Hacker News Reader

Comment by chrisseaton | Hacker News Reader

> Amazon Appstore will reduce developer revenue cut from 30% to 20% and give 10% in Free AWS Credit

I feel like this title is amazingly hard to read for many reasons all working against us at the same time!

‘developer revenue cut’ really means it’s Amazon’s part that’s reducing, not the developer’s.

And they’re reducing the ‘cut’ as in the proportion, not reducing some other previous cut they made to revenue.

‘Amazon reduces App Store fee from 30% to 20% and also gives 10% in AWS credit’ is I think what they mean, and is the opposite of almost every way I could find to read their title.

View on HN

Sorry, for some reason I’m still having a hard time understanding. If a developer with less than $1 million in revenue sells an app on Amazon’s app store for $100 Amazon would get $30 and the developer would get $70 from each sale but now Amazon will get $20 and the developer will get $80 plus $10 in AWS credit from each sale. Am I understanding that correctly?

That's exactly right.

That’s how I grep. But wouldn’t be shocked if the credit was $8

That's what I understand as well.

The first paragraph of the article is much clearer, and seems to agree with your interpretation:

“The Amazon Appstore has announced that it will be reducing its cut of developer revenue from 30% to 20% for developers that earn less than $1 million in revenue per year. The new terms, which Amazon is calling the Amazon Appstore Small Business Accelerator Program, will also provide developers with AWS promotional credit in an amount equivalent to 10 percent of the developer’s revenue if they earn less than $1 million in revenue per year. If a developer chooses to use those AWS credits, that brings their total Amazon Appstore revenue share up from 70% to an equivalent of 90%.”

I think maybe I was (am?) reading too much into it because when I initially read that paragraph it just left me more confused! I guess I don’t really understand how the accounting of it works because they called it a “revenue share” which made me think one sale would result in:

$80 in developer revenue

$20 in Amazon revenue

But it also said the AWS credits will be based off of the developer’s revenue and judging by the “equivalent of 90%” it would seem that Amazon sees the transaction as more like:

$100 in developer revenue

($20) in developer expenses to list on the app store resulting in

$20 in Amazon revenue

But I wouldn’t consider that revenue sharing?

From the quoted paragraph I get:

You sell for $100. Amazon was taking $30. Now Amazon takes $20 and gives you a "promotional credit" of 10% of the $80, or $8.

So if you use all of the "promotional credit" then you make $88 which is not quite the equivalent of 90% but pretty close.

Assuming "promotional credit" means just regular credit you can use for anything on AWS, I wonder how much of this credit either gets left on the table (don't need AWS, credit expires) or stimulates further spending for Amazon (let's use AWS, it's "free").

It might be interesting to have that extra 8% not booked as revenue, but IANAn Accountant.

What are the tax implications of this? Is that $8 income?

Why would a credit be taxable? Regardless, you don't pay taxes on expenses anyways. IANAL.

You've received something with a monetary value, so it's (maybe?) counted as revenue.

If it's taxed, and you don't actually use it, you'll be paying tax on something that you don't need.

Not quite revenue, if you're already hosting your app on AWS and paying AWS for that, those expenses decrease.

But in no way are AWS giving away money so to speak. They are trading their commission from your app for compute they can offer

I think a tax lawyer would have to answer this, and that it probably depends on the country.

In my country, I (even if "I" means a company) can receive a business gift with a maximum value of 42eur, twice per tax year from one company - everything above that is taxed.

Let's say i did some work for a local store and charged them 2000eur for my work. To do my work, I had 1000eur of expenses. I pay tax on 1000eur difference. With eg. 20% income tax, I'd have 800eur of profit. (yes, a bit simplified, I know)

Then they decide to give me a 200eur coupon for their store and give it to me (to my company), and this is counted towards my income (2200eur now). If i actually need stuff from their store, I use it, so now I earned 2200eur gross, spent a 200eur coupon in their store and 800eur anywhere, I have 1200eur of profits, and even after tax I earn more than I did before - with 20% income tax, I'd have 960eur of profit in cash form.

