

There are two points to this.
1. Games are typically easier to finish than Apps because they tend to have a limited, predictable, use. This is followed by lack of user interest because they no longer have reason to frequent your game. So bugs are likely to be found in the first year which increases support costs during that time. After the first year the games are mostly on autopilot.

2. This really only holds true if the developer abandons it. Look at games like No Mans Sky and UnReal World to see examples of games that have profited from extended support cycles. These games, for the most part, make money by encouraging players to keep playing and to tell their friends they still play.

 

[jinnj]

Do people seriously believe that Apple spends 30% cut in millions of daily transactions to run the App Store? If so, whoever’s in charge of procurement must be using government contractors who charge $10k for a toilet seat.

App Store upkeep includes access to its users. This is nothing new, publishing industry has done it with magazine for decades, when you are offered a credit card at a store like Target, Target gets a percentage of the signup and a yearly amount from the Bank that is managing it.

 

[4jasontv]

Do people seriously believe that Apple spends 30% cut in millions of daily transactions to run the App Store? If so, whoever’s in charge of procurement must be using government contractors who charge $10k for a toilet seat.

Did you just compare a for-profit companies upfront pricing with a proprietary part for a discontinued $220,000,000 aircraft that, essentially, only ten customers purchased?

 

[usagora]

For anyone who has a problem with Apple's policy, I have only one thing to say. Why don't you build an "iPhone" and an "App Store" and charge people less on it.

Far easier to whine. Of course, the usual response to what you said is "You're missing the point. Developers have no choice but to use the App Store" as if developers have some God-given or Constitutional right to develop for iOS on their own terms

 

[TiggrToo]

Strange - I don’t find non Mac App Store apps any less stable than those found in the App Store.

Please focus on the fact we're talking mobile here.

There's a huge stonking difference.

Android apps, especially sideloaded ones, have a horrible reputation for stealing data or infecting devices.

If anyone thinks that a sideloaded Apple app would be any different then I've half a dozen bridges to flog them.
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Just allow apps to be sideloaded and this goes away. Then an app is free to do whatever it wants. The ones that want greater distribution will use the app store. The ones that really want all the income will offer an app externally. That way, Apple isn't taking a cut for managing the distribution and it isn't a monopoly lockout anymore.

Welcome to piracyville were Jane Developer spends time writing an excellent app and sells it for $1.99 then along comes Joe Evil who steals the code from a Jailbroken device and gives it away for free on the side market.

So, how does that help Jane?

 

[4jasontv]

I've half a dozen bridges to flog them.

I don't know why this made me chuckle so much, but I read this as you having 12 half-built bridges for sale. Considering the types of apps that would appear with side-loading, I wouldn't expect to get a completed bridge.

'If you believe that then I've got a dock to sell ya!'. Snort.

 

[TiggrToo]

I don't know why this made me chuckle so much, but I read this as you having 12 half-built bridges for sale. Considering the types of apps that would appear with side-loading, I wouldn't expect to get a completed bridge.

Well, truth be told, they're just pictures of bridges. But they are fully built and most of them are still usable. Possibly. Sold as is.

 

[alien3dx]

Please focus on the fact we're talking mobile here.



Welcome to piracyville were Jane Developer spends time writing an excellent app and sells it for $1.99 then along comes Joe Evil who steals the code from a Jailbroken device and gives it away for free on the side market.

So, how does that help Jane?

you watch too many movies .real developers hate other developer codes. If you really have good budget, everybody can clone it easily....... I mean 500k above not the outsource one.

 

[TiggrToo]

you watch too many movies .real developers hate other developer codes. If you really have good budget, everybody can clone it easily....... I mean 500k above not the outsource one.

Hardly: I work in IT and have done for 30 years. I groan when I see computers misrepresented by Hollywood.

I've watched this from the very first days of personal software development.