Friday, February 9, 2018 [Tweets] [Favorites]

That 30% App Store Tax

Brent Simmons:

Apple’s 30% tax on the App Store is increasingly absurd. Richest company in history, and it’s still taking 30% from your friendly neighborhood indie developers.

Jamie Halmick:

It’s an absurdly large cut for the level of support they give devs given the amount of profit they make on it. Obviously as a biz they can demand it and we will pay it. That doesn’t mean we should shut up and like it. They should either do better or take less or both.

Brent Simmons (tweet):

There’s no sacred verse that says businesses acting lawfully can’t be criticized. Nothing says we can’t advocate for change. In fact, I’d say that that’s part of capitalism, too.

[…]

My thinking is that a lower cut provides more incentive for developers to invest in high-quality, long-lived apps — and that that’s good for the platform and good for users, and good for Apple, and so everybody wins.

As hardware progress inevitably slows, software quality and app ecosystems will be increasingly important platform differentiators. The App Store has so many major problems, and I don’t think the 30% is at the top of the list, but on the other hand it’s a really easy knob to turn, with seemingly low downside and possible great upside.

Previously: Dirty Percent, BBEdit Leaving the Mac App Store, Pre-WWDC App Store Changes, Apple to Halve App Store Fees for Subscription Video Apps, Apple Wants 30% of Tips From Chinese Chat Apps.

Update (2018-03-02): Marco Arment:

2. Apple doesn’t get a cut of revenue from third-party ads or privacy-invasion payola networks.

So, in a way, Apple is incentivizing indirect and less privacy friendly methods of app payment such as ads.

17 Comments

"Apple’s 30% tax on the App Store is increasingly absurd. Richest company in history, and it’s still taking 30% from your friendly neighborhood indie developers."

A-freaking-men. 🙌

It should be zero. In fact, on the Mac app store, it should probably be a negative number; Apple should subsidize Mac app development, and encourage devs to put things into the store, instead of selling their apps outside of it.

Apple profits when indie devs have more money to spend on app development; it's a huge opportunity cost that Apple takes that money, and then does literally nothing with it, because it's just added to their huge pile of backup money.

I'm not sure I see the "great upside". Are there really many developers who would be able to continue with a 10% fee that can't also continue supporting their endeavours with a 30% fee? Certainly the fee isn't why Keyboard Maestro is not in the App Store, and I doubt it's the driver for many of the other apps that have left or are not in the App Store. Apps leave the App Store because of problems or restrictions with the App Store, not because of the fee.

Sure, anyone receiving their income from the App Store would always be happy to make 25% more, but is it really going to make a difference for many devs? Most devs make essentially $0, and 25% more isn't going to help them. And a few devs make millions, and 25% more will make them happy, but wont actually change whether it's worth doing for them.

> Are there really many developers who would be able to continue with a 10%
> fee that can't also continue supporting their endeavours with a 30% fee?

Perhaps not, but it may mean being able to hire somebody who does office work for you, so you can focus on writing more code, and making your apps better.

If the difference between 10% and 30% doesn't matter, then why not take 50%? Or 70%? Clearly, the percentage Apple takes *does* matter.

@Peter I agree with you that it’s not the main problem. But going from 30% to 0% would actually be an increase in income of 43%. That’s not going to make every failing business into a success, but it could make a huge difference for ones that are near the margin (not sure how many that is). And some content-based apps are not possible now because the 30% would mean selling at a loss. The upside is that it might turn out that this amount makes a big difference for lots of apps and starts a virtuous cycle like Brent is alluding to. It could also help encourage apps to be iOS-first.

@Lukas Exactly.

@michael tsai, it' can't go to 0%. Credit card transaction fees, hosting costs, curation costs, app review costs, etc: somebody has to pay these things, and expecting Apple to pay them out of pocket is highly unrealistic.

Apple could lower their fee to 10% very easily. Somewhere between 10% and around 4 or 5% they'd hit the break even point.

> somebody has to pay these things, and expecting Apple to pay them out of pocket is highly unrealistic

It may be unrealistic, but that's a different question from whether it would be a good idea.