On the other hand, if I don't need their services, and can't sell the coupon to someone else, the situation is different. I still got 2200eur of income (2k+200eur coupon), spent 1000eur in other stores, get taxed on the 1200eur, technically still have 960eur of profit, but 200 of those are in a form of a worthless coupon, and only 760 in cash - so their usless coupon is actually costing me 40eur.

AWS gives out thousands of service credits to new US-based startups for free, so I'd find it hard to believe that those companies would be getting taxed for such a thing. I don't think those credits are taxable, in the US at least, because they are non-transferable, i.e. you can't redeem them for fiat currency.

The way I’d understand it is you should claim the income but only the portion that offset your expenses thus a net zero and no tax liability.

For example, Amazon give you $100,000. When you use only $1,000 you claim $1,000 income and $1,000 of expense. The other $99,000 is like a loan balance that hasn’t transferred to you or been “realized” and is therefore not taxable and shouldn’t even be reported afaik

Yeah, but this looks like turning actual money that they have in their hands into a "credit", and it's conditional on money changing hands and some of that actual money going to both parties involved, not a promotional credit generated out of thin air and offered to anyone who signs up. This looks an awful lot like payment-in-kind.

it's not a payment. you and the other poster are confused because in both cases yes your gross profit is higher and you do indeed need to pay taxes on that.

but in no way did AWS provide you with a source of income. they mearly decreased your expenses.

Sounds like at least Amazon doesn't view this as taxable income.

> 3. You may not sell, license, rent, or otherwise transfer Promotional Credit. Promotional Credit may be applied only to your own AWS account. Promotional Credit has no intrinsic value, is not redeemable for cash, has no cash value, is nonrefundable, and serves merely as a means to provide an incentive to use our Services. Promotional Credit may not be purchased for cash, and we and our affiliates do not sell Promotional Credit.

https://aws.amazon.com/awscredits/

I speculate that this may be classified as a no-additional-cost service under the tax code.

https://www.irs.gov/publications/p15b#en_US_2021_publink1000...

I don't think it matters either way... If it was cash spent on AWS, it would be a business expense and the total amount given to the taxman would be the same by all parties right?

Misreporting income is not a great idea even if it doesn’t change your tax liability. That said, I think of the “credit” as an elaborate discount or coupon system. Any CPA worth their salt could find a justification for why it’s not income.

Pretty sure it's 10% of $100 and so according to Amazon "This brings total program benefits up to an equivalent of 90 percent of revenue."

FWIW, I had understood it first try, but I do agree that it is a bit strange as the normal way of phrasing this would be "Amazon reducing their cut of developer revenue from...".

How did you disambiguate ‘developer revenue cut’ to be Amazon’s cut not the developer’s? Since it says ‘developer’ not ‘Amazon’.

And weirder than that it’s not Amazon’s cut of the developer’s ‘revenue’ either - since the developer was never getting it in the first place - it’s their cut of the sale price, or the combined revenue, not the developer’s revenue.

1) We normally don't talk about the developer / manufacturer getting a cut: we talk about the middleman / sales channel "taking their cut", so inherently the word "cut" is biased to make it at least sort of understandable.

2) And no: developer "revenue" is the full cost of the receipt, and then a cost of their doing business is the cut taken by the platform, which decreases their resulting "income". The word "revenue" specifically is a number from which you deduct costs to obtain "income".

I think revenue is money you get your hands on, and then pay costs out of. If you never get your hands on it then it's not your revenue, it's someone else's revenue that they're paying their costs - your developer fee - out of. Like a singer's revenue is not all record sales as they're not selling the records they've just licensed someone else to do so and they're getting a cut (wait... so that's cut the other way around...)

So, the definition "money you get your hands on" definitely isn't correct, and the way to make this clearer is to think of it in terms of credit card processing and merchant accounts: if you sell a $5 product and the credit card processor takes $0.25, your revenue is $5, not $4.75, and they actually will report the full $5 to the government as part of a 1099-K and then your job is to report that full gross income and deduct the fees you paid. They also will report any sales you made which were refunded, and you would then separately report deductions for that also.

