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Apple, Epic, and the App Store

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Re: Apple, Epic, and the App Store

#731

Post by ksec »

valuearb wrote: post #641
cromwellian wrote: post #352

"But Apple needs to fund the App Store. XCode, payment processing, reviewers, it all costs money". Yes, very little in comparison. Apple made $50 billion in revenue from the App Store in 2019. $50 BILLION. The data centers costs to serve up this are miniscule in comparison. Apple could build 50 datacenters PER YEAR EVERY YEAR for that revenue. Reviewers? A staff of 10,000 fulltime reviewers paid $200k per year would…

Apple doesn’t make $50B a year from the App Store. That’s roughly it’s entire services revenues. It’s estimated that developers had gross sales of $50B from the AppStore last year, of which $15B is Apples share before expenses. Apples audited financials tell us gross margins on services is 68%, and $9B of those services are from an annual payment from Google for search placement in Safari with a gross margin approach…

>but App Store gross margins are clearly likely to be in the 50-65% range, making its break even somewhere between 10-15% of developer revenues.

Apple dont booked their customer's revenue, only their receiving ( i.e ~30% ) end. So those are close to 100% Margin as well.

There are additional $10 per Mac, iPhone, iPad, Apple TV per unit to Services for their OS, Cloud, Siri and Map Usage. That is close to $3B revenue, and again Gross is close to 100% margin.

The only thing that aren't 100% Gross is Apple Music. Where it has a clear unit cost and margin are likely to be Sub 20%. ( You can take a look at Spotify for margins, and Apple also pay labels a little more than competitors because it isn't part of their profit making branches ) And Apple TV+ which is Apple giving away their Services Profits for something given out for "Free". ( Which is one reason I hate Apple TV+ )

Apple are now basically subtracting all of their Software and Cloud Services Cost from Services Segment. Apple could argue part of the reason why you get 5 years worth of iOS update are from those revenue stream.

And yes, none of these Gross Margin takes into account R&D, marketing, operation and other expenses.

Personally I have no problem with Apple charging 30% for Games like Fornite. Which is the industry Standard across all gaming platform. I just wish they lowered the Apps section in the App Store ( Gaming being already in a separate section ) to 15% rather than 30%. And 10% for Subscription.

Considering the cost of running the App Store, and Apple's promotion of App Store credit. I felt 15% is a much fairer deal.

Re: Apple, Epic, and the App Store

#732

Post by ksec »

pwthornton wrote: post #419
cromwellian wrote: post #352

"But Apple needs to fund the App Store. XCode, payment processing, reviewers, it all costs money". Yes, very little in comparison. Apple made $50 billion in revenue from the App Store in 2019. $50 BILLION. The data centers costs to serve up this are miniscule in comparison. Apple could build 50 datacenters PER YEAR EVERY YEAR for that revenue. Reviewers? A staff of 10,000 fulltime reviewers paid $200k per year would…

It doesn't cost $450 to make an iPhone. That's insane. It may cost that in parts, but there are many, many highly paid engineers, designers, product managers, etc. who worked on those products. Those people's salaries must be accounted for somehow. This is something that a commenter on Hacker News should understand! All of those dumb cost breakdowns for what it "costs" to make iPhones or whatever always miss the fact…

>This is something that a commenter on Hacker News should understand!

It pains me to see Computing, Tech, or Software Engineers that are the top paying job today and especially in Silicon Valley, are complaining about the cost of Hardware all while completely ignoring the Software Cost and Design Cost.

This left, free-ish mentality wasn't a thing 10 - 20 years ago. But has steadily getting mainstream. I have no idea why.

Re: Apple, Epic, and the App Store

#733

Post by cromwellian »

mr_toad wrote: post #597
cromwellian wrote: post #470

Earlier quoted context omitted.