Paying for credit card fees, for hosting, and for the pathetic amount of "curation" that they actually do is a rounding error on Apple's balance sheet. On the other hand, having great apps on their platforms is a huge reason why people stick with iOS, and with the Mac. If it weren't for apps like OmniGraffle, BBEdit, Coda, Affinity Designer, Sketch, Soulver, EagleFiler, Acorn, or Pixelmator, I would have switched to Linux a long time ago. I *did* switch to Android because there's simply nothing on iOS worth staying on that platform for.

To some degree, Apple seems to realize this; their own applications — Final Cut Pro, Pages, Numbers, and so on — probably generate a loss for Apple. But the fact that these applications exist is hugely important to Apple.

I suspect that allowing paid app upgrades would be better than lowering the percentage that goes to Apple. It’s pretty rare for any of the mac app store apps Inown to get an update. Lowering apple’s share wouldn’t change that.

I honestly don't know the correct answer here, but I spent my last few years on the Mac Platform cheerfully ignoring the App Store. I tried it when it first launched, but it didn't do much for me.

I still bought the occasional software from small Mac developers, please dont' misconstrue, I simply bought it direct as it was easier for me and cheaper for the developers too.

I think 30% is too high for the pathetic state of the current app store, but 5% seems too low, given it is Apple that we are discussing. Wouldn't 10%-15% be pretty decent? How much would Apple need to charge to break even? Perhaps double that or at least add a few percentage points?

Honestly, I don't particularly enjoy the app stores on iOS/Android either. On the desktop, I mostly avoid using the Windows app store (Minecraft and Netflix are only things I've downloaded there, I think). Elementary OS (Linux distro) has an app store too, but darned if Synaptic does not remain easier to use for me. Sometimes Elementary gives me updates in the app store updater and I realize other apps still haven't updated yet....so I have to hit apt-get or Synaptic anyway. Sigh....

In Europe, consumers need to pay VAT (value-added-tax) for consumer goods which ranges from 17% to 27% depending on the country.
Since Apple is the merchant, they need to deal with the VAT. So basically, if the App Store fee is lower than the local VAT then that means they are sponsoring every purchase out of their own pockets. No business would be willing to do that.

@H The VAT doesn’t come out of Apple’s 30%. It’s added to the total price. For example, currently Tier 1 in the US is $0.99 with $0.70 proceeds to the developer, but in Germany it’s 1.09 € with 0.64 € proceeds to the developer.

Yeah, I was going to say....VAT cannot be calculated in that way or Apple wouldn't be making any money at all with their current split. Thanks for the clarification Michael!

As and example of percentage cut, we can take FastSpring (https://fastspring.com): they charge 5.9% of the price, plus additional $0.95. For an $24.95 application, it comes down to 9.7 percent. That cut includes everything: credit card processing, their fee and some additional on-demand services. They also do all tax processing for you, so if you sell to different EU countries or different US states, they care about different VAT (which is, of course, added to the total price). Apple could easily survive with e.g 9% cut. And if we take into account something already mentioned here, that they should be encouraging developers to put great applications into the store and the store isn't their primary business so they can afford not to have any fee for their services, that cut can go even lower, perhaps something between 7-9%. Plus, users would finally have one centralised place to look for and buy applications, something many have hoped for when MAS was first announced.

@Dragan FastSpring provides great service for that rate, and they accept more methods of payment than Apple does. Other e-commerce providers charge even less.

@Michael, first let me say I have no affiliation whatsoever with FastSpring apart from being a regular user of their service. FastSpring offers even more methods of payment than visible at first sight. For example, if you are located in the Netherlands, they automatically offer local-specific payment methods so one can pay directly with Internet banking (with Dutch banks) and some other Dutch online payment services. I assume it's similar for other countries. It's true other e-commerces charge even less, but most of them don't do one very important thing (at least for me it's huge), different VAT handling in different countries, so you don't have to think about it. paddle (https://paddle.com) does that too and I was evaluating them and FastSpring, but at the end FastSpring services and APIs proved being more robust and flexible and I decided to go with them, although paddle charges less. It looks to me paddle is in the position FastSpring was 10 years ago.

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