Now, that said, one can actually use that construction to argue that the store is then having revenue, and giving a royalty to the developer or something, and in fact my store did something where I sometimes modeled it as a retail storefront of licenses I purchased wholesale, but these are just not normal models for how the word "cut" is then applied: most people reasonably--and I think correctly--believe that the user bought something from the developer, with the store acting merely as a middleman payment processor charging a "fee" or taking a "commission" off of every sale (and I am pretty sure at least Google even models it directly in that way in its reports; there are a ton of advantages to the store to doing that, and I think even Apple sometimes reaches for this model).

From such standpoint, and to look at this using descriptive linguistics, you simply don't ever see anyone say "Apple recently increased the cut of smaller developer's from 70% to 85%": every single headline I've seen says "Apple recently decreased their cut from smaller developers from 30% to 15%".

It made sense to me the first time I read it because I know most app stores appear to have settled around 30% as their cut, so I just assumed the 30% referred to the amount Amazon was taking. The rest just followed logically.

> How did you disambiguate ‘developer revenue cut’ to be Amazon’s cut not the developer’s? Since it says ‘developer’ not ‘Amazon’.

Amazon to reduce its cut of dev revenue from 30% to 20% with 10% in AWS Credit

Amazon to reduce its cut of dev revenue from 30% to 20% plus 10% in AWS Credit

> How did you disambiguate ‘developer revenue cut’ to be Amazon’s cut not the developer’s? Since it says ‘developer’ not ‘Amazon’.

To me it's because in my mind "Amazon" is the person taking a "cut".

We never say "developers take 70% cut of the app store revenue", because developers don't "take a cut", they sell, and amazon takes a cut of their sale.

Still, I agree, the title is ambiguous.

Amazon is reducing their fee

Totally!

In fact, developer share is increasing from 70% to 90% (with 10% being paid in AWS credits).

That seems a dangerous way of wording this. The market value of AWS credits is less than the equal amount in regular currency (so: 10% in AWS credits is less than 10% of the revenue). The developer share is increasing to 80% (with bonus AWS credits).

Also:

> You may not sell, license, rent, or otherwise transfer Promotional Credit. Promotional Credit may be applied only to your own AWS account. Promotional Credit has no intrinsic value, is not redeemable for cash, has no cash value, is nonrefundable, and serves merely as a means to provide an incentive to use our Services. Promotional Credit may not be purchased for cash, and we and our affiliates do not sell Promotional Credit.

Source: https://aws.amazon.com/awscredits/

And:

> The AWS promotional credits can be used for 12 months from the date they were granted.

Source: https://developer.amazon.com/blogs/appstore/post/93e89be7-16...

While I definitely agree that saying it's upping the take home from 70% to 90% would be misleading - in a fair number of cases that 10% credit will be pretty easy to convert to direct value. It is certainly more valuable than, say, 10% of earnings being spendable on Amazon Basic items - they're not quite trying to pull a company store trick here and the fact that 80% of revenue is take-home sales already puts a decent chunk above Apple.

As a general labor rule, when a company gives me credit, I value that at $0. Even if this is technically wrong (it is definitely valued more) the reason for this is that the limitation imposed to how I use the value of my labor is a disingenuous negotiation tactic and I will not under any circumstances let my self by fooled by it. Therefore I treat the 10% credit as nothing more valuable then a smile or a letter of good will.

Apple gives 85% for devs under a million/year in sales. Google as well.

It's increasing to 80%, the 10% AWS credit is nice, but it's not the same thing as an actual extra 10% of revenue.

Lets not forget the past: https://en.wikipedia.org/wiki/Company_store

It took me multiple passes to read even though I already understood what it was trying to say.

Submitted title was "Amazon will reduce dev. revenue cut from 30% to 20% and give 10% in AWS Credit". We've replaced it with a prefix of the article title. (The specific numbers don't need to be in the title, and we try to avoid abbrevs.)

Reply on news.ycombinator.com