A New Wrinkle in the Epic/Apple Battle

[Jimmyjames]

Epic is charging developers 12% for its store. https://www.macrumors.com/2024/03/20/epic-games-store-fee/

So here’s a serious question - what is it, exactly, that Epic is providing here that means it should be entitled to 12%, but it’s unfair for Apple, which invented the phone, the OS, the SDKs, etc., to get 12%?

Oh I’m sure it’s totally different. His beneficence Tim Epic only uses the 12% for his wounded puppy sanctuary. Unlike that evil Tim Apple who uses his ill-gotten 15/30% for his puppy torture farm.

 

[amonduin]

I personally wouldn’t have as much of an issue with Apple taking 15/30% share if it was a share that was applied to all monetized apps on the platform and didn’t have carve outs for physical goods/services, reader apps, adobe, etc…

 

[Cmaier]

I personally wouldn’t have as much of an issue with Apple taking 15/30% share if it was a share that was applied to all monetized apps on the platform and didn’t have carve outs for physical goods/services, reader apps, adobe, etc…

why do the carve outs trouble you?

 

[dada_dave]

Epic is charging developers 12% for its store. https://www.macrumors.com/2024/03/20/epic-games-store-fee/

So here’s a serious question - what is it, exactly, that Epic is providing here that means it should be entitled to 12%, but it’s unfair for Apple, which invented the phone, the OS, the SDKs, etc., to get 12%?

Was it Epic who argued that Apple should only charge to cover credit card fees or was that someone else?

 

[dada_dave]

As I said earlier, the EU is not the only one with a problem with Apple's marketplace. Apparently the DOJ is now going to go after Apple. Of course they may not win. They didn't against Qualcomm which I thought was strong case and I'm not sure what arguments that they are going to use to convince a judge that Epic didn't. Obviously a much wider range of charges and its the DOJ bringing this rather than a competing company. Having seen the outcome of the Epic trial largely favoring Apple they must think they have a different/better angle. But we'll see.

Apple Facing Imminent U.S. Antitrust Lawsuit

The United States Justice Department is preparing to sue Apple for violating antitrust law as soon as Thursday, reports Bloomberg. The lawsuit will...

www.macrumors.com

I'm sure if this does drop tomorrow, we'll get a new thread on this.

 

[JRLMustang]

I’ve been lurking as usual and admittedly, I might be coming at this with a biased and perhaps even incorrect perspective. My perspective comes from the actual brick and mortar retail end of it. Why should things be any different for digital vendors or goods and wares? For instance, the flat 15%/30% charge—developers/vendors are getting an incredibly great deal for that price. To illustrate this fact, and for those interested In looking for themselves, it’s worth mentioning that in the supermarket industry there exists things called “slotting fees”. Now, bear in mind that there are reasons (whatever they may be) *why* people shop at a particular supermarket let’s say, and “price” is but a single reason among others. On top of that the supermarket is doing whatever it can to attract, retain and *grow* their customer base hoping that the popularity is long lived and expanding—this takes energy and resources. Now back to those “slotting fees”. What are they?

I first learned about them back in the 80s when one of the owners (part of a larger co-op) was paying a visit and I naively inquired how the store could possibly making any $$ since it seemed as though they were throwing out tons of product, like meets Deli and Seafood items approaching their expiration dates as well as dairy, and of course produce items… I remember it well. He looked at me and he stated clearly.
“before I even open the door this morning I’ve already made my money here. If I sell, but a few items, I’m already ahead of the game.” Then he explained to me that any retail store, but especially Supermarket needs to be thought of as real estate. Every location on the retail sales floor up to including the registers, and the breezeway has a real estate value associated with it. Even shelf height, the register candy racks, and what items populate those particular spaces called “slots“. Even the cardboard, shipper items, and J-hook items strategically around the store all had value. A dollar value associated with it. I came to learn that all those spaces are fiercely bid upon by vendors and proprietors, looking to sell their goods and other items. The number of SKUs, their location and placement usually expanded and contracted and moved quite a bit over the course of the year. The bidding would usually happen on a six month rotation and in some cases every four months for things like chips, soda, ice cream, etc. In mind you, it didn’t happen companywide it only applied to whatever handful of stores happen to be in a particular district other districts had their own bidding process so blanket, across-the-board payment. In some instances, a company like proctor and gamble might have been involved in trying to pick up space in four different districts with as many as 10 to 12 stores per district. Do the math. Like it or not it’s how retailers maintain an insurance policy in case items don’t sell. They make their money upfront and they sell later is more or less gravy. Now multiply this by the number of different manufacturers and vendors wanting to sell their goods in a very popular supermarket, that is part of a very popular respected and highly reputable chain. That Apple is levying a 30% flat charge should be a dream come true for developers. That’s just my take but keep in mind. Epic is a business and like any business throughout to make as much money for themselves and they jack anyone they can in the process. And there’s a reason why people buy apple products and rely on the Apple App Store. But back to Brick and retail.

