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A decade on, Apple and Google's 30% app store cut looks pretty cheesy

But we're taking about games here

aren't we?

I'm ignorant of any details of app stores so that's why I ask the following questions.

What's the proportion of all software in all app stores that are classified as games?

What's the mean and median prices of all apps in all app stores? The maximum and minimum?

Might as well add cross referencing with the number of sales for each app.

Governments must be envious of Google and Apple's tax raising powers.

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Re: But we're taking about games here

I don't know about proportions, but games have a special place. This year, Microsoft have reduced their cut on apps from 30% to 15%... Except for games.

To foster app store competition, maybe the EU could just force Android to include as first-class citizens a couple of other app stores, like Amazon's and Samsung's. The tricky part is that for them to be successful, they need to give incentives to developers and users. Meaning, the developers need to take a bigger cut, and yet the apps themselves need to be sold cheaper; which would mean the app stores would have to massively reduce their own cut.

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Re: But we're taking about games here

Perhaps a better comparison would be the margins in retail stores?

Or for software sold through distribution?

Gross margins in both cases are normally higher than 30% even with the amount of competition on the high street.

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Re: But we're taking about games here

Perhaps a better comparison would be the margins in retail stores? Or for software sold through distribution? Gross margins in both cases are normally higher than 30% even with the amount of competition on the high street.

Perhaps you should consider net margins, rather than gross. In the case of B2B software distributors, there's usually a lot more these do than pure retail intermediaries, and in the case of retail stores there's vast overheads and other fixed or partially fixed costs.

The whole point of the debate here is what do Google do that justifies a 30% cut? They do little or nothing to assure security, judging by the malware that has crept into the Play store. They don't actively promote the software they sell, they don't support it, they don't help with its development. And they've got (in relative terms) bugger all fixed costs in running an online app store. They're not even crediting the app and game developers for exploiting their customer's data. Google take ZERO commercial risk in running the Play store, so a 5% margin seems more than enough.

Clearly Google won't agree, hopefully other developers will see how Epic have sidelined Google, and consider doing the same.

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"Perhaps a better comparison would be the margins in retail stores?"

Comparing apples and oranges? Retail stores has far much higher costs - physically packaged software as well. Many physical shops each selling to a relatively smaller number of customers would actually need *higher* prices to survive. Why Amazon can easily undercut them with far lower margins?

The comparison should be made about what electronic distribution costs to a company like Epic, compared to what Google asks. Epic isn't going to sell its software in retail stores.

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Anonymous Coward

Re: "Perhaps a better comparison would be the margins in retail stores?"

We only have gross margins to compare! You can't compare the retail outlets net margin with the app stores gross margin either.

If you compare to a large software company selling through partners (my experience is with SAP), the large partners make 50% at list price, but do have large annual fees to pay.

Smaller resellers are making at 20-30%.

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Anonymous Coward

As regards Game Store - Steam / GOG - charge 30% too

Most of the stores run off with 30% except maybe Itch.io and a few other small players. What's interesting is that Epic's CEO Sweeney is the only big-player I know of, that's been shaming the 30% cut for years. So this isn't a headline grabbing recent move:

https://www.pcgamesn.com/steam-revenue-cut-tim-sweeney

Now that Epic are a billion dollar player with a stellar reputation and kudos / respect because of their game tech, they could open a competing store and charge 15%. They dropped the fee for their creator marketplace already down from 30% recent. so it has to be a possibility:

https://forums.unrealengine.com/unreal-engine/marketplace/1500420-unreal-engine-marketplace-88-12-revenue-share

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Headmaster

@Ledswinger Re: But we're taking about games here

"The whole point of the debate here is what do Google do that justifies a 30% cut?"

They are of the opinion that they do not need to, they do it because they can. Indeed that is not surprising given that they have about 85% of the moble os market. In the circumstances it is hardly amazing that the European competition authorities are beginning to look very closely at the situation. Bluntly put, as Andrew has pointed out, there is no app store competition because each of the two "biggies" have a closed market in practice. Yes, I know you can side-load on Android (and indeed I have) but in reality, for hoi poloi (due to lack of knowledge) Android is in practice almost as locked down as ios. The net result of all this is (as this article is pointing out) that to all practical intents and purposes, there is no competition worth the name. The devs are getting screwed and so are the punters.

