An Open Letter to Tim Cook Regarding the App Store 70/30 Revenue Split

I've been much more concerned with getting my apps visible to anyone. The app store is so flawed when it comes to discoverability (even as a user it is frustrating to find apps that solve a need) I would give up even more share if people could find my app to begin with.

Apple is providing a service (yea there's no alternatives on iOS but still)... for 30% they take care off all your payments from all countries, they take care of refunds, dealing with credit card companies, and for the most part dealing with customers in general.

They also provide the market, the installation system, the update/upgrade system. Having tried to write some of those myself and the servers to maintain them I can tell you I don't personally want to run them.

Compare to Steam. Steam is also 30% on a platform you can do it all yourself if you want. Sure they provide the most exposure but similarly they also provide most of the other services that make it worthwhile.

Assuming you could do that do you really want to do all that yourself? Think about it. If you did it yourself you'd need to run a server to put your software on. Keep it secure, updating it constantly with security patches. Make a relationship with a payment processor. Handle refunds yourself. Figure out an upgrade system. Figure out how to deal with failed installations. I'm sure others could name many more things you'd have to do.

30% doesn't seem unreasonable to me given it would take more more than 30% of my time (and therefore money) to do this myself. At least that's my perspective.

Given this, I wonder if relaxing the 30% rev split might actually be in Apple's interests. In order to build that premium ecosystem, they need developers to be able to work full-time on apps. If they strangle that ecosystem, then the only people building iPhone apps will be folks with other day jobs to support them - which means either the quality bar will go down, or their will be many fewer apps in the app store vs. Google Play.

Then again, perhaps that's Apple's plan anyway: focus on the few things that many customers want, make sure the apps for those are really good, and it's okay if there's not an app for the rest.

Apple is already being nice to small developers by giving them the same rates as big developers - in any other business, doing 100x the sales of the little guy would get you a better rate, not the same one.

Apple can absolutely afford to do this financially, but the 70/30 split is practically the only thing that hasn't changed in the App Store since it launched. So why don't they?

A few possibilities:

- They have a similar split with music labels, so giving more to developers could hurt their music industry relationships

- They have more interest in helping the big app companies like Supercell, simply because of the revenues and brands they create

- They don't want to give additional incentives to creators of crappy apps who never make much money anyway

Whatever Apple's reasons, they haven't changed iTunes music revenue splits in over a decade. So I don't expect them to update developer splits anytime soon either.

There is something nice about just knowing, this is my split. I don't have to worry about it switching and my profit formulas being altered once I hit a certain sales threshold, My take is $.70x, with x being downloads. Period.

Beyond that, I'd have to ask what happens when we take this to its logical conclusion:

Say you start with an 85% split for the first 10,000 sales or something -- what happens if the split then eventually goes below 70/30, say 65/35 or 60/40 or worse, the more copies you sell? How do people react then.

I suppose the counter-argument is that that's how the tax system works -- and that's fair -- but I still don't see developers being happy to have to give up more of their take down the road, just because they have reached "success."

I mean, if you're going to go to tiers, then the next argument becomes about what defines one tier from the next.

Again, it introduces all kinds of complexities that having a straight 70/30 system avoids. And to me, that simplicity ultimately trumps the other arguments, as sympathetic to indie developers as I might be.

It's interesting to see someone give Apple advice on how to make a "big win" financially. They're literally the biggest winners financially of any company in the world right now.

Apple's Appstore is flawed in many ways. All Appstores leave something to be desired.

I'll take all the long breath out of my philosophy[1], but it boils down to an inherit weakness in the business model of pushing downloads for cash flow.

Many of the most successful apps have completely decoupled their revenue from downloads, or the 70/30 split. The "Big Players" like King.com and the rest sell in game items that cost $100! Do you think they care about the 70/30 split?

Then you have other utility apps. Like "Fixify" for $1 that let's me see the title of my Spotify Music on my Pebble. Seems like Spotify should just do it, but they don't. This dude got my dollar. That app had to be like 200 lines of Java, most of which was probably boilerplate.

If you are concerned about 70% or 80%, or 85%, you are thinking too small. If Tim had balls he could say "fine, here is 95%" and then somehow prove it didn't change the economics of the Appstore.

TLDR - If you are worried about the split, you are "gripping the bat wrong."

[1] http://www.connersc.com/blog/lets-face-it-folks-ios-is-not-a...

Look at the 30% fee as a marketing cost. Surely you want the owner of your only marketing channel to be well compensated?

Secondly, wouldn't this create the perverse incentive for developers of multiple apps to release apps under multiple accounts--some might call them shell accounts--in order to minimize their app taxes?

When you have only $1000 in revenues, you're actually paying very little for what Apple is providing. When you have a million, you're paying an awful lot, and are probably wondering if you can find a way to keep more of it.

Android, Amazon and Windows could play with this number to attract more developers. Samsung started with a ramp up but it happened in 6 months or so 0%, 10%, 20% then 30% at the launch of their store. I thought for sure when Microsoft came in later they would also go 25% or even 20%. Everyone followed right behind Apple in line rather than challenged that number through competition. Almost seems like price fixing.

I think the tiered system would be a great way to help but I worry Apple may not care as much about indie titles or smaller apps since they already gain less total. It could be an awesome gift from Apple to developers though.

In games IP royalties are usually 17%, with 30% on that and maybe 5% is using Unreal or other sales based cost. Over 50% cut off the top. At that level the 30% starts to look massive. If you have a publisher then another 20-30%. What's the point at that level with that budget. You can say Apple primarily squeezed the publishers out which is good but the rent is too damn high.

