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

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

#31

Post by stouset »

andrewmcwatters wrote: post #21
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…

Are you serious? What company doesn’t categorize labor and expenses, especially for capitalization and R&D purposes. There’s zero chance Apple doesn’t know. It’s 100% nonsense. They know all the labor costs and revenue for each of their products. Every single one. Zero chance Apple doesn’t categorize server allocation and assign those to budgets. Small companies do it. So, the obvious answer is they’re lying. They’ve…

The GP claims to be qualified as an accountant and gives a simple example of how this type of problem can have no clear answer.

Your rebuttal is simply “of course they know the answer”.

Is there any reason someone reading this thread should prefer your take over theirs?

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

#32

Post by bryanlarsen »

rahimnathwani wrote: post #26
Leonard_of_Q wrote: post #23

Earlier quoted context omitted.

[flagged]

If you think of it like a hick farmer would OK, let's do that. But we need to use an example where there are two or more outputs under 'joint supply'. Otherwise it's not analogous to the situation with Apple's ecosystem. Let's figure out the profit margin on wool from your sheep farm. Each month: - Your wool revenue is $1000 - Your mutton revenue is $1000 - Your total costs (feed, labor, etc.) are $1000 What's your p…

I'm not an accountant, but my understanding is that accounting guiding principles say that the answer is B.

But that's only because the example is over-simplified, and assumes that the labor & feed benefit both wool & mutton equally.

They don't. For example, a lot of the labor cost will be in the shearing. That should be allocated completely to wool, right? Not so fast, if you don't shear your sheep your meat production will be affected so even farmers that raise sheep for mutton will still shear their sheep. So there is no correct answer in a real-world situation. rahimnathwani is correct.

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

#33

Post by orra »

rahimnathwani wrote: post #26
Leonard_of_Q wrote: post #23

Earlier quoted context omitted.

[flagged]

If you think of it like a hick farmer would OK, let's do that. But we need to use an example where there are two or more outputs under 'joint supply'. Otherwise it's not analogous to the situation with Apple's ecosystem. Let's figure out the profit margin on wool from your sheep farm. Each month: - Your wool revenue is $1000 - Your mutton revenue is $1000 - Your total costs (feed, labor, etc.) are $1000 What's your p…

We tend to breed specialised sheep for wool, and specialised sheep for meat. Same thing with different animals.

Besides, why the analogy? We’re talking app stores. It's not apparent why we need a joint supply analogy.

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

#35

Post by rahimnathwani »

orra wrote: post #33
rahimnathwani wrote: post #26

Earlier quoted context omitted.

If you think of it like a hick farmer would OK, let's do that. But we need to use an example where there are two or more outputs under 'joint supply'. Otherwise it's not analogous to the situation with Apple's ecosystem. Let's figure out the profit margin on wool from your sheep farm. Each month: - Your wool revenue is $1000 - Your mutton revenue is $1000 - Your total costs (feed, labor, etc.) are $1000 What's your p…

We tend to breed specialised sheep for wool, and specialised sheep for meat. Same thing with different animals. Besides, why the analogy? We’re talking app stores. It's not apparent why we need a joint supply analogy.

  It's not apparent why we need a joint supply analogy.
The ecosystem wouldn't work without the hardware, the SDKs and the app store. They are designed and maintained in tandem. They are in joint supply. Why does Apple create Xcode and the various SDKs? Is it to support hardware sales, or to support app store sales?

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

#36

Post by basch »

lostlogin wrote: post #14
basch wrote: post #10

Earlier quoted context omitted.

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?

How much "profit" does the app store need to pay back to all the api development that powers the apps under the hood?

Similar to the amazon dont make a profit for a decade by dumping it into growth, Apple can dump all their app store "profit" into developing new api's that apps can access, such as ai tools etc.

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

#37

Post by tonyedgecombe »

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 assumed Apple's margin was 30%, the difference between what a user pays and what the developer receives. Am I missing something here?

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

#38

Post by Leonard_of_Q »

rahimnathwani wrote: post #26
Leonard_of_Q wrote: post #23

Earlier quoted context omitted.

[flagged]

If you think of it like a hick farmer would OK, let's do that. But we need to use an example where there are two or more outputs under 'joint supply'. Otherwise it's not analogous to the situation with Apple's ecosystem. Let's figure out the profit margin on wool from your sheep farm. Each month: - Your wool revenue is $1000 - Your mutton revenue is $1000 - Your total costs (feed, labor, etc.) are $1000 What's your p…

A and B are both close enough to the truth to indicate a profit margin of around 70%. There is room to quibble over the last few percent, no room to deny a hefty profit margin, hence It won't matter if they get it a few percent too low since actual profits will be far up in the double digits region.

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

#39

Post by [deleted] »

lostlogin wrote: post #14
basch wrote: post #10

Earlier quoted context omitted.

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?

[deleted]

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

#40

Post by headhuntermdk »

stouset wrote: post #31
andrewmcwatters wrote: post #21

Earlier quoted context omitted.

Are you serious? What company doesn’t categorize labor and expenses, especially for capitalization and R&D purposes. There’s zero chance Apple doesn’t know. It’s 100% nonsense. They know all the labor costs and revenue for each of their products. Every single one. Zero chance Apple doesn’t categorize server allocation and assign those to budgets. Small companies do it. So, the obvious answer is they’re lying. They’ve…

The GP claims to be qualified as an accountant and gives a simple example of how this type of problem can have no clear answer. Your rebuttal is simply “of course they know the answer”. Is there any reason someone reading this thread should prefer your take over theirs?

Let's look at a few things that we know about Apple:

1. The first $1 trillion, $3 trillion and (soon to be) $4 trillion company. 2. Cancels or stops production of products that don't make money (VisionPro being the latest). 3. Spent over half a trillion dollars in stock buybacks.

No company gets to the height Apple is currently without knowing every dollar coming in and going out.

I'm reminded of "if it don't make dollars, it don't make sense" chorus from DJ Quik's "Dollaz + Sense".

When I apply that to Apple (let alone any successful company for that matter), the claim that they don't know if the AppStore is profitable or not *defies belief*.

Schiller might not know exactly how much profit is generated, but to suggest that he's clueless whether or not on the WHOLE if the AppStore is profitable... If people believe that, I got a bunch of bridges up for sale.

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