Just wow.

> Of course this should force them into binding arbitration and otherwise challenging the discount should void that discount.

So you want apple and google to act as even more monopolistic bullies ...

I see that you're taking this position as what you would do if you were Apple or Google, not what is the best course of action for all stakeholders. But you then opine that this is justified because the status quo is better for consumers.

The thing is, we already know that it's not. Apple and Google allow third party payment processors for _some_ of their apps. Would it be your best interests as a consumer to pay 40-50% more then you currently do for Uber and GrubHub? There's a reasonable argument to be made that those businesses simply would not be economically viable if they had to pay a 30% apple/google tax on every transaction. How many other apps or services went under (or were never made in the first instance) because Apple decided that their business needed to pay them a 30% cut of everything.

Which brings us to another salient point. Apple claims that they need to charge their 30% cut to pay for the cost of running the app store and for the developer tools they provide. But if this is the case, why should Uber and Facebook get to use them for free?

I don't think he's saying that it'd be good if Apple and Google did that. He's saying they should have done that if they had had their strategic thinking caps on.

The fact that these two things are different is the problem with corporate America. The morally correct thing is always the better thing for shareholders in the long-run, but corporations don't see it that way.

> The morally correct thing is always the better thing for shareholders in the long-run

Are you asserting that this is the case in reality, or that we should strive for a society and economic system in which this would be true?

Both. I think that when corporations do exploitative things, they are being short-sighted, and will eventually suffer in the long run.

And really what I would advocate for is stricter regulations so we don't have to rely on the good will of corporations in general. Their track record is terrible.

The thing is this "long run" is a hypothetical for investors and their finite lifetimes and finite windows of return.

Companies aren't accountable to some infinitely long running algorithm or timeless dynasty of shareholders, they are accountable to living breathing greedy humans who want to make a buck NOW, not when they are dead or for their heirs.

Right, hence we need to regulate the hell out of them.

That's my take too on what poster is saying.

Yet, it's not out of the ordinary to presume apple and google have good strategists among the management ranks... so what gives? What do we not know?

Presumably, that they already do volume discounts/sweetheart deals with certain vendors. Apple allows Microsoft to publish packages through their App Store that install non-sandboxed apps, for example. I’m sure they’re giving them a discount as well. They’re a “strategic partner.” Epic is not.

Which apps does MS do this with? Office is a bundle, right?

> How many other apps or services went under (or were never made in the first instance) because Apple decided that their business needed to pay them a 30% cut of everything.

Probably very few apps fit this. This rule basically only applies to digital goods, which are "free" to manufacture. There is some fixed server/dev costs, but its practically "free" to serve n+1 users.

This applies especially true to games where you buy in-app "coins". They're free to the dev, and giving our more / de-valuating the currency is a not-issue.

Of course, it probably takes a toll on licence-based apps like netflix/spotify and mostly server-heavy apps like Hey (by basecamp)

Hmm, I don’t think the marginal analysis tells the whole story here. If you imagine a business that made revenue through sales through an App Store without a 30% tax, with a 20% profit margin, that’s a healthy business. With the 30% cut, they lose 10% and go under.

These missing smaller players are the deadweight loss from the cut. You either need the scale to cover your fixed costs from a reduced revenue stream, or a revenue stream which avoids the 30% (like ads).

You're looking at it wrong. The 30% store fee was a known cost of doing business before anyone spent money building the product. That cost would have been built into a determination of whether they'll need to set a retail price of $9 or $7.

But the point is that you might have a viable business at a price point of $7 that you won’t have at $10 (with the extra $3 all going to Apple).

This business also wouldn't be viable if Apple and Google had never opened their platforms to external developers in the first place. Or if they never existed and everyone still had really advanced Nokia phones with T9 and SMS.

Or perhaps their business wouldn't be viable if iOS and Android were Windows-esque free-for-alls with rampant spyware and malware, making a good portion of their potential user base wary of installing apps.

Or perhaps their business wouldn't be viable if people haven't become accustomed to spending money in App stores without worrying about credit card fraud, etc.

Or perhaps their business wouldn't be viable if iOS and Android had no mechanisms to protect against app piracy, and 30% of their potential customers pirated the app.

> So what Apple/Google should've done is give larger publishers a volume discount.

From Apple/Google's perspective this is a terrible strategy.