The other thing that comes up a lot is whether or not certain chains have the right to deny access to shelf space within a particular store in their chain. Well aside from the fact that it’s impossible for every store to carry every item from every vendor the short answer is, yes they can. And slotting fees/shelf space bidding wars have a lot to do with it. Other times conscious decisions are made by those running the company whether or not they want to carry a particular item or brand. They generally have a lot of discretion. But make no mistake, there are times when one manufacturer is outbid by another manufacture for a slot in a store.

For instance, Wise may want to pedal a certain new flavor of potato chip, but if they’re outbid by Frito Lay, that Wise chip is not appearing at the store. Or maybe only available at one or two store locations with the rest not carrying the item. That’s how competition works. That’s how it works in supermarket retail. Basically, vendors and distributors like popular chains because it gets them the eyeballs and exposure. Greatly simplified the entire process with their 30% take. Sometimes that new potato chip flavor is only available at the dollar store bodega down the street town over.

The bottom line? Apples ecosystem. Their customer base is massive and it’s very valuable. It provides a lot of eyeballs and exposures, even if you can grab a small percentage of that humongous space. Truth be told that they put a lot of effort, energy, and resources— huge investments into getting where they are in the world today. Why should they let the vendors dictate terms?

 

[amonduin]

why do the carve outs trouble you?

I think that Apple, as the platform vendor, should work to ensure that all developers can prosper equally well and that no categories of developers are being singled out for the responsibility of financially supporting the App Store and treated as the primary financier of Apple's continual IP/SDK/Tooling development.

Edit: Additional rephrase: I agree with the premise that Apple should be able to charge developers as a way of financing the App Store and continuing to invest in iOS however I disagree that this burden should fall only on some categories of developers while others (including some of the wealthiest companies in the world) are able to use the tools, SDK, and App Store to profit from their iOS Apps without contributing to the support of the store or SDK.

 

[Cmaier]

I think that Apple, as the platform vendor, should work to ensure that all developers can prosper equally well and that no categories of developers are being singled out for the responsibility of financially supporting the App Store and treated as the primary financier of Apple's continual IP/SDK/Tooling development.

Edit: Additional rephrase: I agree with the premise that Apple should be able to charge developers as a way of financing the App Store and continuing to invest in iOS however I disagree that this burden should fall only on some categories of developers while others (including some of the wealthiest companies in the world) are able to use the tools, SDK, and App Store to profit from their iOS Apps without contributing to the support of the store or SDK.

I prefer a system where we don’t interfere with business models unnecessarily.

 

[Citysnaps]

AAPL is down 4.2%.

 

[amonduin]

I prefer a system where we don’t interfere with business models unnecessarily.

When companies grow to Apple's size I would like our representatives in government to ensure they aren't abusing their position, I get that from a more libertarian position this seems like a negative but since I am not a libertarian that is how I approach things. I think that whether or not a company is of regulatory interest has more to do with power and influence than absolute marketshare.

 

[Cmaier]

When companies grow to Apple's size I would like our representatives in government to ensure they aren't abusing their position, I get that from a more libertarian position this seems like a negative but since I am not a libertarian that is how I approach things. I think that whether or not a company is of regulatory interest has more to do with power and influence than absolute marketshare.

Unfortunately our representatives have no idea what they are doing. Just look at the claims in the DoJ’s complaint today. I don’t want Ted Cruz and Elizabeth Warren designing my computers.

 

[Jimmyjames]

Unfortunately our representatives have no idea what they are doing. Just look at the claims in the DoJ’s complaint today. I don’t want Ted Cruz and Elizabeth Warren designing my computers.

I am not opposed to intervention in principle. So much of what passes for intervention is misinformed, and in my opinion, so bad for consumers, I worry every time I hear it’s happening.

There are areas ripe for intervention that are constantly ignored. Digital media is one that most annoys me. I can pay to “own” a movie that I do not in fact end up owning. Why can a company remove a movie I have paid for? This is an area government should be regulating. Not nonsense about iMessage.

 

[Andropov]

I am not opposed to intervention in principle. So much of what passes for intervention is misinformed, and in my opinion, so bad for consumers, I worry every time I hear it’s happening.

