[Mikho]

The real problem with the Apple Tax — it ruins value-chain and makes it uneconomical

For every value created a customer receives there is value captured by a company paid by this customer. Let's say a company creates a service valued as 1X by the customer and the customer pays 1X for that. This balance guarantees accessibility and interest among many customers.

Apple tax demands for a customer to pay 1.43X for the same value of 1X (0.43 = 30% of 1.43). It means that the balance is ruined and customers do not get enough value for what they pay. In value, they still get 1X despite paying for 1.43X.

There is a price elasticity curve that measures how many clients a company loses after each step of the price increase. In other words, a company gets significantly fewer customers due to the increased price at the same time, it’s unable to benefit from an additional 0.43X customers paid. A drop in the revenue is significant. At the same time, the company needs to increase its marketing budget effectively decreasing its margin even more. That makes business unsustainable.

Imagine what a decrease in purchases a product gets if its price is increased by 43%. This ruins all economic assumptions of a business.

Not to mention that if it has any network effect, significantly fewer users result in a degraded experience for all users.

I'm considering using PWA for the next mobile app and not investing in native iOS development. Even 50% fewer users due to PWA installation is better than being a lifetime slave to Apple which extorts 43% of what a company gets after Apple TAX from a user.

[mmcnl]

It depends on what you consider "value". Apple would argue the distribution through the App Store is part of the value chain. I think the real issue here is that Apple demands 30% always. 30% might be the "distribution value" for small indie devs, but it probably decreases once the developer is big enough and their products are well known (Epic/Fortnite, Spotify). Then it becomes just a tax that indeed skews the price-elasticity curve.

[dlubarov]

I think it's useful to separate these scenarios -

1. A user knows they want to install a certain app; they do so using the app store since that's the only method Apple allows.

2. A user discovers an app while browsing the App Store, but Apple isn't involved beyond that.

3. A user discovers an app through Apple's marketing, e.g. from WWDC.

With (1), it feels very unfair for Apple to charge 30% just to essentially get out of the way. It's not too far off from Apple threatening to block websites from Safari unless they agree to a ransom payment.

With (2), Apple did refer the customer in some sense, but it still feels unfair in a way since the user was essentially forced to use their App Store for discovery.

With (3), at least Apple is putting in some kind of work (specific to the app) rather than purely rent seeking. Still feels morally questionable since developers have no choice to opt out, though.

[georgeecollins]

Even with case (3) there are many companies that would love to be the store / portal that you discover and new purchase apps through (with all the security and testing Apple requires) for less then a 30% cut. But Apple won't let them. It's clearly a price set without competition.

Keep in mind Apple sells advertising in the App Store. They make $ beyond just the 30%.

Disclosure: I am APPL shareholder and sometimes app developer.

[tcmart14]

I'd be really skeptical that there exists companies who would love to be the portal for a smaller cut then Apple. At least longer term. I can see someone, just to get their platform off the ground, trying undercut for a little while. But 30% is sort of like an industry standard. Google takes 30%. There are alternative app stores for Google, but really how prevalent are they and are they really worth mentioning. Nintendo takes 30%. Steam I believe takes 30% [1]. So even in markets where alternative app stores/portals can exist, 30% is still pretty much 'industry standard.' Gog is 30%. Microsoft store is 30%. Playstation is 30%.

[1] https://www.ign.com/articles/2019/10/07/report-steams-30-cut...

[chandler5555]

why wouldn’t microsoft make a portal and do 0%. they get all of the market share and analytics and good will, plus the value of being the main “other” store. they can break even on hosting fees with some ads

[tcmart14]

Because breaking even isn't stocks going up and to the right. If shareholders aren't seeing good returns on building a portal, it isn't gonna be a good time. That is true for most of these companies. Good will and analytics alone isn't enough for investors.

[flemhans]

I'd do it for 1-2%

[tcmart14]

You would. But would the venture capital firms you would need to bank roll the infrastructure and upstart costs be fine with this. I imagine most of them, might be fine short term with low percentage (to eat market share), but eventually they'll ask, why can't we take 30% like everyone else?

I do think this is why EpicGames only takes like 12%. It isn't really good will, or it is surface level goodwill. Its market share. They'll eventually crank it up to 30 like all their main competitors.

[dev_tty01]

Most, if not all, small indie devs pay 15%. Everyone pays 15% for subscriptions after the first year.

