They should have gone the other direction. There is zero good arguments for why Apple deserves 30% of gross transactions for ebooks, music, movies, etc that are merely purchased on their customer's phones.

I looked into this some time ago, and 30% is roughly the same retail margin you pay when buying essentials like groceries (at least in Australia).

So I honestly don’t understand the angst around this. It seems like there is this idea that the only cost associated with hosting apps on the App Store is the transaction fee, but that’s only part of it. Apple is a for-profit company, and their margin is in line with other industries.

I’m not defending the shitty things they’ve done, I just don’t understand why people think 30% is excessive.

Retail typically has low single-digit profit margins and a massive inventory risk.

Apple has zero risk and 80% profit margins (on the App Store anyways).

Lastly, retail stores are where you typically purchase one-off items. They don’t keep charging you for that refrigerator month after month.

The two business models aren’t really comparable.

No, I’m talking about groceries. Food, stuff you need to live. Gross margins in Australia for the top two chains were about 28% last I looked.

Profit margin is more useful metric to determine if you're being gouged -

Grocery stores: < 3% Profit margin, huge inventory risk.

App store: > 70% profit margin, zero inventory risk.

Put another way: If grocery stores cut gross margin by a couple points they'd be out of business. They are basically charging the absolute bare minimum they need to make a profit. The reason? Competition.

Apple could drop their App Store gross margin by 50% and still have one of the most lucrative operations in the world.

The difference is that retail is split over many companies and there is good competition. You also have the option to open your own store to sell your products.

You don't realistically have that option for phones. It's insane to require a company to build their own phone hardware, OS, app store, and get the majority of people to switch over to it before you can sell books without paying a 3rd party for it.

>There is zero good arguments for why Apple deserves 30% of gross transactions for ebooks, music, movies, etc that are merely purchased on their customer's phones.

If you're starting with that premise, then you've already made up your mind.

The fact is that the 30% covers more than just the purchase and you have to ignore that completely to maintain your "zero good arguments" position.

I could rephrase that to “I’ve seen zero good arguments”, but since I’ve read more arguments/comments/articles about this stuff than I can count over the last few years, I’m assuming that if there was actually a good argument I would have seen it by now.

I’m not saying Apple should get nothing, but they need to justify why they are entitled to that much. Sure they created the phone, operating system, etc, but without those third party apps the iPhone would be a stupid toy not a bajillion dollar a year business.

If you want to justify the 30% because it funds development of the developer resources and frameworks and such, I would say that Apple would be doing all that stuff regardless of money from the App Store since without it they aren’t going to keep selling phones at massive premiums.

>Sure they created the phone, operating system, etc, but without those third party apps the iPhone would be a stupid toy not a bajillion dollar a year business.

But then it's a chicken or egg scenario. The iPhone was one of the best-selling smartphones of all time even before the App Store existed. If those third-party apps didn't exist without the ecosystem Apple set up and maintains to this day, the whole progression stops cold. Apple uses the 30% to justify the entire App Store ecosystem (payments, reviews, localization, distribution, updates, etc.) because it guarantees that it's scalable and sustainable. If the App Store and apps become more popular, they're still covering the costs. Console manufacturers and other platform manufacturers (hardware/software) have agreed and set their prices at nearly the same levels independently of Apple. That's not a coincidence.