There are areas ripe for intervention that are constantly ignored. Digital media is one that most annoys me. I can pay to “own” a movie that I do not in fact end up owning. Why can a company remove a movie I have paid for? This is an area government should be regulating. Not nonsense about iMessage.

This, a thousand times this. For me, the issue with this sort of regulatory intervention is not an opposition to intervention in principle, just that the specific things that end up being proposed are nuts. And often end up derailing the discussion so much that it's impossible to talk about the things that *actually* need regulation. As @Cmaier said above, just look at the DoJ complaint. Some of the quotes show a severe lack of understanding on how tech works, and yet that's going to be the main topic of discussion in the coming months.

(Small off topic about not owning media you pay for: yesterday I became very annoyed as I was trying to share a screenshot of a show, on a streaming service I pay for, to someone else WHO ALSO PAYS FOR THE SAME STREAMING SERVICE and all the screenshots would turn up black. And I was viewing the show in a web browser. Why on earth is the web browser able to tell if someone is making a screenshot / screen capture in the first place anyway. Almost ended up writing a tool to directly read the display's framebuffer just so I could get the screenshot).

 

[diamond.g]

Epic is charging developers 12% for its store. https://www.macrumors.com/2024/03/20/epic-games-store-fee/

So here’s a serious question - what is it, exactly, that Epic is providing here that means it should be entitled to 12%, but it’s unfair for Apple, which invented the phone, the OS, the SDKs, etc., to get 12%?

At least it tracks with what they charge on the macOS/Windows store.

Honestly, aside from having Fortnite in their own store I'm not sure this mobile OS store is going to do well. Heck I'm pretty sure the Windows version of the store only does well because of the free games and they force you to use it to get Unreal Engine dev tools.

 

[dada_dave]

I’ve been lurking as usual and admittedly, I might be coming at this with a biased and perhaps even incorrect perspective. My perspective comes from the actual brick and mortar retail end of it. Why should things be any different for digital vendors or goods and wares? For instance, the flat 15%/30% charge—developers/vendors are getting an incredibly great deal for that price. To illustrate this fact, and for those interested In looking for themselves, it’s worth mentioning that in the supermarket industry there exists things called “slotting fees”. Now, bear in mind that there are reasons (whatever they may be) *why* people shop at a particular supermarket let’s say, and “price” is but a single reason among others. On top of that the supermarket is doing whatever it can to attract, retain and *grow* their customer base hoping that the popularity is long lived and expanding—this takes energy and resources. Now back to those “slotting fees”. What are they?

I first learned about them back in the 80s when one of the owners (part of a larger co-op) was paying a visit and I naively inquired how the store could possibly making any $$ since it seemed as though they were throwing out tons of product, like meets Deli and Seafood items approaching their expiration dates as well as dairy, and of course produce items… I remember it well. He looked at me and he stated clearly.
“before I even open the door this morning I’ve already made my money here. If I sell, but a few items, I’m already ahead of the game.” Then he explained to me that any retail store, but especially Supermarket needs to be thought of as real estate. Every location on the retail sales floor up to including the registers, and the breezeway has a real estate value associated with it. Even shelf height, the register candy racks, and what items populate those particular spaces called “slots“. Even the cardboard, shipper items, and J-hook items strategically around the store all had value. A dollar value associated with it. I came to learn that all those spaces are fiercely bid upon by vendors and proprietors, looking to sell their goods and other items. The number of SKUs, their location and placement usually expanded and contracted and moved quite a bit over the course of the year. The bidding would usually happen on a six month rotation and in some cases every four months for things like chips, soda, ice cream, etc. In mind you, it didn’t happen companywide it only applied to whatever handful of stores happen to be in a particular district other districts had their own bidding process so blanket, across-the-board payment. In some instances, a company like proctor and gamble might have been involved in trying to pick up space in four different districts with as many as 10 to 12 stores per district. Do the math. Like it or not it’s how retailers maintain an insurance policy in case items don’t sell. They make their money upfront and they sell later is more or less gravy. Now multiply this by the number of different manufacturers and vendors wanting to sell their goods in a very popular supermarket, that is part of a very popular respected and highly reputable chain. That Apple is levying a 30% flat charge should be a dream come true for developers. That’s just my take but keep in mind. Epic is a business and like any business throughout to make as much money for themselves and they jack anyone they can in the process. And there’s a reason why people buy apple products and rely on the Apple App Store. But back to Brick and retail.

