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Comment by smiley1437 | Hacker News Reader

Standardizing a 1000 hr bulb life vs standardizing a 30% commission to host an app, is it really a coincidence or are cartels just better at hiding it now?

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Market forces often push participants towards an equilibrium value, so it’s hard to say. I don’t know enough about economic theory to know if there’s a way to tell.

The 30% commission has a long history. There are precedents going back to the early days of games consoles. Both the iTunes music store and Steam opened in 2003 charging 30% or very close to it (iTunes tracks were 99c so it doesn’t work out exactly).

It’s hard to argue the 30% in either of those cases were a matter of abuse of market power. Steam was struggling to establish itself against the incumbent distribution channels. The iTunes rates were negotiated with the major labels who were notoriously hard deal makers and very wary of online sales channels. They held all the cards is their negotiations with Apple and yet they seemed to think 30% was fair. So at that point I don’t think it’s possible to make a credible case that the 30% rate was extortionate.

If 30% was abusive, we’d expect to see it act as a brake on adoption of the App Store by developers, but is there really any evidence for that? On Android have any of the smaller stores tried to differentiate on price at lower than 30% to attract developers, or has Google tried to woo iOS developers with lower rates? If 30% was abusively high we’d expect to see something like that happening.

A percentage doesn't make sense, because cheap apps and expensive apps require exactly the same effort for hosting them, and there is no risk involved.

So the fact that these competitors use the same pricing model and the same price has a bad smell.

If the actual cost of service was pro rated across apps this would basically eliminate free and low cost apps. In fact how would you price this in the first few years of the App Store when it lost money? Furthermore it would make it incredibly expensive and therefore risky to develop launch an app. They would likely have had to charge hundreds of dollars, perhaps thousands per app in the early years, stifling innovation and strangling freemium or free offerings. The App Store would be a very, very different place today.

This would be like supermarkets charging product manufacturers a uniform fixed rental for shelf space. No supermarket would stock toilet paper, it’s too bulky and low revenue, or if they did they have to charge a lot more for it.

So Apple and Google decided that expensive apps should subsidize the cheap ones? That sounds almost like a governmental move. I'd rather have the real government regulate the market I'm operating in.

Have Microsoft and Google standardized on the 30% commission?

Or is it more that "Apple stuff" is not directly substitutable with "Google stuff", and that Apple has a monopoly on "Apple stuff"?

Yes, they have, please see this chart

https://www.statista.com/statistics/975776/revenue-split-lea...

Pretty much everyone has, with the occasional exception.

Steam and GOG too

Wasn't Steam one of the first to implement such pricing? Or have they followed the lead of somebody else before them?

Steam has a much better case to argue, given that they're a fiscally independent company with no board of directors or shareholders to satisfy. Since they don't get monthly cash infusions, they need to do two things: shoot for an aggressive growth model, and shower the end user in features. In my opinion, they've succeeded in both regards: their 30% cut is pretty large, but it's justified given the scale of the operation they run. Plus, their generosity with things like cloud save, video streaming, and their assortment of community offerings, it's hard to really claim that Steam doesn't deserve their cut. If anything, I consider them the premier example of what a "premium" CDN pipeline looks like.

That is remarkable, and I wonder if there are explanations other than a cartel.

Interesting, thanks.

I wonder how much of this is deliberate collusion, as opposed to an equilibrium where companies all realize that it's more profitable to match each others' fees than to try to compete on price.

If other app stores charge 30%, you know that developers are willing to pay 30%, and there's not much to be gained by reducing your own rate below that.

I wonder how much of this is deliberate collusion, as opposed to an equilibrium

I saw a theory in the comments on HN once that companies can 'collude' without communicating with each other. If memory serves, it was different than just achieving an equilibrium. Maybe it's enough of a theory to have a name? Hopefully someone who knows what I'm thinking of can chime in.

Edit: I may be thinking of "tacit collusion". https://en.wikipedia.org/wiki/Tacit_collusion - "Tacit collusion is a collusion between competitors, which do not explicitly exchange information and achieving an agreement about coordination of conduct."

They read each-other's press releases, they reasearch competitors, employees and mamagers move between companies. There is no way for them to not communicate.

Just because bosses didnt sit down a and sign a deal in a smokey room doesnt mean no decision was made

Yes, although typically tacit collusion is introduced with the example of price matching at big box retailers. The setup in this case is somewhat different, although the outcome is still an equilibrium in which all sellers "agree" to keep prices high (and above marginal cost) without directly communicating.

It’s unlikely there was collusion around app store commissions. It’s more likely a case of “how much can we get away with charging?” and existing competitors in market providing a proof point of what is palatable to developers. That is a somewhat stable state until someone like Epic comes in with a lot of money and a desire to quickly capture market share with a lower commission.

I am pretty sure it is established that there was, Amazon and Apple were the first 2 members

Apple and Amazon are far from the first storefronts.

Steam was charging 30% as far back as 2003.

I'd be willing to defend Apple's 30% cut if any of it was justified. Instead, my experience working in the walled garden has been gruelling. Xcode is a pathetic disaster at this point, but Apple seems to be unwilling to extend any functionality to the editors I actually use. Getting an app through the guidelines is an exercise in arbitrary debasement. Their phone support is useless too, with most of them directing me to forum posts that basically say "don't do whatever you're doing". I think Epic has every right to offer their lower commission, because their service downright sucks. I still plan to buy games from Steam for the foreseeable future, because their work on Proton is worth it to me.

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