The problem is that, if we assume the Pareto Principle holds, the larger publishers probably generate 80% of revenue on the App Store.

So assuming 5% is operating at cost, you are talking about them probably sacrificing 70%-75% of their current profits (i.e. moving to 5% margin vs 25%, profit for high-grossing apps is probably closer to 1/5th previous rather than 1/3rd).

So they avoid the lawsuit, but they also lose all the profits they are trying to protect anyway.

Not only that, "we charge 10% to the big monster and 30% to the little guy" is terrible PR against the amount of money they would generate from just the little guy. It's so bad that by that point they might as well just charge the lower rate to everybody. Especially when they're trying to stave off legislation.

Steam is doing this 30%-20%, and it seems to be working fine of them.. so far. I generally think volume discounts come a bit too close to price fixing, if proven in court. Granted, it's tough to prove, as we've seen in Intel vs. AMD which settled out of court AFAICR.

Yes - although I think Steam is in a different market position where there are substitutes (e.g. developers/publishers can choose to submit via GOG, Epic store, Microsoft Store or sell direct so there is no monopsony), so providing a lower revenue split to encourage big developers to the platform is a good/valid strategy. The strategy is different for Apple (where there are no perfect(ish) substitutes, and they can exploit this to have higher margins).

The unusual thing about Steam is that their high fees discourage developers from using it. If they charged 3% then everyone would use it, there would be a million games there and being in the store wouldn't cause you to stand out at all.

If they charge 30%, most small developers don't use it and then if you choose to pay, you get to be featured on a list without that many of your competitors. You're paying for exclusivity. Then you reach an equilibrium where small developers pay to be listed next to Valve's first party AAA titles, until there are enough of them that the exclusivity is sufficiently diluted to stop attracting more developers.

That doesn't apply to Apple because anyone who wants to reach iOS customers doesn't have any reasonable alternative way to do it, so there are millions rather than thousands of apps in the store and the exclusivity of being listed is already diluted to nothing. But they still charge the same rate.

I do think Steam can charge more because it offers more good services for users than any other app/game store: search/discovery features that have gotten better over time, per game communities/mods, tons of social features including a marketplace, multiple platform support, and their customer service. Sure their fee might discourage some developers, but if there is a case to be made for 30%, this is it. It all works because there is competition between Steam/GOG/Itch/Epic/etc.. on multiple open platforms in a pretty well differentiated way.

Paying lower unit price for higher volume customers is literally how the entire economy works. People deal with this every day. It's why jumbo packs in the supermarket are cheaper. It's how Costco exists. It's the one capitalist principle almost nobody has a huge problem with.

> Paying lower unit price for higher volume customers is literally how the entire economy works.

That's not how the economy works - it's a very simplified view which IMO is incorrect in this instance.

Companies in theory only offer volume discounts when it makes commercial sense to do (i.e. 'second degree price discrimination'). Price discrimination opportunities happen when you believe that you will sell more to a customer by changing the price for a particular segment / volume target (companies in theory always try to sell at the maximum price that the buyer will accept, and price discrimination is just strategy to help sell at a higher price to certain segments if the market will accept it). Companies will also only do deals which are profitable (sometimes higher volume deals are profitable while lower volume deals aren't, for instance it might be practical to sell 1 million cans of beans to a large supermarket chain for 20 cents, while it's only practical to sell 10 cans of beans for 50 cents each to a smaller shop).

In the AppStore in reality this would mean you would need to believe that the reduction in fees would encourage enough big developers to the platform to offset the change in fees (at the moment I'm assuming the profitability threshold is met - as Apple is clearly already making money on the bigger apps here).

Now in order to pay for the 30% to 10% swap, you would need to bring c5 times the number of big developers to the platform to offset the reduced margin, which is very unlikely to happen, particularly as Apple have the dominant platform (i.e. most developers are already probably on iOS that are going to be on iOS).

Now if the industry was heavily competitive, and mobile developers could leave and go to another platform with lower fees and reach the same audience, then the competitive pressure would exist to do what you are describing and volume discounts may become a thing - but because Apple can block any competition in this space they don't need to offer any discount to encourage these big developers to use their platform - the developers have to keep using them (which is what the lawsuit is about).

i.e. Apple's market position allows them to act as a market-making monopsony, which means it's not in their interest to provide a discount as they can exploit the situation to generate super-normal profits. Economics & business strategy 101.