Anyhow, I don't think it's going to happen, it looks to me that as far as Apple is concerned, he have you/us where it wants and don't want to change anything.

First thing that happens is opening a new development account per app in an attempt to squeak under the $100k as much as possible.

Think about how you would handle corporate entities. Do you handle pass-through entities like LLCs differently than S-Corps?

Now imagine designing a split structure that would make sense for a developer in Vietnam / Mexico / Spain. It would have to be different for each country. $5K for Vietnam? $20K for Mexico? $50K for Spain? Good luck.

Oh, what if you have multiple people writing one app? With a 60/40 split between them?

Okay, let's say you ignore all the previous points. Just imagine the kind of infrastructure you'd have to build out to verify identity globally, to ensure that people aren't using frontmen -- having their friend register an account and passing the money through their account.

No thanks.

Not only would it let more devs work full time on their project, but it will also make new niche markets interesting.

Oh, our 'freemium' game just hit the 10% threshold. Better re-release it under a new dev account as shitquest-2 and rake in the moolah!

Here at Apple we pride ourselves on our developer friendly ecosystem. Apple has led the way in creating more value for developers. Plus, we have a monopoly on the developing for iOS, so it looks like you pretty much have to do whatever we say. Between you and me, we could change the split to 50/50 and it wouldn't really hurt us any.

It may not seem like a lot of money is at stake to you guys, but we didn't build a collosal mountain of cash by participating in race-to-the-bottom economics. Our pricing scheme was built to get developers to our platform. It was probably too generous, but we can't go back now, until we finish going thermonuclear on android.

Pretty soon we will have enough money to buy Earth. The new earth will be the best earth yet, redesigned from the literal ground up. Till then, we have to deal with pesky problems like robot, er android, or whatever. Anyways, keep cranking out those golden apps.

My benevolent smile be upon you,

Fake Time Cook

The difference is you don't really "elect" how Apple decide what to do, unless you start a mass campaign and challenge Apple's authority. AWS and Google are always cutting their cloud price to attract customer. But as app developer you probably should let Apple know exactly what works and what doesn't work for you. I read all the comments below like how App Store's discovery sucks (+1). I think Apple is obligated to improve how apps are discovered, used, and marketed.

The cost of hosting the 0% rate apps (99.3% of all apps[1]) would not be a small cost at all.

[1]: http://metakite.com/blog/2015/01/the-shape-of-the-app-store/

The current situation is indie developers make apps, most completely disappear, and very few make it to the top of the charts. The rest of the apps on the charts are there because a big company dropped 70k ad spend to put it there or because it was cross promoted from other apps or already had a high place. Encouraging small time development is encouraging a part of the app store hardly any users see anyway.

Bug fixes are a nightmare because you are on their schedule, not yours. You can't deploy fixes or new features overnight or over a weekend. Your customers suffer because Apple is in the middle wanting to micro manage it all.

So we've shifted our strategy to web based apps done wih Python, jQuery, etc. and, you know, it feels good.

The 30% isn't the issue, Apple is the issue.

And, unfortunately, it wouldn't have any effect on, e.g., Amazon being unable to sell books on Apple products because Amazon's margins are too low to allow them to eat the 30% and jacking up their prices 43% to cover the Apple tax would make them uncompetitive with Apple's book store. Apple's plan, maybe, but damned inconvenient for users.

If Apple cared about a thriving ecosystem of independent developers, they would make it easy for developers on non-Apple hardware to build and test iOS apps. For the Windows/Linux-based developer who is just interested in kicking the tires on iOS development, the walled Apple ecosystem is very unfriendly to experimentation. I know I focused early on Android development for mobile apps because of the lower barrier to entry.

Indie devs are good for Apple, and many of them are quitting because it's not financially viable. They aren't going to Android, they are getting 9-5's

Sure improving discovery would also help, this isn't the only thing that can be changed. It is just one thing that could be changed.

> At $70K in net revenues per year, your spouse could be telling you to get a day job.

For real? $70K income is pretty darn good pay and more than enough to support a family even if nobody else is working outside the home. In the US the median household income is only $53K.

I can't decide if this misstep weakens the author's actual argument or not, but either way it simply drips with elitism and privilege and probably serves to undermine the presentation.

However, in reality, the reverse is the case. Supermarkets must stock major products (e.g. Coke) and, if you have a less popular product with many substitutes, _you_ will _pay_ the supermarket for shelf space, just to get your brand known.

"At $100K in net revenues per year, you may be a successful independent developer. At $70K in net revenues per year, your spouse could be telling you to get a day job.

Therefore,..."

Most?!

But what if, Apple hugely improve App Store's app discoverability, searching, tagging and sharing? Therefore opening up a bigger potential market? ( And hence making more money )

In explanation, you join the iTunes affiliate program, which gives you a 7% cut on sales in the app store. I really don't understand why this isn't more widely known.

I don't believe this is the case at all. From the linked study, most are making substantially less than that.

Credit card fees are higher as a percentage of the price, the lower the price. Apple pays close to 30% to credit card companies for a one dollar transaction, whereas a hundred dollar transaction costs just a few percentage points. (I think this is due to a fixed per-transaction fee added to a percentage-based fee.) This is why retailers often place transaction minimums for credit-card purchases.

It's to Apple's benefit to consolidate multiple app and music purchases into one transaction to reduce the total percentage paid out. They do this by offering iTunes gift cards for sale at stores and by consolidating multiple purchases from the same day or two into one transaction.

no incentive to change a thing, and that's the straight dope.

Neo-libertarian downvotes away!