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Apple denies App Store profit margin is 75% – claims to have no clue

9to5mac.com

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Re: Apple denies App Store profit margin is 75% – claims to have no clue

#11

Post by danpattn »

Clent wrote: post #8
elashri wrote: post #6

Doesn't courts have the power to ask Apple to actually calculate this number and give the supporting evidence about that? Because judges are not robots and understand that it is really Apple doesn't want to know the number so that it doesn't have to disclose the margin. This is probably not the first a time a company trying this tactic in court. It would be surprising (for me) if not.

How could they calculate this if they weren't tracking it? The cost would need to included not just development hours that have gone into creating and maintaining the system, but hours of other employee's used for the project. Also the servers, the network, buildings, etc. If there were forced to calculate this number, it wouldn't surprise me if they were able to do so in a manner that shows they lose money. At best…

It isn't hard. It is basic managerial accounting. You just need access to lots of internal data. Ultimate parent level GAAP accounting won't provide the specific details you need. Apple definitely knows what the number is, every 10k they won't shut up about how much growth is coming from services.

Re: Apple denies App Store profit margin is 75% – claims to have no clue

#13

Post by karaterobot »

basch wrote: post #10
karaterobot wrote: post #7

It is difficult for me to believe Apple doesn't have a pretty good idea what the profit margin for the App Store is. When they say that the profit margin isn't 75-78%, I assume that's because it's 79% or more.

The App Store is dependent on the OS. The OS is dependent on the hardware. Are you including the cost of API development, architecture, and hardware R&D into the probability of the app store. Because that is what Apple is round-a-bout saying. That its such an integrated product, you can't tally the net revenue from one component and call it profit.

Right, they would have to define their parameters first, and there might be a margin of error. But then, that's true of every revenue number they track. And this probably is one of the most important sources of revenue they have. So, I just try unsuccessfully to imagine a scenario where an executive says "I guess we'll never know if revenue is going up or down, c'est la vie!"

Re: Apple denies App Store profit margin is 75% – claims to have no clue

#14

Post by lostlogin »

basch wrote: post #10
karaterobot wrote: post #7

It is difficult for me to believe Apple doesn't have a pretty good idea what the profit margin for the App Store is. When they say that the profit margin isn't 75-78%, I assume that's because it's 79% or more.

The App Store is dependent on the OS. The OS is dependent on the hardware. Are you including the cost of API development, architecture, and hardware R&D into the probability of the app store. Because that is what Apple is round-a-bout saying. That its such an integrated product, you can't tally the net revenue from one component and call it profit.

Do you really believe that Tim Cook doesn’t know the profit margin on a key Apple product?

Re: Apple denies App Store profit margin is 75% – claims to have no clue

#15

Post by pjmlp »

johnisgood wrote: post #12
pjmlp wrote: post #5

People lie all the time under oath, they only need to be sure they wouldn't get caught in first place. Folks are so naive.

I never understood the practice of it. It makes no sense to me.

A leftover from cultures where everyone supposedly always does the right thing.

Re: Apple denies App Store profit margin is 75% – claims to have no clue

#17

Post by neilv »

I thought Chief Financial Officers were supposed to be good at financials.

Do they also have to be good at perjury?

Is that FAANG job interview analogous to the one for software engineers?

"Can you go to the whiteboard, and perform for me one of the standard case studies of CFOs who got away with perjury? Which you should have memorized, even if you learned nothing else in school."

"Using STAR format, tell me about a time that you lied about financials, and got away with it."

"OK, in the 3 minutes left, I want to turn this over to you, for any questions you have. ... Oh, if you have experience working with financials, normally people mention that in the Hobbies section of their resume; here at Faang, our interviews focus instead on the fundamentals."

Re: Apple denies App Store profit margin is 75% – claims to have no clue

#18

Post by rahimnathwani »

For those claiming Apple should be able to calculate the App Store's profit margin - can you actually define how to do it?

As someone who qualified as an accountant over 15 years ago, it's not obvious to me how you would develop a meaningful allocation of costs.

I suspect this misunderstanding stems from the same thinking that leads people to believe the myth that Costco makes no profit on its physical products, only on memberships.

Re: Apple denies App Store profit margin is 75% – claims to have no clue

#19

Post by xhkkffbf »

rahimnathwani wrote: post #18

For those claiming Apple should be able to calculate the App Store's profit margin - can you actually define how to do it? As someone who qualified as an accountant over 15 years ago, it's not obvious to me how you would develop a meaningful allocation of costs. I suspect this misunderstanding stems from the same thinking that leads people to believe the myth that Costco makes no profit on its physical products, only…

I agree. It's not possible to do.

But that being said, if the AppStore were somehow spun off into a separate company, I think their costs would be less than 10% or even 5% of the cut that Apple takes from the AppStore sales. I'm sure I could run it at those costs.

Still, it's fair for Apple to want the cut they take from the App store revenues. I totally get their position. They built a great product and platform. They deserve to reap the rewards.

Re: Apple denies App Store profit margin is 75% – claims to have no clue

#20

Post by xhkkffbf »

basch wrote: post #10
karaterobot wrote: post #7

It is difficult for me to believe Apple doesn't have a pretty good idea what the profit margin for the App Store is. When they say that the profit margin isn't 75-78%, I assume that's because it's 79% or more.

The App Store is dependent on the OS. The OS is dependent on the hardware. Are you including the cost of API development, architecture, and hardware R&D into the probability of the app store. Because that is what Apple is round-a-bout saying. That its such an integrated product, you can't tally the net revenue from one component and call it profit.

Realistically, it's not fair to put many of the costs of iOS development on the App store. They would need to do it anyway. And if there were no App store, they would still be designing their product as a collection of independent apps. That's what MacOS is anyway. So they would still need to build all of the features for supporting apps into iOS, even if they never allowed any outside apps.
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