The other thing that comes up a lot is whether or not certain chains have the right to deny access to shelf space within a particular store in their chain. Well aside from the fact that it’s impossible for every store to carry every item from every vendor the short answer is, yes they can. And slotting fees/shelf space bidding wars have a lot to do with it. Other times conscious decisions are made by those running the company whether or not they want to carry a particular item or brand. They generally have a lot of discretion. But make no mistake, there are times when one manufacturer is outbid by another manufacture for a slot in a store.

For instance, Wise may want to pedal a certain new flavor of potato chip, but if they’re outbid by Frito Lay, that Wise chip is not appearing at the store. Or maybe only available at one or two store locations with the rest not carrying the item. That’s how competition works. That’s how it works in supermarket retail. Basically, vendors and distributors like popular chains because it gets them the eyeballs and exposure. Greatly simplified the entire process with their 30% take. Sometimes that new potato chip flavor is only available at the dollar store bodega down the street town over.

The bottom line? Apples ecosystem. Their customer base is massive and it’s very valuable. It provides a lot of eyeballs and exposures, even if you can grab a small percentage of that humongous space. Truth be told that they put a lot of effort, energy, and resources— huge investments into getting where they are in the world today. Why should they let the vendors dictate terms?

I think that Apple, as the platform vendor, should work to ensure that all developers can prosper equally well and that no categories of developers are being singled out for the responsibility of financially supporting the App Store and treated as the primary financier of Apple's continual IP/SDK/Tooling development.

Edit: Additional rephrase: I agree with the premise that Apple should be able to charge developers as a way of financing the App Store and continuing to invest in iOS however I disagree that this burden should fall only on some categories of developers while others (including some of the wealthiest companies in the world) are able to use the tools, SDK, and App Store to profit from their iOS Apps without contributing to the support of the store or SDK.

I have problems with both of these. I agree that in comparison to the old physical stores of digital media that the App Store and Steam etc … allowed for an explosion of digital content and was massively beneficial to both the consumer and the creators. However, digital and digital-physical marketplaces have fundamental differences between them and physical brick and mortar retailers and regulatory frameworks should reflect those differences: eg it would make no sense to grab an item off the shelf for free and then pay for little bits of the product over time while I use it nor does buying an item generally mean I have to make all subsequent purchases through the same store I purchased that item from for the time I use that item. As I mentioned in the post in the other thread, console makers always got their cut regardless but regulators could point out that different stores could still vary their take, building off of @Cmaier ’s post say taking 65% instead of 70%. This doesn’t change that this was of course worse for everyone except the middle men, but that feature is something that regulators want back.

On the other hand, the idea that Apple must charge everyone equally for every transaction made on a device or it’s unfair is just ludicrous. It leads to all sorts of obvious problems: transfer money between people or even my own bank accounts? 30%. Tip someone? 30%. Use the internet to buy something unrelated whatsoever to the device? 30%. I’m sorry but what? That doesn’t even cover the fact that businesses regardless of digital or physical take different percentages on different products and have store brands since time immemorial. I’ll be blunt as someone who is pro-regulation basically all the carve outs Apple has made are ones that I would encode were I inclined to formally encode such things into regulations. That doesn’t mean I think Apple have been perfect, far from it, but I think your position here isn’t really supportable.

When companies grow to Apple's size I would like our representatives in government to ensure they aren't abusing their position, I get that from a more libertarian position this seems like a negative but since I am not a libertarian that is how I approach things. I think that whether or not a company is of regulatory interest has more to do with power and influence than absolute marketshare.

I am pro-regulation but fundamentally disagree. It isn’t about power or influence. It’s about business model and the effect that ultimately has on people be it consumers or workers. We even regulate business to business interactions with that goal in mind. A small business abusing its workers or customers isn’t any better than a large one. The problem with large, powerful corporations isn’t just that they’re large and powerful but that they have the ability to more greatly warp the market and perpetuate these abuses and thus require more scrutiny. But it is ultimately the effect on workers and consumers that we need to care about and that to be fair is what market regulations were designed around. Those that weren’t designed to protect businesses anyway against consumers and workers.

I am not opposed to intervention in principle. So much of what passes for intervention is misinformed, and in my opinion, so bad for consumers, I worry every time I hear it’s happening.

There are areas ripe for intervention that are constantly ignored. Digital media is one that most annoys me. I can pay to “own” a movie that I do not in fact end up owning. Why can a company remove a movie I have paid for? This is an area government should be regulating. Not nonsense about iMessage.

Agreed we are long past time to get an updated consumer rights law with respect to digital ownership and I agree that’s far more pressing. The last set of major digital rights regulations in the US, the DMCA, were waaaaay too pro-business.

 

[Nycturne]

Why on earth is the web browser able to tell if someone is making a screenshot / screen capture in the first place anyway.

