Comment by etchalon | Hacker News Reader

Comment by etchalon | Hacker News Reader

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1. If you want to include a link to an website for payment of digital goods, you have to request an entitlement from Apple.

2. As part of that entitlement, you agree to pay Apple a 27% commission on any purchases made when users click those links, for up to 7 days after the link is clicked.

3. You agree to send Apple monthly sales reports.

4. You agreed to give Apple a right to audit your books at anytime.

That's the meat of it. It's a self-reported cost-per-conversion, which isn't exactly unheard of. Developers are in arms because they don't believe Apple deserves any money for distributing their app on their App Store.

That's the heart of the disagreement.

Apple believes they have a right to charge developers a fee for access to the users who shop through the App Store.

There are developers who believe that the App Store should exist as a free-thing Apple provides to developers, to encourage them to write software for the iPhone. They're willing to accept a nominal processing fee, but anything more is "anti-competitive".

> Developers are in arms because they don't believe Apple deserves any money for distributing their app on their App Store.

Rephrased - Developers are up in arms because the cost of distribution on iOS is artificially high. It's artificially high because the cost is not subject to market forces. It's not subject to market forces because Apple has a vertical monopoly on hardware and software distribution. Vertical integration is illegal.

The cost is subject to market forces if you believe that other phones exist.

That's not true in the slightest, though. Sony, Microsoft, Nintendo, and Steam all take 30% for distribution and hosting, same as Apple. It's not artificially high if it's in line with the rest of the tech industry and if you want to try and claim that it's because of some monopoly, vertical or otherwise, then you have to explain why the other storefronts are also monopolies.

It's not a monopoly. Other phones and ecosystems exist.

> Sony, Microsoft, Nintendo, and Steam all take 30% for distribution and hosting, same as Apple.

> It's not a monopoly.

I believe you have accurately described a cartel, however.

Cartel =/= same rate. It requires more than just price matching. this is why gas stations and grocery stores aren't cartels either.

There are absolutely antitrust issues with grocery stores - Kroger/Albertsons is being contested right now! It's a major contributor to food deserts. It's not a cartel because the main players aren't acting in concert, but they are attempting to monopolize regionally. Walmart has also concentrated way too much power, but that's the 800 lb gorilla no one wants to touch.

That said, gas stations and grocery stores deal in commodity products. The video game companies are much more integrated with many games that will only run on one system, stores will only run on one type of hardware, and games are not transferrable between competitor systems. Competition is extremely restrained because of these exclusive and limited distribution agreements. The fact that they all maintain the same line on prices is a very clear signal of cartel behavior when you take the context into account - they are using control of a distribution chokepoint to control competition and pricing power. That's the essence of why antitrust laws passed in the first place.

I dont have an opinion on regional monopoly, just the cartel issue, because I almost never hear it used correctly.

Epic has a game store charging 12 percent and nobody seems to care much about it.

Because developers go where the users are. That's all that matters.

Epic had to pay developers, a lot, to bootstrap the Epic store so that there were games there that mattered. And even now, with a decent selection, most PC gamers still use Steam. Because all their games are on Steam already. And every game they care about is on Steam.

So Steam can charge 30% and Epic can charge 12% and nothing really changes.

Probably has to do with market power. For my money, none of these companies should be allowed to own a game marketplace. The distribution channels should be stand alone from the hardware and software producers.

I believe you're arguing in bad faith. Are you just becoming aware of these companies 30% cuts? Why were you calling Apple a monopoly if you think this is a cartel issue? What evidence do you have of cartel behavior other than that people followed suite in setting rates?

You shouldn't make that assumption without significantly more proof. Why can't it be both? In the App space Apple has the dominant position in a duopoly, and in the software distribution space more broadly there is cartel-like behavior occurring regarding commissions because distribution has become a major chokepoint (I'm guessing thanks to DRM, but that's probably oversimplifying).

This is not accurate. Do more research. Steam has a tiered cut they introduced to keep big players on their store, for example. Google and Apple both offer a lower rate for small business. And alternative stores on PC successfully operate with much lower cuts (EGS, GOG, itch, humble). It's not "in line with the rest of the industry", it's "no higher than the other bad ones".

Steam also doesn't collect 30% for distribution (ie developer issued keys for things like bundles)

On consoles I can buy a digital copy, and I believe the 30% does not apply.

On Windows I can buy a digital copy on the devs website and MS gets nothing.

On Steam, I could buy the game in another storefront (GOG), or Direct, and Valve would get nothing.

On Android I could use a separate AppStore and Google would get nothing…

In other words, in all those platforms devs can opt in to participate on a centralized store taking 30%, or keeping an alternative channel with higher revenues. On iOS, not so much.

Years ago, Apple had a loving relationship with Devs. Now Apple is an over demanding Karen yelling over her alimony payments every end of the month.

Digital copies on consoles still get 30%, and console agreements may include additional royalties beyond that.

There is no way, on any major console, to "opt out" of the fee.

Mac has the same options available to developers as Windows.

Steam's third-party redemption mechanic is notable, and awesome.