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Cost does not justifiy Value

what do Google do that justifies a 30% cut?

Why should this 30% cut be justified by something else than people being ready to pay that price?

The value of a service is what people are ready to pay for, it is unrelated to what the service costs to the provider. The link between cost and value is benefit, the higher the better for the provider.

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Re: "Perhaps a better comparison would be the margins in retail stores?"

You think that Google and Apple pay the say taxes that the retail stores pay then?

My guess is that they manipulate the "expenses" so that the 30% disappears at tax time.

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Re: Cost does not justifiy Value

Why should this 30% cut be justified by something else than people being ready to pay that price?

That's the point of having competition authorities. In some cases (luxury watches, for example) most of us would say that the buyers and sellers can sort it out themselves and the margins are indeed what people choose to pay. Where there's good knowledge, commodity or near-commodity goods (eg groceries) likewise, the market sets the price. Where you have a dominant company appearing to abuse its market power, then that's why the authorities should act.

If Tesco or British Gas had a similar market share and chose to extract a similar margin, they'd be hung drawn and quartered by the relevant competition authorities - and even then, I come back to the important point that Google's net margin is the thing to focus on not gross margin.

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Re: Cost does not justifiy Value

The value of a service is what people are ready to pay for

That is true in a competitive marketplace. But this is not.

As already mentioned, for the vast majority of Android users, if it isn't in Google's store then it doesn't exist. For Apple it's virtually all users since Apple don't allow any sideloading and go to great lengths to prevent users breaking the locks so they can use the hardware they bought as they wish. So as a developer (unless you are big enough to run your own store, which is not the case for most devs) it's not a case of whether you think it's a reasonable price to pay, it's a question of "do I want to sell this ?" - if the answer to that is yes, then they have no choice but to pay whatever Google "asks" for.

Ie, it's not a choice between 30% or some other cut a different store will charge - it's a choice between 30% or no business.

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"My guess is they manipulate the expenses so the 30% disappears"

Since both Google and Apple are profitable overall, there isn't any such manipulation possible. If they lump expenses into the app store that maybe don't belong there, those expenses can't be used again against some other income.

This kind of arbitrage is only possible / only worthwhile if you have different tax rates. Since a dollar of profit from the app store is taxed at the same percentage as a dollar of profit from selling an iPhone or slinging an ad, there's no point to doing this. At least I'm not aware of any countries that might tax the two differently, but I suppose some may do so.

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Re: But we're taking about games here

well Google can justify the costs by stating it got to fund the development of Android operating system and it doesn't have much of a hardware to do it.

What does apple do to justify the cost of it store?

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Re: "Perhaps a better comparison would be the margins in retail stores?"

https://www.creditloan.com/blog/double-irish-deception-how-google-apple-facebook-avoid-paying-taxes/

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Re: Cost does not justifiy Value

"The value of a service is what people are ready to pay for,"

When it's an effective monopoly, you pay or you do without. In a multi-national market, a few choosing do without is neither here nor there to the monopolist. They'll squeeze 'till the pips squeak and then squeeze some more.

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Re: But we're taking about games here

Google could also argue it gives the basic development tools for free to anyone interested. (Not sure about Apple, do you have to buy the sdk?)

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Anonymous Coward

Re: Cost does not justifiy Value

"If Tesco or British Gas had a similar market share and chose to extract a similar margin"

They can't because of the competition not the authorities. If Tesco hikes its prices it looses market share to Aldi etc. The problem here is that there isn't any competition. The only source of Apple apps is Apple and Android fares little better, so it should be something for the competition authorities. Rather than reducing their margins it could be addressed by forcing them to open their phones to third party stores, unfortunately that would lead to security concerns, but it would end ridiculous margins.