In this case it's likely HDCP or the like entering play (so AVKit/etc, not WebKit/Safari). But the short answer is because content owners demand it, or the streaming service doesn't get content.

 

[amonduin]

On the other hand, the idea that Apple must charge everyone equally for every transaction made on a device or it’s unfair is just ludicrous. It leads to all sorts of obvious problems: transfer money between people or even my own bank accounts? 30%. Tip someone? 30%. Use the internet to buy something unrelated whatsoever to the device? 30%. I’m sorry but what?

The argument Apple makes (today) is that the 30% fee covers their SDK/IP/Tooling etc... If we take them seriously then yes, banking apps using Apple's IP should be charged 30% for every transaction that occurs in any app (web based transactions are not using Apple's IP but someone else's IP to build the website). The fact that doing so sets up ludicrous examples is precisely my point, that Apple is talking nonsense when they claim this is a fair and reasonable charge for IP access.

That doesn’t even cover the fact that businesses regardless of digital or physical take different percentages on different products and have store brands since time immemorial. I’ll be blunt as someone who is pro-regulation basically all the carve outs Apple has made are ones that I would encode were I inclined to formally encode such things into regulations. That doesn’t mean I think Apple have been perfect, far from it, but I think your position here isn’t really supportable.

You claim that you would decode things the same way but I don't believe you, primarily because most other companies don't operate this way and it is only the hindsight of history that has lead to the normalization of Apple's artificial exemptions for reader apps, and digital vs physical goods.
Why don't I believe you? Because most other digital platforms (that didn't follow in Apple's footsteps) do NOT make this distinction, if I use AWS or Azure it doesn't matter if I am a bank sending money between users, building the next retail giant or just trying to run a game server, they charge based on usage. This is why Apple's version of charging for its IP (since we're all going to pretend this was always the point of the 30% cut and not, as initially announced or described for the first few years, a fee to keep the store operating) is so pernicious. It is not tied to actual payment for services rendered or IP used. It is in fact more like a tax on digital businesses. Digital businesses have to prop up everything else. There is no justification for this based on actually looking at the financial state of digital vs physical businesses. Spotify has a -4% profit margin while McDonalds has a 30+% margin... Many digital businesses struggle, as evidenced by the recent report on how few apps make any money at all.

I believe that the reason Apple has these exemptions is because they know that they would lose many native apps if they got rid of them. Because, contrary to what Apple claims, the privilege of a native app is not actually worth 30% of revenue. The companies that are big enough to push back against Apple do so, Adobe, Spotify, Netflix, Amazon, all have exemptions for their products because they are big enough to push back against Apple's power. These apps would have a hard timer affording Apple's 30% cut and still remaining profitable and I expect the carve out exists because they threatened to switch to web-apps if forced to pay it. The reader carve out is one of the most obvious examples of a carve out that exists just because of the power of the companies who benefit.

I am pro-regulation but fundamentally disagree. It isn’t about power or influence. It’s about business model and the effect that ultimately has on people be it consumers or workers. We even regulate business to business interactions with that goal in mind. A small business abusing its workers or customers isn’t any better than a large one. The problem with large, powerful corporations isn’t just that they’re large and powerful but that they have the ability to more greatly warp the market and perpetuate these abuses and thus require more scrutiny. But it is ultimately the effect on workers and consumers that we need to care about and that to be fair is what market regulations were designed around. Those that weren’t designed to protect businesses anyway against consumers and workers.

Given that the App Store is estimated to have a 70+% profit margin do you really think Apple couldn't come up with a better way to fund it that wouldn't be so unfair?

Agreed we are long past time to get an updated consumer rights law with respect to digital ownership and I agree that’s far more pressing. The last set of major digital rights regulations in the US, the DMCA, were waaaaay too pro-business.

Definitely agree, I think this is more important but I am pushing back against the defence of Apple because I don't think Apple is engaged in sensible or fair practices and that their behaviour is going to get them into so much more trouble than it is worth.

 

[dada_dave]

The argument Apple makes (today) is that the 30% fee covers their SDK/IP/Tooling etc... If we take them seriously then yes, banking apps using Apple's IP should be charged 30% for every transaction that occurs in any app (web based transactions are not using Apple's IP but someone else's IP to build the website). The fact that doing so sets up ludicrous examples is precisely my point, that Apple is talking nonsense when they claim this is a fair and reasonable charge for IP access.

This is wrong on multiple fronts. An app uses someone else IP as well as Apple’s just as a website does. You have to go through Safari to get to it after all and banking apps build off internal infrastructure just as the website does! So no they are not talking nonsense, but I strongly believe that you are.