I'm sorry to say this but your comment reads like some core concepts from Econ 101 were absorbed but the part about how economics theory is largely descriptive not prescriptive was missed. You're not far into your comment before having the "in theory" qualifier.

There are lots of reasons why volume discounts exist:

- To encourage more use;

- It's aspirational in that users believe they can get big enough to get that lower per unit price;

- Every customer has fixed and variable costs. Volume discounts account for fixed costs. Generally speaking, a large customer will be less overhead for the provider in cost per dollar of sales;

- Bargaining power. Some customers are price takers. Others are price makers;

- Anchoring. Supermarkets in malls will tend to pay lower rents (per square foot) because mall owners know their presence brings in customers that frequent other businesses. Likewise if a customer is accustomed to buy Fortnite skins through your ecosystems they're more likely to spend on other things;

So basically I don't accept your premise so the rest is kind of irrelevant.

You're literally giving examples of how his premise applies in real life.

"Companies in theory only offer volume discounts when it makes commercial sense to do" - Encouraging more use makes commercial sense because it yields more money overall even with the discount (if done correctly) - Users aspiring to buy more makes commercial sense because people buying more means more money - It makes commercial sense to give discounts because large customers cost less relative to small ones due to fixed costs not changing based on customer size

...and so forth. You're saying his premise is irrelevant but giving a series of examples of why his premise is relevant.

It is Econ 101, and of course all this is theory - but that's the idea right, we are describing why it is in Apple's interest to do what they are doing. You are prescribing a change that goes against basic economic theory and also isn't the behaviour being observed, so I personally don't think that criticism is fair!

The main thing your comments miss is how apple is going to make up for the immediate shortfall in profit from your proposed changes. Bear in mind, they need to increase revenue 5 times to make the same amount of profit.

It's fine to hand-wave about how Apple should provide volume discounts because everyone else does, but you don't really provide a reason for why they should do that from a financial perspective and how they can do it without loosing a majority of their profit (everything is a soft-benefit which doesn't account for the huge financial losses this would incur).

I don't mean a bullet point, I mean like "I think a reduction of the fees to 10% would translate to a 20% reduction in the price of apps, and that would encourage people to buy 5 times more apps".

Or that all the money these big companies make will be so inspirational that 5x new developers will enter the market and these will, on average, be just as successful as the previous developers with zero cannibalisation.

Volume discounts come about because the true cost of a product has both fixed and variable components. If it costs a given amount to have a checkout clerk ring up your order, that amount doesn't change based on whether you buy a case of ramen or a single cup, so if you buy the case they can spread it over a larger volume.

But in this context, the fixed and variable costs are already split out. iOS developers pay the $99 fixed charge that should cover any of Apple's fixed costs and pay 30%. If you're already paying the fixed costs explicitly then the unit price only needs to cover the variable costs and higher volume yields no change.

And they're starting off from a PR hole because the rate so obviously has no relationship to their actual costs. It costs them the same to distribute a 100MB app whether the developer charges $1 or $100, but they charge $0.30 in one case and $30 in the other. A developer with a 10MB app sold for $10 pays ten times more than a developer with a 100MB app sold for $1 even though their distribution cost to Apple is ten times less.

Ordinary competitive markets don't work like that because otherwise a competitor would come in charging prices more proportional to their costs and everyone being overcharged would switch to the alternative.

> Game theory will tell you that there is essentially no downside to (3). Worst case you will be back on the app store at 30% or will leave.

Worst case is you want to be on the app store at 30% but are not allowed back in.

> I stand by my position that end users don't actually want competing third-party app stores

I disagree. More stores bring more competition. Both in terms of platform costs and in terms of promos for customer acquisition.

The epic game store is kind of crap, but their weekly free game setup has offered some great content. I haven't given them a single dollar and I've gotten a number of titles including Control, Enter the Gungeon, Alien Isolation, etc.

I say let them fight

> Worst case is you want to be on the app store at 30% but are not allowed back in

If 30% cut of your revenue is big enough, Apple will let you back in even if the two companies apparently just tried to murder each other in court.

Money talks.

Companies keep massive clients and vendors that they are locked in lawsuits with all the time, just look at Apple and Samsung.