On Android, different third-party stores have different fees. Samsung, for instance, charges the same 30% as Google. Epic's store charges 12%.

> Vertical integration is illegal.

Is it? The only related info I could find is https://www.investopedia.com/ask/answers/012615/what-are-leg..., which says it _can_ be illegal (in the USA) if it is achieved through a merger.

https://en.wikipedia.org/wiki/Vertical_integration mentions quite a few examples of existing vertically integrated companies, mentions a few court cases, but doesn’t say it’s outright illegal.

Also, if vertical integration is illegal in the USA, somebody should tell Musk he should split up Tesla and SpaceX.

It can be in certain cases if it is in restraint of trade.

> if vertical integration is illegal in the USA, somebody should tell Musk he should split up Tesla and SpaceX.

How are those companies related in terms of market power? I don't see it. Plus, space is so capital intensive and reliant on government contracts that pursuing it would be pointless.

How is it not subject to market forces? That doesn't make sense.

If Apple's platform doesn't work for their profit margins they are free to sell their software elsewhere, including a plethora of phones from a diverse set of manufacturers. But they don't want to do that because Apple's platform makes them a fuck load of money. They just want more of it.

How about this: Apple can charge Epic the same outrageous* 12% that Epic charges game developers. Do you think that would alleviate Epic's concerns?

> Vertical integration is illegal.

Can you provide a legal document or explicit law that states "vertical integration is illegal"?

* It's outrageous because Epic provides even fewer services (SDKs for example), still requires developer fees $100/submission, and has a much smaller user base. They're also not really doing anything. At least Apple makes the iPhone and improves the capabilities of it each year...

> How is it not subject to market forces? That doesn't make sense.

65% of domestic App Store revenue is on iOS, and the Apple app store is the only distribution channel. What market forces affect Apple's pricing power on commissions?

> Can you provide a legal document or explicit law that states "vertical integration is illegal"?

No, because like all things, it's about how you use it. Per the FTC - Exclusive dealing and exclusive distribution arrangements may be anticompetitive, however, if they are used to raise rivals' costs, exclude (or foreclose) competition, or facilitate tacit collusion. Exclusive dealing contracts may raise rivals' costs when the contracts are made with so many retailers, and lock up so much capacity at the retail level, that competing manufacturers are unable to attain minimum efficient scale in either the production or the distribution functions.

Apple is dealing with itself - maybe that argument holds in court (certainly has a shot with the current junta). It would certainly help if Congress would update the law for the 21st century. It's close enough to the line that it can be argued, and they are clearly nervous about it.

> How about this: Apple can charge Epic the same outrageous* 12% that Epic charges game developers. Do you think that would alleviate Epic's concerns?

Be mad at someone else. I don't know or care about Epic and I don't play Fortnite. I just know that private companies should not be able levy a tax or unreasonable tolls in restraint of commerce. It's hard to justify a 30% toll on 65% of a $100B+ market without at least knowing if a third-party marketplace would offer better rates and service.

> 65% of domestic App Store revenue is on iOS, and the Apple app store is the only distribution channel. What market forces affect Apple's pricing power on commissions?

That just proves that Apple provides a lot of value through its platform and that developers are hungry to develop for it despite the platform fees, it doesn't prove that Apple's App Store isn't "subject to market forces".

> No, because like all things, it's about how you use it. Per the FTC - Exclusive dealing and exclusive distribution arrangements may be anticompetitive, however, if they are used to raise rivals' costs, exclude (or foreclose) competition, or facilitate tacit collusion.

This broad definition would apply from any company ranging from Nintendo to Walmart to Tesla. It's not convincing. If you are going to make the claim that "vertical integration is illegal" you should provide factual evidence stating this instead of just your broad interpretation of "Per the FTC".

> Be mad at someone else.

Something something Apple tax, Junta, illegal something something.

> That just proves that Apple provides a lot of value through its platform and that developers are hungry to develop for it despite the platform fees, it doesn't prove that Apple's App Store isn't "subject to market forces".

That's really an argument for court. It could mean they've locked in a dominant market position they are abusing. Not for me to say, but you haven't made an argument otherwise.

Sure, but friend aren't we just discussing this on the Internet? It's all an argument for court :)

>What market forces affect Apple's pricing power on commissions?

Raising the rev share they take makes the developers less incintivized to develop for the platform. Lowering the rev share makes developers more incentivized to develop for the platform. Apple is competing against other app platforms over developers of which there is a limited amount of.

So for Apple to lower the amount they take there would need to be another platform that is stealing developers from Apple's ecosystem. If developers stop developing apps for Apple's devices then that makes them less desirable for users so they would be incintivized to let developers keep a bigger portion of the revenue.

Vertical integration is not, in any way, illegal.

"you agree to pay Apple a 27% commission on any purchases made when users click those links, for up to 7 days after the link is clicked."

So if the publisher says, "Click here for a renewal reminder and a 10% discount" and then sends a renewal E-mail on the 8th day, they're in the clear.

RAW, yes.

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