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Margins to high

If I got 30% mark up as a retail buyer in the mass electrical store business ide be hailed a god (which sadly I’m not) average margins about 12% and of course they don’t hold any stock to look after deliver or repair. Looks like a gap in the market for a discount download store. Let’s crowd fund one sounds like fun

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Re: Cost does not justifiy Value

it's not a choice between 30% or some other cut a different store will charge - it's a choice between 30% or no business.

It's still a choice, and there's another alternative, the one used by Epic.

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People being ready to pay that price?

People "being ready" to pay that price in a captive market, you mean...?

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What is the fee as a percentage?

Why is the fee a percentage of sales? Why not a flat fee like $0.5 per download. Or make it dependent on the app's download size to reflect network costs. Why does Walmart charge a percentage of sales? Why can't it be dependent on how much physical shelf space a product takes up? The world does not make sense.

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Re: What is the fee as a percentage?

Why does Walmart charge a percentage of sales?

I doubt they do. Most physical retailers are very savvy about where they make margins, and the margin varies from negative to double figure positive - and sometimes much more. I've worked for a company that dealt with major retailers, and they have an exceptionally good idea of how much goods cost - not just the wholesale cost and shelf space, but stock turnover, likely spoilage and losses, "cross-sell" potential and customer draw effects, return volumes, impact on competing products in the same store etc etc.

The flat % charge shows both the market power, but also the utter ignorance of Google when it comes to retailing.

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"Why can't it be dependent on how much physical shelf space"

So toilet paper would cost more than caviar?

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Re: "Why can't it be dependent on how much physical shelf space"

Why not, it tastes better...

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So toilet paper would cost more than caviar?

No, it would just have a higher margin for the retailer. Low price-in + 6 cheap units of margin still equals a low price-out, whereas astronomical price-in + 1 cheap unit of margin still equals an astronomical price-out.

Yeah, still feels weird, but it wouldn't be as absurd as your example.

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Apples and Oranges

Always interesting to see the app stores compared as if they do the same thing.

One does meaningful human audits of every app uploaded ( sometimes to the chagrin of us developers), spending a ton of money on checking there aren't a sea of trojans and other malware infecting the platform. The other does pretty much nothing for the same markup.

I'm sure that both Apple and Google make a ton of money from their app stores, but only one has a plausible security justification for it's monopoly.

Also a bit disgusting to see the proposal that successful businesses should get a discount. The cost of entry and failure rate among mobile apps punish the small players, so further rewarding the most successful players might seem a natural consequence of a competitive app store market place, but the effect on the general app development market place would be extremely pro-monopolistic.

Full Disclosure: I am not an Economist :)

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Re: Apples and Oranges

GordonD,

You're right about the important difference between Apple and Google. Apple are actively trying to keep their users secure, whereas Google look to be going through the motions a lot more. By making side-loading a lot harder Apple are also preventing their consumers from accessing cheaper (or more likely pirated) competition - but on the other hand that also means the consumers get better protection from malware and the app creators protection from being ripped off. Hence Apple consumers tend to get the best access to apps - so you've got ammunition for the walled garden versus freedom argument right there.

But on discounts for big producers you've got it a bit wrong. If I'm Epic and Fortnite is getting downloaded millions of times, then Apple's costs are going to be lower, because they only have to manually check the app once. Which is a much bigger cost than the data for each individual download. So you're not so much punishing the smaller developers, as aligning the price to the developers with the costs they cause. Which is what you'd exepct to happen in a properly functioning market.

The market failure here isn't amongst app developers, it's that smartphone OSes have become a duopoly. Worse, Microsoft didn't sell PC hardware and generally didn't take a cut of software sales, except where they sold their own. Obviously you got some dodgy competitive practises with MS Office, but not really with games and lots of other software.

In Apple's case, they run the hardware, so are less interested in data-harvesting and their app store cut also acts to help the app writers - since they try to block side loading for normal users. I know there's a way to get corporate apps onto iPhones.

Google at least allow sideloading. But that doesn't help app writers so much, as it's allowed a lot more piracy. And of course malware.

