On the App Store Turning a Profit

Posted by Matt Birchler
— 2 min read

My days-long exploration of App Store pricing has not resulted in actual fisticuffs, but it’s certainly helped me understand why some people feel that “this is fine” and devs should deal with it. The biggest thing people keep coming back to is “the App Store needs to break even”.

My retort: no, it doesn’t.

It’s absolutely important for Apple the company to break even. If they don’t, they go out of business and then no one wins. An let’s be clear here, they more than break even. But I would contend that it doesn’t matter one way or another if the App Store itself makes a profit.

First off, this argument doesn’t hold up when applied to basically any other service the comapny offers. Apple Podcasts does moderation and promotion just like the App Store, and it even makes it possible for the entire podcasting ecosystem to thrive by opening their directory to the world. How much do I, the podcast listener pay for that? Zero. How much do podcast producers pay to use Apple’s store? Zero. Are there people suggesting Apple should be getting a penny of the ad revenue from podcasts using their service? Nope. Or how about Maps, which requires Apple to map out basically the entire world, physically sending people in vehicles to do the work for this? The list goes on, but it’s obvious that things like these and Siri and iMessage and Weather and many more are paid for by the revenue of the hardware Apple sells you to use these services, even if they all cost Apple millions (billions?) per year to develop and operate.

Second, let’s talk about scale. 3 years ago, Apple announced they had paid out $70 billion to developers since the App Store debuted in 2008. If we assume they made all 30% on all of this revenue (and sweetheart deals surely mean they got less), then that’s $30 billion for Apple. Now surely that has increased quarter over quarter for those nine years, but in Q1 2017 soon before this was announced, Apple reported $78 billion in revenue in that quarter alone. Let’s not pretend this service is moving the needle so much that to trim it down is going to devastate them.

Third, let's not act like this 30% is something everyone pays. Subscriptions after year one are 15%, some huge companies have worked out sweetheart rates, and there are some big companies who simply refuse to use Apple’s payments and Apple can't afford to lose them. Who pays 30% and has no good way to work around it? The smaller devs and companies who can't stand up to Apple.

I understand this feeling, I really do, and if I was looking at this situation from a purely capitalistic view, then I might also say, “they need to be on iOS, so they'll pay whatever it takes to be there. Maybe they'll throw a fit now and again, but where else are they going to go?” But even then, I’d say it’s in Apple’s interest to keep their developer community happy. The iPhone has lit the world on fire, and Apple didn’t get there on their own.