While technically possible I consider that incredibly unlikely as a result of what's essentially a contract dispute. What would Apple's cause of action be to terminate, say, Epic from the App Store entirely?

They sort of tried this at the beginning of the dispute when they claimed anything running Unreal Engine was a security risk and should be kicked. They overplayed their hand with that one and a court blocked it.

Game theory applies to Apple too. What's their upside from banning Epic from the App Store? They face the risk that a court may take that decision out of their hands. And while they're doing it they are losing out on that 30%.

There’s an entire cottage industry of jailbroken app stores. You might argue that those using alternative stores are a minority (1-5%), but the act of jailbreaking a phone is quite challenging and we still have a lot of people doing it. If iPhones were able to run third party stores I think you’d see 30 or 40% of users opting in to that.

Is it a usability nightmare? Perhaps. But device makers shouldn’t make that “choice” for their users. Likewise you might not like the fact that your city has small businesses instead of a single large warehouse store on the basis of convenience and usability. But the public would not agree with you and that’s why we enact laws against anti-competitive behavior.

It’s way less than 1%

Waay less.

That's because Apple has waged war on these stores for over a decade. The fraction used to be much, much higher several years ago.

They've merely fixed the security holes in iOS that allowed these stores to exist.

Unless you're suggesting Apple ignore them which would be insane.

Perhaps the iOS security model is incorrect if it only allows Apple’s store to exist?

In some third world countries going to a shop to get your device jailbroken at least was quite popular.

Yup. There's not too many people out there willing to risk bricking their $1000 phone for extra permissions

No. This would entrench their monopolies even further.

It should be legally required that any device that is marketed as a general-purpose computer, whether pocketable or not, and is shipped in a locked state, is fully unlockable by the end user. Without a single network packet sent to manufacturer's servers. That's the only way we as a society could fix this dire situation.

In other words, if I buy a phone from Apple, I should have the choice for this to be the only interaction I have with Apple. They sold it to me. I gave them money, they gave me an iPhone. It's mine now. They're no longer in possession of it. I thus should be able to run arbitrary code on it with highest privileges possible with no hindrance.

So then they don’t market it is a general purpose computer? How would you solve for that?

Then it shouldn't have a publicly available SDK because appliances often don't have one.

Actually, no. The other option is that the court forces Apple to not do that, and fines them billions of dollars if they refuse.

South Korea is already doing significant laws that are at least related to this conversation.

I expect more countries to pass similar laws soon.

Okay, so you want to live in a world where you buy a car and the manufacturer will wipe the engine firmware or lock the vehicle if you change oil without their permission? Thats already happening to farming equipment.

You will love in a world where you own nothing, and have less control over your life than a medieval surf - all devices are becoming 'smart', frok door locks to toasters

I'd love an iPhone that runs Android tbh

>I stand by my position that end users don't actually want competing third-party app stores.

I have 9 chat apps on my phone. I just counted, and that's skipping things like email and basecamp that I might have included to inflate the number. It's not ideal, and the downsides can be exaggerated for the sake of banter, but overall the chat app situation is fine. Similarly, I wouldn't mind having more app stores.

I expect there'd be one all the free software hardcores believe in, one that fills the role Steam does on PC, another with all the "too hot for TV" content that Apple and Google won't touch with a 10 foot pole, a few developer-publishers big enough to get traction, and dozens of also-rans that nobody uses. Yes, slightly more inconvenient like all the chat apps, but in reality it'd also be fine.

I don't think it makes sense to say what consumers do and don't "want," because largely they don't understand the terrain the App Store and Google Play put down. Ask people if they'd like a 2nd store that lets them install apps that contain porn without putting it behind hidden curtains in otherwise general-purpose apps, then we might expect positive responses. Ask people if they want an app store that contains more malware because the app store monopoly provides a chokepoint to enact user protection that on-device sandboxing can't, then we'd expect negative responses.

The reason Apple and Google would never offer up a volume discount for large publishers without legal action is because it's 99% of the app store's revenue. Giving a discount to small developers cost them nothing, giving a discount to Epic Games and similar would cost them billions.

I think it's certainly heavily weighted to the big publishers but 99%? I'm not so sure.

But you know what's expensive? Private lawsuits, government lawsuits, a court or legislature deciding the outcome, compliance with legislation, compliance with consent decrees, compliance with judgements, etc.