You claim that you would decode things the same way but I don't believe you, primarily because most other companies don't operate this way and it is only the hindsight of history that has lead to the normalization of Apple's artificial exemptions for reader apps, and digital vs physical goods.

Stores have always taken different cuts from different products.

Why don't I believe you? Because most other digital platforms (that didn't follow in Apple's footsteps) do NOT make this distinction, if I use AWS or Azure it doesn't matter if I am a bank sending money between users, building the next retail giant or just trying to run a game server, they charge based on usage.

They have a completely different business model, commission vs rate, for completely different services. It’s apples and oranges to compare. If that’s you’re point of comparison it’s not relevant but does explain your confusion here.

This is why Apple's version of charging for its IP (since we're all going to pretend this was always the point of the 30% cut and not, as initially announced or described for the first few years, a fee to keep the store operating) is so pernicious. It is not tied to actual payment for services rendered or IP used. It is in fact more like a tax on digital businesses.

It’s a store … it sells products for profit. That’s no more a tax than a brick and mortar store is for physical goods. You seem obsessed with the idea that Apple is only allowed to recoup costs of using its IP. Apple’s point is that they need to recoup that cost but their mechanism is to run a store which yes makes a profit. Within reason they are allowed to set the rules of that store including what transactions count as transactions that make sense to charge for.

Digital businesses have to prop up everything else. There is no justification for this based on actually looking at the financial state of digital vs physical businesses.

I’m not sure what you’re trying to say. Everything else? What’s everything else in this context?

Spotify has a -4% profit margin while McDonalds has a 30+% margin... Many digital businesses struggle, as evidenced by the recent report on how few apps make any money at all.

And? And how does this relate to the above?

Comparing restaurants to Spotify is just … again apples and oranges. But humoring the analogy: plenty of physical businesses make no money and go under. Some ridiculous number of restaurants not named McDonalds fail every day and most barely make ends meet and would love Spotify’s margins but that doesn’t mean Apple shouldn’t charge 15% or 30% or not have reader apps. That would be a nonsensical non-sequitur no? Spotify pays one of least to artists out of any of the streaming services. It’s the streaming music business model that necessitates low margins. People won’t pay more x amount for the service and the costs are too high with too many people, labels, artists, etc … who want a piece … to get a substantial profit. Apple could allow exemptions for streaming music knowing that the model suffers but that people want it on their device, but they don’t have to. More of a concern is that they compete and Apple is walled garden. I can see why regulators and legislators want to change rules about this even if one could argue that brand names have always had to compete against store brand. Still the differences between physical and digital is still worth reviewing policies here.

I believe that the reason Apple has these exemptions is because they know that they would lose many native apps if they got rid of them. Because, contrary to what Apple claims, the privilege of a native app is not actually worth 30% of revenue. The companies that are big enough to push back against Apple do so, Adobe, Spotify, Netflix, Amazon, all have exemptions for their products because they are big enough to push back against Apple's power. These apps would have a hard timer affording Apple's 30% cut and still remaining profitable and I expect the carve out exists because they threatened to switch to web-apps if forced to pay it. The reader carve out is one of the most obvious examples of a carve out that exists just because of the power of the companies who benefit.

A lot of those smaller apps and subscriptions get 15% … and no reader apps are fine. Apple allows cross platform purchases and reader apps are an extension of that policy. That is a massive benefit to the end user. This stands in contrast to consoles which don’t allow that or force developers to pay them for the pleasure and are far worse for the end user. So yes allowing that absolutely is something I would encode into legislation if I had a mind to say walled gardens are fine but needs additional rules coded up.

Given that the App Store is estimated to have a 70+% profit margin do you really think Apple couldn't come up with a better way to fund it that wouldn't be so unfair?

Unfair for who? I am pro regulation but the idea that a store can’t charge separate rates for separate categories and separate products is nuts - even you tried to separate out a category by saying “except web purchases” with an explanation that would apply just as much to native apps. Basically that’s been done forever. Yes given the differences between digital and physical and walled gardens there should be rules in place to ensure Apple can’t abuse customers or developers. There are certain practices that should be avoided. But saying Apple is too profitable and therefore must be forced to make less profit is not how good legislation and regulation should be designed.

Definitely agree, I think this is more important but I am pushing back against the defence of Apple because I don't think Apple is engaged in sensible or fair practices and that their behaviour is going to get them into so much more trouble than it is worth.

