Apple Services can't help cover at-risk App Store fee, says Macquarie

This is what happens when you have ill informed "analysts" under pressure to produce reports to keep their jobs.  

 if "Google makes a developer-friendly move first when it comes to commission rates, developers will be highly incentivized to work more closely with Google than Apple."  

LOL.   Developers aren't going to ignore the over 1.5 BILLION iOS devices, and much more lucrative iOS market because Google shaves off some portion of their commission. Developers have already made over $150 BILLION dollars from the Apple App Store.  LOL.  
If Google "eats its young" and reduces its commission, yes developers will take that extra percentage, but it will have zero impact on whether they are incentivized to sell their apps to Apple's BILLION plus wealthier than average customers.

I wonder how many developers have gone out and priced what it would cost to maintain their own server to download their app, the cost of securing it so it doesn’t get hacked and the app replaced by a malicious clone, the cost to process payments for the app, and the cost to maintain correct accounting of app sales. 

30% might seem high to some, but they haven’t really come forward publicly to give an alternative or explain why a smaller percentage would be beneficial to both parties. 

Sorry, I don’t believe Spotify’s crocodile tears when it comes to a developer making a point about paying fees to Apple. IMHO, they are mad because they are getting squeezed by the RIAA and feel Apple is taking up whatever profits they would get for the price they are charging. 

Any year now. Just you wait. The downfall is inevitable, it has been written!

"By way of example, dating app Tinder "which is one of, if not the largest payer of app store commissions on the planet" according to the firm, has altered its Android app so that payments go through a different process than Google Play for billing, which Macquarie worries is a technique that other tech firms may follow in pushing back against the fee."

Somehow analysts fail to fully grasp more than one-step ahead. If developers did a rush on the store, then Apple would simply change the conditions to keep revenue coming in.

At the moment we have an "App Store" that metaphorically treats apps like individual products on a shelf. Apple manages the store and the people who make the products manage their side of their businesses. This is a pretty normal arrangement that begins to approximate consignment. 

Following through on the scenario proposed by the analyst to the logical extreme: All apps are now free with developers earning revenue via externally managed subscriptions.

So now the "free" apps are no longer metaphorical products on a shelf - instead it's more like the developers are no-cost leasing space inside of the Apple building and running their own business on the side to keep the margin out of Apple's hands. So what does Apple do now? Well they change how they derive revenue from the developers of course, for example, they could metaphorically charge rent. Like all rented store fronts, the landlord can require that the various stores report their earnings, from which Apple could charge a sliding scale of fees based on their revenue. Those making money from the store pay something. They could base it just on number of downloads. They could base it from notifications delivered. They could even jack up the annuals. There are so many ways any company can fairly apportion costs.

The point is that there is no such thing as a free ride and the App Store is not free to run. Apple can make moves to obtain revenue from developers who make money through their platform one way or another. But also keep in mind, there is nothing stopping a competitor from coming along and upending the business model of delinquent developers - heck maybe even Apple could commission a free tindr clone and destroy Tindr's business model in the process.

hammeroftruth said:

I wonder how many developers have gone out and priced what it would cost to maintain their own server to download their app, the cost of securing it so it doesn’t get hacked and the app replaced by a malicious clone, the cost to process payments for the app, and the cost to maintain correct accounting of app sales. 

30% might seem high to some, but they haven’t really come forward publicly to give an alternative or explain why a smaller percentage would be beneficial to both parties. 

Sorry, I don’t believe Spotify’s crocodile tears when it comes to a developer making a point about paying fees to Apple. IMHO, they are mad because they are getting squeezed by the RIAA and feel Apple is taking up whatever profits they would get for the price they are charging. 

Nothing you mentioned comes anywhere close to 30%, individually or collectively. 

