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Comment by rahilb | Hacker News Reader

Why though? If I build a big fancy shopping mall should I let business owners use units rent free? I’ve paid construction costs, electricity, taken the risk etc, so it’s obvious I should be able to profit from tenants otherwise I wouldn’t have built the thing in the first place. If you don’t like how I’ve built my mall you can go to the Xbox mall next door, or the PC slums where you are free to do whatever you like.

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But you really can't just "go to the mall next door", since your faithful customers cannot follow you and your entire merchandise has to be remade from scratch.

For that reason, no real mall-owner ever can even dream of extracting 30% from every sale. Why can Apple/Google/Sony/Microsoft/Nintendo get away with it? Because they don't suffer competitive pressure in the same amount. Most of them are effective monopolies in their segments, thanks to network effects, so they can get away with the worst type of feudal rent-extraction.

They do extract money from every sale… if rent was free the companies would be way more profitable as a major cost is removed. To put it another way, if you open a physical shop the first X% of your sales every day go only to costs and you must reach a certain amount of sales before your shop is profitable.

Of course, but it's a fixed cost that, if the shop is even mildly successful, will quickly become a single-digit percentage. London retail space (most expensive in UK, of course) goes for around £50 per square feet p/y, with revenues that will easily go 5x to 70x that. Elsewhere the difference is even higher. Which is why the richest companies in the world are the ones running appstores, not the ones holding retail properties: because they can get away with unescapable feudal rents that would not be tolerated in meatspace.

I guess the analogy kind of falls down as a physical business owner and move and setup somewhere else, but then they won’t have access to the mall’s traffic… actually I guess this kind of still holds up

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