Look I stated at the beginning of either this thread or the other one that way back when Apple first announced the App Store and I read the rules I had a suspicion that this was going to come to ahead eventually even though nothing they were doing was technically illegitimate. And I was right. But we’ve got Tim Epic on tape praising Apple for its App Store on tape because @JRLMustang and @Cmaier and others are right in comparison to what came before Apple’s business model is amazingly generous. The old retail model for digital goods was horribly inefficient and if you think few make money now, it was way worse then. The fact that so many digital businesses exist at all nowadays is a result of this. That doesn’t mean Apple’s policies are perfect now or that we shouldn’t revisit whether improvements can be made but acting like Apple has somehow been this evil unfair overlord is revisionist history and peddled by some of the worst companies in the digital market.

 

[amonduin]

This is wrong on multiple fronts. An app uses someone else IP as well as Apple’s just as a website does. You have to go through Safari to get to it after all and banking apps build off internal infrastructure just as the website does! So no they are not talking nonsense, but I strongly believe that you are.

I didn't say Apps only used Apple's IP, what I pointed out was that Apple's justification for their commission (today) is as license for use of its SDK/IP and as a way of funding future improvements to iOS.

As to websites: If Apple was saying "all transactions that occur on iOS should give us a cut regardless of whether or not they use any of our technologies" then they would be expected to go after websites too, but given that websites are generally using technologies to target a common set of open web standards and Apple implements those standards in Safari I can't see quite how you could reasonably make a case for websites owing Apple a share of revenue as well.

Stores have always taken different cuts from different products.

So? That doesn't really matter if there is only one store. It also implicitly agrees that iOS itself is a store which I disagree with. Apple doesn't even claim this, they claim it is about IP/SDK/iOS costs. A store and an SDK licensing agreement are seldom compared to one another. If Apple only tried to get a share of purchases they directly facilitate then taking different cuts might be viable and reasonable. Since they also try and take a share of purchases they do not directly facilitate then I am unwilling to treat this as a "iOS is a store" argument.

They have a completely different business model, commission vs rate, for completely different services. It’s apples and oranges to compare. If that’s your point of comparison it’s not relevant but does explain your confusion here.

It’s a store … it sells products for profit. That’s no more a tax than a brick and mortar store is for physical goods.

iOS isn't a store. iOS isn't selling me a Spotify for profit, Spotify is.

I’m not sure what you’re trying to say. Everything else? What’s everything else in this context?

If it costs Apple money to develop iOS and build the tools, and as they claim, the 30% fee is to support this, then the digital businesses are propping up all other apps. Digital sales are by themselves being required to support iOS and tool development while apps that sell other types of purchases get a free ride.

And? And how does this relate to the above?

You mentioned in your post that you would have similarly broken out physical and digital sales. On what justification? Try and look at it without being influenced by Apple normalizing this breakdown. Companies that make apps to facilitate transactions for physical goods are often as profitable or more profitable than tech companies.

The idea has been put forward that the physical/digital split makes sense because companies selling digital goods don't have the same reproduction costs as those companies selling physical goods (not by you but this often pops into my head when thinking about this). I would point out that these costs are irrelevant to whether or not the digital businesses can actually afford to be the ones to bear the burden of supporting iOS/SDK etc... alone. The reproduction cost has only a small bearing on whether or not a business is able to operate profitably and I think it is thus irrelevant to determining who should be required to fund Apple's costs.

Comparing restaurants to Spotify is just … again apples and oranges. But humoring the analogy: plenty of physical businesses make no money and go under. Some ridiculous number of restaurants not named McDonalds fail every day but that doesn’t mean Apple shouldn’t charge 15% or 30% or not have reader apps. That would be a nonsensical non-sequitur no? Spotify pays one of least to artists out of any of the streaming services. It’s the streaming music business model that necessitates low margins. People won’t pay more x amount for the service and the costs are too high with too many people, labels, artists, etc … who want a piece … to get a substantial profit. Apple could allow exemptions for streaming music knowing that the model suffers but that people want it on their device, but they don’t have to. More of a concern is that they compete and Apple is walled garden. I can see why regulators and legislators want to change rules about this even if one could argue that brand names have always had to compete against store brand. Still the differences between physical and digital is still worth reviewing policies here.

My point is kind of proved by this, there isn't a useful distinction between physical or digital in terms of whether the business is high or low margin.

A lot of those smaller apps and subscriptions get 15% … and no reader apps are fine. Apple allows cross platform purchases and reader apps are an extension of that policy. That is a massive benefit to the end user. This stands in contrast to consoles which don’t allow that or force developers to pay them for the pleasure and are far worse for the end user. So yes allowing that absolutely is something I would encode into legislation if I had a mind to say walled gardens are fine but needs additional rules coded up.