[nojvek]

Don't forget the $100 tax just to be part of ecosystem. I paid that twice but didn't get the apps approved. Learnt my lesson.

[gretch]

I applaud you taking personal action and voting with your wallet / dev cycles.

> it ruins value-chain and makes it uneconomical

This is empirically not true. If the value-chain is so 'ruined' and 'uneconomical'. Why are there so many iOS devs? Lots of people are participating in the system and lots of people are getting rich.

Examples of truly uneconomical ecosystems are Windows Phone and Blackberry - which is why all the devs left and those platforms are dead.

[evanmoran]

I don't believe you're accurate. All apps that could charge money through Apple payments stopped doing so long ago and now are "free" with an external subscription or ads: Netflix, Amazon Prime, Microsoft Office, Slack, Google Docs/Drive, Dropbox, Facebook, Instagram, TikTok, Hey Email, etc. Only free-to-play games / gambling / scam apps stayed in the App Store, and the rest are gone.

[freeAgent]

It’s also worth noting that the “developers” who are able to escape this all need Apple’s permission and Apple almost exclusively grants permission to megacorps that could single-handedly hurt Apple’s business were they to protest. Smaller (which in this case doesn’t necessarily mean “small”) players are still locked in. This has the effect of further entrenching Big Tech since they can escape the confiscatory Apple tax while smaller competitors cannot.

[dns_snek]

> This is empirically not true. If the value-chain is so 'ruined' and 'uneconomical'. Why are there so many iOS devs?

Survivorship bias. You only see businesses that have high enough margins to eat the fees. Whether that's a desirable set of incentives for long-term prosperity of everyone involved is a different question.

Apple could raise their fee to 90% and there would still be plenty of iOS developers using in-app purchases, because selling a few bytes in a database is effectively free. It would all be trash, but they would definitely be there.

[SilverBirch]

To be honest it sounds like you've swallowed an econ 101 textbook along with a few libertarian talking points. I was just waiting for you wheel out Deadweight loss.

The problem with modelling this as a tax is that... it's not a tax in a pure sense. Apple has partly built the product that you're selling. You're building on their hardware with their libraries and their APIs and their servers and their quality control. They want compensation for that.

Now you can argue what level of compensation is fair, and as you point out, its a free market and you even have an option to use a different technology to build you product. The alternative is that Apple doesn't collect this cut of the profits and you have to actually engage in what that means.

Why would they build APIs for you? Why would they distribute your app at all. What happens for example if we pass a law tomorrow saying "Sorry Apple, you can only collect enough for credit card fees".

Well one option is Apple just closes the store, hires a couple hundred high quality developers and builds out their own library of Apps, take 100% of the revenue. No tax in that situation! But I'm not sure it's a better outcome for developers.

[msm_]

>Well one option is Apple just closes the store, hires a couple hundred high quality developers and builds out their own library of Apps, take 100% of the revenue. No tax in that situation! But I'm not sure it's a better outcome for developers.

It's also not better for Apple, quite obviously, or they'd already do this. People want and expect their favourite apps to work on their phones.

[SilverBirch]

They don't do this right now because they get revenue from Apps built using their SDKs. If they can no longer get that revenue they may well decide they'd rather just build their own versions and get 100% of the revenue instead, and for everything else just push developers into a web view.

Hell, without the revenue they could just turn around and say "We're not going to charge a 30% fee. But you need to pay us $10m per quarter to license our SDK". There's tonnes of options that Apple can use to squeeze developers for something that genuinely is hugely valuable.

I think people lose sight of the fact that before the App Store the way applications got onto phones was far far more favourable to the hardware vendor.

[evandale]

> Why would they build APIs for you? Why would they distribute your app at all. What happens for example if we pass a law tomorrow saying "Sorry Apple, you can only collect enough for credit card fees".

They would do it because they make massive margins off hardware. Apple can't build good software and third party iOS devs are a major reason why the iPhone is successful.

[realusername]

> Imagine what a decrease in purchases a product gets if its price is increased by 43%. This ruins all economic assumptions of a business.

That's exactly why the apps succeeding financially on the play store and app store are casino-like games.

[thewileyone]

But but but I love my walled garden ...

[MagicMoonlight]

“Supermarkets ruin the value chain, consumers should pay only the grain price”