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Comment by orliesaurus | Hacker News Reader

Okay this is going to sound stupid but maybe someone else feels like me about it: I don't understand why Apple has to take such a big chunk from transactions of in-app purchases? Similarly Google. Why 30%? Why not 5%? That feels like it would be more honest.

Is it just because "they can"?

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I assume their costs are just, Credit Card Fees, Infrastructure Fees (Bandwidth, Storage), Reviewers Salary. Not sure this adds up to 30%.

I think the real reason is that when the Apple store was started, they looked around at the current prices for "software distribution". Retail was like 70%, and other app stores; for example the Danger Hiptop / T-mobile Sidekick charged 60% for their apps store, and the carriers were worse. At the time, 30% was actually a lot cheaper than everyone else. Then I assume Google just copied Apple.

CC processing fees may exceed this. Just using Stripe [1] as an example, 2.9% + 0.30 per transaction means $.329 for retail CC pricing. Surely Apple gets a discount, but it's price of competitive alternative that matters.

Part of the problem with this whole market is that we're talking about zero marginal cost goods. Taking away frictional costs of transaction, distribution and support, the economic argument is for prices to trend towards $0. Hence the "race to the bottom" once the App Store made distribution "free" for free apps.

[1]: https://stripe.com/pricing

$0.329 for one dollar.

$0.59 in CC fees for ten dollars. That's 5.9%

$0.735 in CC fees for $15: 4.9%

What about other countries where micro transactions are not that expensive... eg. UPI of India.

The German GiroCard payment system is 0.125%.

The EU just limited credit card inter bank exchange fees to 0.2%.

Maintaining XCode, running iCloud app-facing services, building/maintaining SDKs, etc...

Apple has to pay for these somehow. They can either get the money by charging more for each iPhone or they can get the money from the real end-users of these products: Developers.

Or you know, they could get the money from the yearly fee they charge developers for exactly these reasons

$100?

20 Billion in 2018, but I read that in a similar thread here and sadly can't remember the source anymore

Apple has 200 million paying developers?

Yes, I'm sure you would buy an iPhone if Xcode didn't exist.

The iOS App Store supposedly grosses around $50 billion USD per year. Let's say that they were to halve their cut from 30% to 15% (very close to what players like Epic are asking for) - cutting Apple's take from $15 billion USD to 7.5 billion USD.

What is Apple spending 7.5 billion USD on such that they'd have to raise the price of iPhones? They have multiple other revenue sources as well, like developer program fees. None of those cover their costs either? Are you suggesting they're selling phones at a loss?

Programming languages, code editors and other developer tools exist for many platforms, without corporate backing. Developing apps for iOS would be very doable without Apple maintaining XCode.

But Apple are choosing to maintain XCode, not as a charity, but to make money selling phones -- $250 billion last year. It's not like they aren't getting paid for it…

The MAS fees add up to 3% with presumably similar service costs.

30% is just rent-seeking opportunism. 3% shows something far closer to Apple's true costs for all this when faced with the fact that the Mac App Store is (for now) not required.

> Not sure this adds up to 30%.

It absolutely shouldn’t add up to 30% unless you believe Apple should be using the App Store as a pseudo-loss-leader for the iPhone.

Call a spade a spade. Not even the mafia extorted businesses for 30%. I'd argue an act of digital eminent domain is in order. Imagine being a store owner and having to give a 30% kickback to your landlord.

Most shops do have to pay somewhere around 15% of the revenue in rent. In addition to the flat cost, there are tons of commercial leases that charge a percentage of profits on top of that.

well maybe the digital word needs Georgism too. The OP is exactly right, what Apple is doing is nothing else than the digital equivalent of extracting land rents.

If Apple, Google et al want to have control over their digital domains honestly instead of breaking them up let's just socialise the economic rents, or cap it at 2% or whatever.

> Call a spade a spade. Not even the mafia extorted businesses for 30%.

What do you call Steam, Xbox, Nintendo, Best Buy, Game Stop, Playstation, Microsoft...

rent seekers. why, what do you call them?

Ok, and what exactly is your proposal?

well, for one get rid of laws that allow platform manufacturers to control who makes stuff that runs on their platform. (even stronger would be to mandate providing an open api or equivalent, but just getting saying interop trumped the dmca would be a great start). that would fix the issues with xbox, nintendo, playstation and ios immediately. best buy, game stop and steam aren't as bad, they don't have as many reasons they can't be competed against if someone was minded to.

Platforms.

Part of the reason is that Apple & Google don't charge credit card processing fees. So for a $1 app, 30% is ~ their cost. Of course, that logic doesn't scale to things like $9.99/mo subscriptions and the like.

Apple could take out credit card processing fees and then charge 5%, but up until now they haven't had a reason to change. Perhaps we will see change here, who knows?

That logic doesn’t scale of for other countries that have friendly micro transactions platforms..

Apple's share of the hardware market is practically fully saturated. They're not going to sell 30% more phones or computers. They need some place to expand and grow, and services/payment processing is where they're doing it.

Partly because they can but also to prevent developers from gaming the system. Imagine a free app with an IAP to unlock features but Apple only takes 5% from the IAP.