These markets probably can't be made to function properly at this point without government intervention. Which might well create problems all of its own.

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Re: Apples and Oranges

One does meaningful human audits of every app uploaded

For a given value of meaningful: the value of Apple's checks was debunked a while ago. I have a couple of apps on my Mac went back to selling directly beause the App Store was so shit.

Of the two Apple is definitely the most anti-competitive. Android will let you use and trust other stores and also let you install your own browser, mail client, etc.

Stores should be opened up and, if there is no fixed price for books any more, there shouldn't be for apps. Developers should be able to sell directly but there should also be some thought given to avoiding a race to the bottom.

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Re: Apples and Oranges

But what kind of intervention?

Forcing both Apple and Google to allow multiple stores on their phone? s/ Of cause I'm sure the competition watchdog will be fair to both google and Apple on this issue /s

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Re: Apples and Oranges

Erm, apple do data harvest.

They used to brag to prospective advertisers that-

"iAd is part of Apple, and we know Apple users, all 800 million of them.

We know what apps and other items content they downloaded and we know how and when they use it."

Apple and Google seem to forget that it was third party apps that made their devices desirable in the first place.

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What's the situation in China?

Seeing as Google is blocked out, there should be a lot more competition between app stores. How many are there? What percentage do they take?

I heard there's more malware in China, which might be a reason for the rise of super-apps like WeChat: the app becomes the app store.

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Re: What's the situation in China?

Just because Google is blocked doesn't mean there will be more competition. People get a phone with a suite of stuff that replaces Google Play Services.

I heard there's more malware in China…

Moving the app store to add-ons for apps won't necessarily make anything safer. Piracy and knock-offs are common in China so people have less of a problem installing less legitimate stuff.

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Anonymous Coward

Microsoft ?

Do Microsoft have an App Store ?

What cut do they take ?

A journalist might have mentioned that.

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Trollface

Re: Microsoft ?

They used to take 30% everywhere, but they have recently reduced it to 15% or 5%... Except for games: Announcement here.

This probably reflects how desperate Microsoft is to attract developers. As to why the article did not mention it, I can only assume they thought it was irrelevant.

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FAIL

Re: Microsoft ?

how desperate Microsoft is to attract developers

Not so desperate they didn't manage to break every single incarnation of Windows Mobile with it's successor. 8 broke 7.5 which broke 7.1 which broke 7.0 which broke 6.5 which broke WinCE ....

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say again, how are they dodging 30% apple tax?

article seems lopsided, pushing the blame on google.

But never explains how fortnite dodges the Apple tax????

Remember Apple are the bastards that started this shit, and there excuse of security is bull, it's to make sure your not bypassing their Apple toll.

Remember Apple stops anything that attempts to do what apple does ( true 3rd party browsers NOT allowed).

and if apple make a new app that nicks others ideas, the other app gets banned.

Put the anger where it really belongs fucking apple!!!.

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Re: say again, how are they dodging 30% apple tax?

true 3rd party browsers NOT allowed

And there are good reasons for that - browser engines are complex beasts. Given Apple's insistence on checking every app for trojans, malware and other nasties, as well as trying to ensure they run smoothly on all supported hardware and don't munch battery power like a hungry robot in a Batteries 'r' Us warehouse, you are at least getting something from the "Apple tax" here. That's why Apple users rarely sideload anything.

Android, however, not only gives you the possibility of shooting yourself in the foot, but will happily hand over a fully loaded shotgun should you ask it to...

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Re: say again, how are they dodging 30% apple tax?

"But never explains how fortnite dodges the Apple tax????

Probably because they're not. But that's not to say that they would not if the option was available - as you quite rightly point out Reaps, "Apple stops anything that attempts to do what apple does" - so unless you're willing to jump through the hoops of a jailbreak, there's no easy alternative to loading an app than via the app store.