Hosting Apps

Maintaining a server to host downloads costs next to nothing. Our app is under 15 MB, which Apple hosts on the App Store, but it requires downloading content between 100 and 500 MB depending on the user.  That content is hosted on our own servers, and it costs a fraction of a penny per user.  Most developers have to maintain servers for other purposes anyway, especially if their app is cross-platform, and hosting app downloads would be a microscopic fraction of overall costs.  Our back end infrastructure for app functionality that is unrelated to hosting content is 99.99% of our costs, and is something we would need anyway. 

Apple does provide alternatives to setting up your own back end infrastructure (database, storage, etc), but that locks you into Apple's ecosystem, and makes it difficult or impossible to sell your app or content on other platforms.  Also, Apple's services are down more often than our own services. There have been numerous iCloud outages this year, whereas our services have been continuously up for the past three years. 

Transaction Costs

We sell content on the App Store as IAPs and offer the same content on our own store at a discount to the App Store price.  Selling the same content via the App Store costs 30% versus 2% on our own store.  

Accounting

Accounting of app sales seems like something you just threw in there to make the argument more persuasive, but is a non-issue.  Not sure what you think Apple provides in this regard, but sales reports are often delayed and are very sparse in their content.  We do not know who our customers are, can't provide refunds, or answer questions about the purchase.  The information that Stripe or Square provide for credit card sales is just as good and often better than what Apple provides, and as I noted, costs under 2% for each sale. Stripe and Square also integrate with accounting software, the App Store reporting does not.  

Security

The security issue you raised is a red herring for a number of reasons. First, it is in Apple's best interest to provide a method to secure apps for the benefit of its customers. The only benefit to developers is it makes it difficult to pirate apps, but in our case it is a non-issue because most of our apps are free, and we secure the content that we sell for use in those apps. Again, the cost is nominal.The benefit of selling apps on the App Store has little to do with the factors you mentioned.  The benefit is exposure to over a billion users, essentially free advertising. For a very small developer just starting out, the 30% is well worth it when compared to the costs of advertising an app outside the App Store. But as app revenues move past $1 million, there is very little benefit from the 30% paid to Apple. And for well-known companies like Netflix and Spotify there is zero benefit since people know who they are and just need a client app to consume the content. 

I see more and more developers moving to a model where the app is free and functionality/content is sold outside the App Store.  There really is nothing the App Store offers us developers aside from exposure to new customers.  Moreover, dealing with Apple is often frustrating.  Their developer support is not at all like the customer support you get when you buy an iPad or iPhone. You are not allowed to call Developer Support, and any message you send via the developer portal is met with canned responses that often have no relevance at all. If you are lucky enough you may receive a phone call from someone who is clearly trained in conflict resolution, but who will not actually fix anything. 
I no longer bother unless the issue is critical.

Deploying new apps and app versions is time consuming. Whenever we need to deploy a new app version to the App Store, I have to devote most of the day to that process.  
Screenshots have to be uploaded for every single device class.  iTunes Connect returns cryptic errors that the screenshot is the wrong size, when it is in fact exactly what Apple requires in its documentation. Creating app preview videos requires paying $299 for Final Cut Pro because video recordings from the actual device are incompatible. Then you need to spend half an hour archiving and uploading a bundle.  After you spend all that time uploading a bundle, it may reject the bundle, often with some cryptic error message that needs to be googled because Apple does not provide any context or information. After the bundle is uploaded, then App Store then needs to process it, which takes anywhere from 30 minutes to over a day.  It could be rejected again for some other reason, which requires you to start the process anew. In contrast, when we deploy a new web app, it takes a button push and 30 seconds of configuration.   

App reviews can be arbitrary, and appeals can take weeks, during which time your app is not being sold.  Even if you win, the next time you submit the app a different reviewer will reject it for the same reason.  And if your only source of income is the App Store there is always the danger that Apple will yank your developer privileges and put you out of business. 

To be fair, the issues I mentioned above don't occur every time, but often enough to make developers wonder why we pay so much money for Apple's service.