I would contend the reader exemption is not just an extension of this policy but was heavily influenced by the power of the apps it mostly affects. If it was just about cross platform purchases the reader app exemption would apply to games and apps that allow you to use the same purchase on multiple platforms, it doesn't. It is an extension that seemed to exist originally mostly to keep the native Netflix and Kindle apps on the platform.
If allowing cross platform apps to let users buy the product outside of the store is something you would allow then why should Apple get a share if the app provides a link to the website to buy it? Why shouldn't all apps that have cross platform purchases be able to do so? Why limit it to reader apps? What is the benefit to consumers of this?

I don't care about consoles and they are largely irrelevant to this discussion.Ask a normal person if they think a phone is comparable to a console and you will get laughed at. I asked my wife and she thought it was silly to do so. Normal people do not think of their phones the way they think of games consoles and it is pure Apple marketing propaganda to claim that phones are more like consoles than they are computers.

Unfair for who? I am pro regulation but the idea that a store can’t charge separate rates for separate categories and separate products is nuts - even you tried to separate out a category by saying “except web purchases” with an explanation that would apply just as much to native apps. Basically that’s been done forever. Yes given the differences between digital and physical and walled gardens there should be rules in place to ensure Apple can’t abuse customers or developers. There are certain practices that should be avoided. But saying Apple is too profitable and therefore must be forced to make less profit is not how good legislation and regulation should be designed.

Web purchases don't fit into the logic that Apple is charging for SDK/Tools/IP because they don't actually use it.

Again, iOS is not a store. There are apps that are sold through its store. If an app selling physical goods can integrate Stripe and use that for payment processing a digital app doing the same should be allowed. Simply asserting that different categories can be charged differently doesn't provide any justification for why they should be charged differently.

Look I stated at the beginning of either this thread or the other one that way back when Apple first announced the App Store and I read the rules I had a suspicion that this was going to come to ahead eventually even though nothing they were doing was technically illegitimate. And I was right. But we’ve got Tim Epic on tape praising Apple for its App Store on tape because @JRLMustang and @Cmaier and others are right in comparison to what came before Apple’s business model is amazingly generous. The old retail model for digital goods was horribly inefficient and if you think few make money now, it was way worse then. The fact that so many digital businesses exist at all nowadays is a result of this. That doesn’t mean Apple’s policies are perfect now or that we shouldn’t revisit whether improvements can be made but acting like Apple has somehow been this evil unfair overlord is revisionist history and peddled by some of the worst companies in digital market.

Apple is not generous. The original model was praised as generous because it was a cut of payments through an actual store. When it is a payment in the App Store no one complains about Apple's cut. When Apple facilitates the transaction through its payment mechanism (in app) I have no problems with their cut and most people don't. However, they force developers of some apps to use their payment mechanism while others are free to use whatever they want. Apple's justifications for why some apps are required to use Apple's in app payment system while others are permitted to use their own is shaky.

The fact that Apple reaches into Apps and onto the OS outside of its Store shows that it is not about taking a commission of something on their store shelf (this metaphor keeps breaking down which makes me think it is a bad metaphor). They don't own the App itself. Their IP and SDK tools were used to create the APP and that is what Apple is now trying to claim is why they are entitled to some fee. This is a shift, this isn't the same thing and trying to pretend it is the same as it was in 2008 when the store launched no longer makes sense.



Edit: I actually think that the CTF in the EU is a much more sensible way for them to charge for their IP, I think it might be too high and even Apple has acknowledged there are problems with it. Generally however its universality and the fact that it gets pretty close to being a per user license makes it far more sensible, comprehensible, and fair.

 

[throAU]

Concern 1. Should Apple have some form of license fee for iOS SDKs and technologies?
Concern 2. Does Apple deserve a share of all revenue that occurs on iOS?
Concern 3. How should Apple be generate the revenue to cover the costs of running the App Store?

1. I'd suggest that the quality of the Apple (not just iOS) software libraries is worth some amount. However if apple want to take some amount of money for that they need to provide the option for development not using said SDKs.
2. If software is distributed via the App Store and/or leverages the Apple SDKs then they deserve a cut for each. As I see it there are two things apple deserve compensation for - distribution and software library use.
3. As above. However there should be an option for end users to side-load, after re-flashing the device or otherwise unlocking it via some form of tether or authenticated, apple provided "jail break" (unlock) process. I think this really needs to be carefully considered so that users who do not want software from outside the curated ecosystem to get onto their device can ensure that it does not end up unlocked and running non-curated code by accident.

If developers want to host their stuff elsewhere via another store, they should still pay the royalties for use of the SDKs.