This is economics. The price of a product in a competitive market tends to its marginal cost -- the cost to produce one additional unit. The marginal cost of an iPhone is $450 in parts and labor. The R&D costs are fixed costs, not marginal costs, they don't vary whether you sell 1 million iPhones or 10 million iPhones. Most of iOS's costs are fixed. Even if you amortize the cost of it across the number of phones sold…

> The price of a product in a competitive market tends to its marginal cost Long run marginal cost. Which will be higher than the cost per unit. You can’t sustain a market when you can’t cover fixed costs. Just look at what happened to Detroit.

I already showed they cover fixed costs with a mere 5% of revenue and 12% of gross profit (note their reported gross profits actually already removed the fixed costs)

Re: Apple, Epic, and the App Store

#734

Post by ksec »

m463 wrote: post #448
cromwellian wrote: post #352

"But Apple needs to fund the App Store. XCode, payment processing, reviewers, it all costs money". Yes, very little in comparison. Apple made $50 billion in revenue from the App Store in 2019. $50 BILLION. The data centers costs to serve up this are miniscule in comparison. Apple could build 50 datacenters PER YEAR EVERY YEAR for that revenue. Reviewers? A staff of 10,000 fulltime reviewers paid $200k per year would…

The app store should be free as a complement to hardware sales. "A complement is a product that you usually buy together with another product. Gas and cars are complements. Computer hardware is a classic complement of computer operating systems. And babysitters are a complement of dinner at fine restaurants. In a small town, when the local five star restaurant has a two-for-one Valentine’s day special, the local baby…

>also, people should be speaking of monopsony: https://en.wikipedia.org/wiki/Monopsony

For some strange reason the term never really caught on, even having been reported and used multiple times in mainstream media.

I just wish more people understand and use it. Especially in discussions like the current issues.

Re: Apple, Epic, and the App Store

#735

Post by user5994461 »

PaulDavisThe1st wrote: post #446

>This is not a console you play to entertain yourself, or even a PC for work: it is the foundation of modern life OMFG. Is it just because I'm 56? Is it just because I've spent my entire adult life connected to the internet (barring a few early years where it was just Bitnet)? Is it because I helped start the biggest e-commerce company in the anglo/eurosphere? Is it that I spend all day in front of screens, connected…

It is honestly the center of modern life to many young people.

Half the things you mention are oblivious to the younger population. They don't have a vehicle, don't use physical mail (paper letters), and couldn't care less about journalism.

Consider somebody trying to get a job in modern society. The phone is needed to apply. The phone is needed to do the interview. The phone is needed to take a picture of your id and receive the contract when you're hired.

Re: Apple, Epic, and the App Store

#736

Post by alickz »

tomc1985 wrote: post #297
kartayyar wrote: post #279

Earlier quoted context omitted.

I don't get the whole objection to mutiple app stores. Instead of clicking icon A, I click icon B and if I get a cheaper game, all power to Epic. I don't spend time in an app store. I spend time playing the game.

So I recently built a living room gaming PC. Installed Steam, Epic Store, GOG, Origin, XBOX, Rockstar Social Club, even Twitch. Pretty much anything where I have a library of games. And let me tell you, what a pain in the ass it is! I keep all the games organized in Playnite. If I try to launch Epic games from Playnite, most of the time nothing happens. So I start the epic client and... oh look, it logged me out agai…

You could try organising your games with GOG Galaxy. I haven't tried it but I've heard good things.

https://www.gogalaxy.com/en/

Re: Apple, Epic, and the App Store

#737

Post by pwinnski »

chadcmulligan wrote: post #468
pwinnski wrote: post #229

Earlier quoted context omitted.

At launch, Apple operated the App Store hoping to break even, and 30% wasn't quite doing it at first. On a $.99 app, they still might not. I mean, they might, given economies of scale, but barely. Free apps incur costs with zero compensation. If all apps cost 99 cents, I don't think we'd be having this conversation. If Apple were still operating the App Store at break-even, I don't think we'd be having this conversat…

The trouble is with the App Store that you can't charge more on the App Store than you do elsewhere to cover the costs of the App Store. This is perhaps the anti competitive part - if you could just pass on the App Store costs then the free market would reign.

This is not true.