The biggest issue is that third parties will end up deciding the outcome. You're almost always better off heading off government action by instituting the least bad solution for you.

What if the outcome of governent action is completely independent third party app stores? Apple and Google certainly don't want that. I would argue that neither do end users actually. A vocal minority thinks they do but they're wrong. That could happen if the wheels of the US or EU regulators start turning against you.

Google's Project Hug that was revealed in the Epic trial shows that they give discounts under the table. They just don't want it to be known publicly.

Project Hug is basically a bribe, rather than a discount: It's not offered to everyone. Just developers who are likely to strike out on their own. (EA and Activision both being companies who have bucked the Steam train before, demonstrating a willingness to launch outside of monopoly app platforms.)

The tech giants simply flexed their power too hard during the last few years and now pretty much every country on earth realizes they are a threat to national security in various ways. They are getting sued, fined, or punished in almost every major country now and they deserve it honestly

> So what Apple/Google should've done is give larger publishers a volume discount. Of course this should force them into binding arbitration and otherwise challenging the discount should void that discount.

Binding arbitration is a uniquely US-legal system thing that is not legal elsewhere. (And imo it is better to have a more neutral third party than an arbitration private firm that has one of the parties as a recurring customer)

That's exactly it, so many users are afraid that this will mean every random app you download will have a credit card entry field. Nope. Those random apps will still benefit from the simplicity of the system IAP, one tap, auth, done. The ones asking for a credit card will drop in ratings and search results.

The big players are the ones that will switch, amazon, Netflix, Spotify, Hulu, etc. And beyond that, competitors like Square and Stripe will release SDKs that make purchasing just as easy as the system IAP, and will actually force Apple to improve their system.

If Apple thinks hosting costs are of any consequence, then charge people for hosting if they don't actively use IAP. For 99% of apps hosting is pennies on the dollar, but for games like Fortnite it may actually cost a decent amount, especially for the binary size.

The end point is that there are no technical limitations to anything here, it is all political and Apple has the ability to change this at any time. There just isn't any point when they can continue to rake in 30% of every digital subscription service on the internet that wants to exist on their platform.

It's more than just one-time IAP, though. I'm generally "whatever" on what payment processor people use, but one of the things that does concern me is subscription management. To me there is a lot of value to having a central place where all my subscriptions are and where they can be canceled easily, even if I don't have the app installed anymore.

YOLOing something with Stripe doesn't give me that without a bunch of fundamentally opt-in stuff on the part of the developer, and that's pretty concerning. If the platforms can (and do) solve this, then I feel a lot better about it.

so as an end user I have to pay 30% more because YOU want that convenience?

sorry, but you should be the one paying for that convenience.

> If Apple thinks hosting costs are of any consequence, then charge people for hosting If they don't actively use IAP. For 99% of apps hosting is pennies on the dollar, but for games like Fortnite it may actually cost a decent amount, especially for the binary size.

I don't know how this is on iPhones, but on android (large) games are usually still a small download with just the binary and no assets from the app store, and the game assets are then downloaded from the game company server by the game binary itself.

That also allows them to push some updates (think e.g. balance patches) that don't require a new binary to be pushed without having to wait for appstore approval again.

So there's a decent chance they may already do that because it also gives them other benefits.

I haven't heard of any actual regulation or court proceedings that would end with Apple Pay being removed as a payment option from apps.

Apple can always require an Apple Pay option for any app in its app store which collects payments. And honestly it'd probably be okay if they require devs to charge users the same amount regardless of how they pay.

The issue is that they ban other options entirely, which reeks of monopolistic anticompetitive behavior.

Just let devs tell their users about Apple's 30% cut, then let devs give users an option to pay however they want.

I'm surprised discounts for big publishers hadn't already been more of a thing. It's certainly happened before from time to time: https://www.cultofmac.com/319040/apple-only-takes-15-cut-on-...

It's also quite possible that if they had just set it at 10% from the beginning across the board, there would simply be more sales than there are now with 30%. I know a lot of apps make users foot the bill for the extra 30%, with different pricing if you buy not through apple. This just translates to lost sales. The market is the market.

What an incredibly shitty contract to be forced to sign.

Apple overstepped, and they are going to get reeled back.