Exactly this. If IAP was a different cut, all apps would go "free" overnight and require an IAP purchase to unlock most of the app.

Apple could try something like giving "consumable" IAP a different cut, but I'm sure devs would still try to game that too (e.g. having a consumable that unlocks the app for a set amount of time, rather than a permanent unlock).

BTW if Apple is protecting customers so much they should ban consumable IAPs because they're being used to drain money from people via addiction.

Consumables are used for more than just freemium games.

I really wish they would. I would be okay if games had to all be paid up front and there was upgrade pricing.

Most apps are free already and use ads to generate revenue of which Apple gets $0.

So they should take 5% of regular app purchases, too. Problem solved.

Would hardly even create a dent in Apple's revenue and they apparently don't know what to do with the money anyway except put it in a giant pile, so no loss for society.

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 conversation.

Apps with IAPs that are $9.99, that's a lot of extra profit. Apple might argue that they help offset all of the free apps, but obviously a company like Epic is going to feel singled out.

Apple is no longer only trying to break even with the App Store. They have openly stated that it is profitable, and that they want it to be more so. Epic and others with higher-than-99-cents sales don't like giving up so much, and I can't say I blame them.

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.

Yes you can. In fact Spotify did just that before they stopped allowing in app purchases.

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.

When it started, I think they needed that kind of share, and (obviously) everyone agreed (because they came in droves). Now that the thing is successful, they could surely reduce it. What I want to see is a sliding scale. If you're an Amazon, Netflix, or Epic, based on your sales, it should be an ever-decreasing percentage. I feel like that's how most any business would shape their fee structure, and I don't understand why Apple won't even consider it.

When they launched the App Store Apple took a risk - invested in the systems etc needed to support it and I think that at the time it would be possible to justify 30% as reasonable given these factors - and was comparable with other stores.

I think it would probably be hard to argue, given the market structure now, that the return relative to risk is still reasonable. Normally other entrants would join and exert some degree of pricing pressure on theses fees. The Google / Apple duopoly means that this isn't working.

Don't they need to pay for and take care of country specific sales tax for you? If you sold directly to customers within the EU for example, you'd be liable to pay ~20% VAT for sales to most countries as far as I understand.

I don't know if 30% is fair but there's value for sure in making tax returns easier.

If I were an app developer who relied on in-app purchases, I would probably care a lot more. But as a consumer, I don’t, and I suggest the only reason consumers have to care is because app developers (understandably) want lower fees and are negotiating terms via PR.

You should care because in the end you are the one paying the 30%.

No because I don’t pay for loot boxes, gems, and other useless consumables.

Actually I pay 100%. I don’t care how that 100% gets divided up; all I care is the actual price that 100% adds up to.

Are developers going to lower prices of in-app purchases if Apple’s cut goes down? Doubtful. But if they do I might buy more.

Yes the are providing an eco system, customers and payment processing.

This is something I hadn't thought about until the article pointed it out. According to the first link in google (https://www.braze.com/blog/in-app-purchase-stats/) the average iOS IAP in 2017 was $1.08. If you compare that to Square and Stripe's fee structure then the processing fees charged by the credit card processors is about 25%. This means Apple's taking for themselves much closer to a 5% cut which seems much more reasonable for the services provided.

Why Apple doesn't switch to a 5% + $0.29 structure is anybody's guess, however...

Why compare to Square's or Stripe's fee structure? It's ridiculous to claim "This means Apple's taking for themselves much closer to a 5% cut" as if Apple is paying a $0.29 processing fee per IAP.

If developers had a choice in payment processors, they could choose one with smaller minimum per-transaction fees, aggregate multiple payments from the same customer, try out subscriptions instead of microtransactions so the payment processor takes a smaller cut, etc...

Sorry, I am not arguing that developers shouldn't be allowed to pick their payment processor on iOS, just doing some back-of-the-envelope math that tracked with the quote from the original article that 30% is not much higher than the processing fees in the first place on a $0.99 transaction. This was a surprising revelation to me since I hadn't considered that there were often flat fees of ~30 cents from card processors.

Having worked at a payment processor, if you are a medium to large business, you can cut deals with payment processors for a much lower fee. They are very competitive, and of course, Apple would be a special customer given very generous terms (assuming Apple are not processing the transactions themselves which is possible). This does not even take into account Apple store credit via gift cards and the like or purchasing different apps in one transaction which eliminates or lowers the fees.

Apple provides a ton of services besides the credit card processing.

  - 24/7 worldwide availability, instant payment/app download
  - Easy re-install after deletion, you still own the app even if deleted
  - Region restriction
  - Separate app pricing by region
  - Revenues paid to developer from multiple region currencies without
    conversion fees
  - Tax calculation and collection
  - Customer refunds
  - User rankings and reviews
  - App store advertising in category listings
  - Video previews of the app in operation
  - Packaging of media content allowing developers the ability to load game
    levels as needed. This allows a user to start playing your game quickly.
  - App sales stats

Most of them are there either because local laws, or purely to benefit Apple, or both, e.g. region restriction helps Apple add content to their store, and circumvent local restrictions, if apply.

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