Pixel Envy

Written by Nick Heer.

Apple’s Thirty Percent Cut

Brent Simmons:

Quality costs money, and profitability is just simple arithmetic: anything that affects income — such as Apple’s cut — goes into that equation.

To put it in concrete terms: the difference between 30% and something reasonable like 10% would probably have meant some of my friends would still have their jobs at Omni, and Omni would have more resources to devote to making, testing, and supporting their apps.

Jack Nicas and David McCabe, New York Times:

ClassPass built its business on helping people book exercise classes at local gyms. So when the pandemic forced gyms across the United States to close, the company shifted to virtual classes.

Then ClassPass received a concerning message from Apple. Because the classes it sold on its iPhone app were now virtual, Apple said it was entitled to 30 percent of the sales, up from no fee previously, according to a person close to ClassPass who spoke on the condition of anonymity for fear of upsetting Apple. The iPhone maker said it was merely enforcing a decade-old rule.

Airbnb experienced similar demands from Apple after it began an “online experiences” business that offered virtual cooking classes, meditation sessions and drag-queen shows, augmenting the in-person experiences it started selling in 2016, according to two people familiar with the issues.

[…]

Apple said it believed that Airbnb had long intended to offer virtual experiences — not that the business was created simply because of the pandemic — and that it would continue to do so once the world has resumed to normal. Apple also pointed out that Airbnb had never paid Apple any money despite the fact that it built its multibillion-dollar business with the help of its iPhone app.

At least Apple is being consistent and not offering Airbnb and ClassPass a sweetheart deal, as it did with Hulu and Netflix on the Apple TV.

I’m not sure many people are swayed by the line Apple keeps dropping about how some developers, despite paying no more than the Apple Developer annual fee, have built successful businesses with its platforms. Developers sold software for the Mac decades before the App Store came along — it’s not like Apple got a cut of any of those purchases, but I bet it gained some lifelong customers because of some of that software.

Dieter Bohn, the Verge;

All of these arguments are old hat. And though the Netflixes, Fortnites, and Spotifys of the world are surely vexed by Apple’s policies, I think that for many smaller developers the 30-percent fee is simply not at the top of their list of concerns. Higher priorities likely include prices being driven down, market dynamics being corrupted by free-to-play games, upgrades made difficult because of limited pricing models, review-bombing over subscription fees, and just making payroll.

No matter whether the thirty percent commission is at the top of a developer’s list of priorities, it is only being scrutinized so closely because native third party apps cannot be distributed for any of Apple’s non-Mac platforms outside of the App Store. I feel like something has to give.

John Gruber:

Why not pull a Steve Jobs on the App Store? Cut the commission rate to 85/15 across the board and act like it’s innovative and something only Apple could or would do. Open up the Netflix rule to all developers — maintain the rule that if your app charges money as an in-app purchase, you must use Apple’s in-app payment system — but let any and all apps choose to do what Netflix does if they want to opt out of that, and sign up customers on their own outside the app. Just make all of this antitrust stuff disappear before it even starts by eliminating the complaints about money and maintaining what matters more to Apple: independence and control.

Matt Birchler:

This is done video games (like the Unreal Engine) and coincidentally also in payments, but Apple could have a system where you pay your $99/year to publish your app, and then you don’t pay a penny more unless you sell over X units per year. Maybe that’s 1,000, maybe it’s 10,000, but there would be some cut off where you would go from paying either nothing or a very small portion of each sale to Apple, but once you hit the big time, that percentage would go up to the standard rate.

This would benefit smaller indies who really need every penny to stay float, but it would make no difference to the bigger players, so while it would make some people in our community happy, it would do nothing for the Netflixes, Spotifys, and Amazons of the world.

I’m surprised Apple has let the App Store’s policies drag along largely unchanged for twelve years, even as momentum has built around antitrust cases. This is something Apple could have — should have, I think — dealt with as iPhone and app sales grew. The same goes for its insistence that all developers play by the same set of rules as it exempted some developers from various App Store policies.

These are both choices Apple has made, and it can change at any time. It can be more honest about the way it treats higher-profile developers, and it can modify its revenue agreement.

While it is inaccurate to call the App Store commission a “tax” and it would be inadvisable to duplicate the tax code, Apple has used the App Store’s cut in a similar way. For example, it allowed a handful of tvOS developers to use their own payment mechanisms in exchange for implementing platform features. Along similar lines, I’ve been arguing for years for a progressive fee structure which, I believe, would help independent developers in particular.

I still can’t work out why Apple — a company that notoriously loves control — is risking having its App Store policies changed by regulators.

Update: E.U. regulations took effect a couple of weeks ago that require online marketplaces, like the App Store, to disclose preferential treatment and enforces transparency around search rankings. It also requires Apple to give thirty days’ notice to developers before an app or service is removed from sale, with exceptions for scams, intellectual property infringement, and similar offences. These regulations seem not to apply to console stores, which are not being treated as marketplaces. Via Michael Tsai.