It was true for a brief period of time, several publishers challenged Apple on it, and Apple relaxed that rule.

They still have several silly rules, but not this one.

Re: Apple, Epic, and the App Store

#738

Post by valuearb »

ksec wrote: post #731
valuearb wrote: post #641

Earlier quoted context omitted.

Apple doesn’t make $50B a year from the App Store. That’s roughly it’s entire services revenues. It’s estimated that developers had gross sales of $50B from the AppStore last year, of which $15B is Apples share before expenses. Apples audited financials tell us gross margins on services is 68%, and $9B of those services are from an annual payment from Google for search placement in Safari with a gross margin approach…

>but App Store gross margins are clearly likely to be in the 50-65% range, making its break even somewhere between 10-15% of developer revenues. Apple dont booked their customer's revenue, only their receiving ( i.e ~30% ) end. So those are close to 100% Margin as well. There are additional $10 per Mac, iPhone, iPad, Apple TV per unit to Services for their OS, Cloud, Siri and Map Usage. That is close to $3B revenue,…

The audited accounting is clear. Apple s gross margins on services are 68% on roughly $50B in service revenues. That’s roughly $16B in expenses.

Subtract $9B for Google safari payment, and you have $16B in expenses on $41B in remaining service revenues, or 60% gross margins.

Hosting and distribution of terabytes of data every hour costs money. Building and maintains hundreds of localized app stores costs money. Customer service costs money. App Review costs money. Developer support costs money. Maintaining Developer tools and store APIs costs money. Payment processing costs money, esp. on 99 cent purchases.

And why should Apple price these devices at a “fair price”? When you build a business from scratch that be ones far more successful than anyone thought possible, aren’t you allowed to keep the money people freely pay you?

Apple set the pricing at 30% day 1, and it hasn’t stopped a single developer from running to jump into the App Store goldmine. There has never been a more profitable software market for developers. I’d say Jobs clearly got the pricing right.

Re: Apple, Epic, and the App Store

#739

Post by valuearb »

georgeecollins wrote: post #654
valuearb wrote: post #641

Earlier quoted context omitted.

Apple doesn’t make $50B a year from the App Store. That’s roughly it’s entire services revenues. It’s estimated that developers had gross sales of $50B from the AppStore last year, of which $15B is Apples share before expenses. Apples audited financials tell us gross margins on services is 68%, and $9B of those services are from an annual payment from Google for search placement in Safari with a gross margin approach…

Developers pay to advertise their apps (some of it goes to Apple) Apple pays to market Apple TV, Apple Music. Apple doesn't need to take in revenue to market other people's apps, advertising them is a money maker for them. Also, you are talking about the margins on all Apple's services, some of which are much more expensive than others. The margins that other digital software stores can charge suggest to me that they…

No one is saying the App Store isn’t very profitable for Apple. Just countering the misinformation from n the original post and the blatantly wrong assumption that the App Stores only costs are payment processing.

Disclosure: I’m a long tine App Store developer.

Re: Apple, Epic, and the App Store

#740

Post by bluedevil2k »

giantrobot wrote: post #564
bluedevil2k wrote: post #246

Earlier quoted context omitted.

> Apple's cut of sales for the service they provide is pretty small compared to the costs of doing it yourself Pretty small? I think Epic, who makes billions and billions of dollars in overall sales (though revenue is unknown specific to Apple devices, but fair to say at least $100M), would strongly disagree with this point.

I couldn't possibly care less if Epic only makes $100m instead of $130m. Why are you carrying water for Epic which makes stupid amounts of money selling props for in-game toons? I'd be sympathetic if they sold anti-cancer drugs or built low income housing but they sell fake things to people in their own captive market.

This is such a condescending and arrogant response. What makes you the moral judge over whether Epic deserves to make the money they do? Who put you in charge of deciding what "good causes" or "bad causes" are? You might not care, but they have employees who have families that could use the money to better their lives. What the hell does Apple need the extra $30M for? You come off as a bitter and jealous person with this comment, perhaps upset at their own business failures.
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