However, this exact same level of lockdown makes it a lot harder for me to do something like creating a malware app, making it look suitably close to the official Fortnite branding, and floating it on the store. So security is not an excuse here, it's a fact. In fact, having made mobile games myself and seen how easy it is to put a fake app up on Play, I for one would feel more confident about side-loading an APK that I had downloaded from the official Fortnite site than hoping I'd found the right one in the store.

However, as the article points out, avoidance of the 30% "tax" is at least part of the reason behind the decision, as the CEO freely admits. And why not? It's just business - and like I said, I bet if the option were there on iOS, they would do the same.

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Anonymous Coward

Re: say again, how are they dodging 30% apple tax?

Remember Apple are the bastards that started this shit, and there excuse of security is bull, it's to make sure your not bypassing their Apple toll.

> Why can't it be both? Why does it have to be one or the other?

Remember Apple stops anything that attempts to do what apple does ( true 3rd party browsers NOT allowed).

> Err... Nope. I have other browsers installed. From the App Store.

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Anonymous Coward

Re: say again, how are they dodging 30% apple tax?

"> Err... Nope. I have other browsers installed. From the App Store."

Err... Nope you dont, you have a shell that encapsulates apples browser, (with extra limititations)

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Re: say again, how are they dodging 30% apple tax?

You do realise the The Register is one of the biggest haters of Google on the web for reasons unknown to me.

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Anonymous Coward

Re: say again, how are they dodging 30% apple tax?

"You do realise the The Register is one of the biggest haters"

El Reg - biting the hands that feed IT.

It doesn't matter if it's google, apple, microsoft, intel, some random tech company or the government. If they are being shitty, El Reg bites them. It's the very reason we come to here.

By the way, Welcome to El Reg.

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Re: say again, how are they dodging 30% apple tax?

You ALSO realize El Reg is very much against Big Brother (they have an icon), which they feel Google and the like are trying to achieve through the back door.

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Facepalm

Re: say again, how are they dodging 30% apple tax?

"... for reasons unknown to me

Well, there's little things like the streetview cars scanning for wifi, scanning email contents, anticompetitive behaviour, product tying, "illegally" using NHS data without consent, attempting to patent material already in the public domain, tracking locations of Android users despite said option being "switched off"... you know, little things...

I can provide links if needed...

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Re: say again, how are they dodging 30% apple tax?

However, this exact same level of lockdown makes it a lot harder for me to do something like creating a malware app, making it look suitably close to the official Fortnite branding, and floating it on the store.

It strikes me that if apks are properly signed, and certificates properly checked by the OS on install, then your 'foortnight' app purporting to be from Epic Games would not have the appropriate certificate to identify it. True, there isn't much of a barrier to obtaining a signing certificate legitimately, but I can't see how some simple checks in the store could stop the more rampant abuses (certificate registration, checks, and a human eye on each to make sure it tallies with what it says it is). These needn't be costly - a one-off fee for each certificate submitted to the store's registry and a fee for each app submitted, both of which should reflect the amount of work required to check them - say £10.

The certifying authority (which could be the app store itself) would do some basic checking when a new certificate is issued (e.g. rejecting that certificate for the Russian start-up calling itself 'Epick Games')

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Anonymous Coward

Re: say again, how are they dodging 30% apple tax?

Vulture search results for 'Google News' shows only the viewing/reporting of Fake News Media,In other words, they have it RIGGED, for me & others, so that almost all stories & news is BAD. Fake Reg is prominent. Google News & Fair Media is shut out.

The Register & others are suppressing voices of Googlers!

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Re: say again, how are they dodging 30% apple tax?

On my Apple iPod Touch 2g, I have Opera Mini, Version 7.0.5.45389 Copyright (c) 1995 - 2012 Opera Software ASA All rights reserved. They list 12 "Third Parties", none of whom is Apple (though ironically one of them is google). Mildly disappointed to learn that this is just window dressing around Safari. Though the important question is whether it works.

Before malware and internet banking, I was anti-Apple. Now there's a point to a walled garden, if well maintained. And thanks to the masons.

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You have to remember that the 30% of paid for content also covers the cost of Apple/Google distributing free content.

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