I wrote yesterday about the various cost components that would go into Apple’s 30/15% charge on all sales through it’s App Store. But what about all those apps that exist on the App Store that allow customers to bypass Apple and sign up for subscriptions elsewhere? These apps are distributed by Apple but all the subscription revenue goes to the maker.
This was a mistake by Apple. This should have never been allowed to happen and will be the root of most of the App Store’s problems in the future
This was a mistake by Apple. This should have never been allowed to happen and will be the root of most of the App Store’s problems in the future
First, it’s unheard of in the business world for one company to develop a store front and to allow others to make money from it without taking a cut. Otherwise, why help your competitor? Apple’s competitors in the equity markets aren’t just other smartphone makers, it’s anyone publicly listed. Investors can either buy stock in Apple, Coca Cola, or Twitter. They don’t care what they sell, they are looking at returns. From a capital standpoint, Apple is in competition with everyone.
All retail outlets cost an enormous amount of money, whether it’s digital or bricks-and-mortar. Therefore, all costs associated with retail needs to be matched with all revenue. Why on Earth would Apple spend money that belongs to shareholders on the App Store and allow Spotify to use it free of charge to make money? That would be like GM allowing Ford to sell it’s cars in Chevrolet dealerships and not taking a cut. It makes no sense.
You could make the argument that Apple sees the App Store as a loss leader in order to sell more hardware. But that’s a dangerous game to play. What happens if iPhone sales go down and Apple is stuck paying for a costly apparatus that caters to a bunch of moochers? The guys at Apple had better think long and hard at which direction the App Store is headed because if device sales stall, they may have created a monster that they’ll dearly regret. Decoupling the App Store from profitability works in an environment where hardware sales continue to grow but that may not always be the case.
You could also try to draw a parallel with free trade among nations where a rising tide lifts all boats. But that falls apart when you dig beneath the surface. Nations will drop tariffs in order to funnel more business towards privately held companies within their borders. This will yield greater tax revenue for the state via other channels. But again, the focus comes back to these privately held companies matching their costs with their revenue dollars. There is no parallel between trade tariffs and one company allowing competitors to use it’s costly infrastructure free of charge.
Whoever at Apple made the decision to allow third parties to offer subscriptions on their App Store and not pay their fair share of the overall cost of the App Store made a huge mistake. Be it Steve Jobs or Eddie Cue. If I had been working at Apple I would have made the case that if there are companies accessing our customers and using our infrastructure to distribute their software and not wanting to share the revenue, they don’t belong on the App Store, period.
And if Apple’s competitors want to allow these software competitors to use their infrastructure free of charge? Great, Apple can sit back and watch their competitors products become more expensive and they’ll get the life sucked out of them. Rule number one in competition, if your opponent is committing unforced errors, stand back and enjoy.
I’m sure at the time the thinking was that subscriptions were a small part of the mix and so it was no big deal. Well, if subscriptions grow in the future, it’s going to be a big deal. For now, they will tolerate subscriptions like they do their return policy, as long as the cost is low they can look the other way.
All retail outlets cost an enormous amount of money, whether it’s digital or bricks-and-mortar. Therefore, all costs associated with retail needs to be matched with all revenue. Why on Earth would Apple spend money that belongs to shareholders on the App Store and allow Spotify to use it free of charge to make money? That would be like GM allowing Ford to sell it’s cars in Chevrolet dealerships and not taking a cut. It makes no sense.
You could make the argument that Apple sees the App Store as a loss leader in order to sell more hardware. But that’s a dangerous game to play. What happens if iPhone sales go down and Apple is stuck paying for a costly apparatus that caters to a bunch of moochers? The guys at Apple had better think long and hard at which direction the App Store is headed because if device sales stall, they may have created a monster that they’ll dearly regret. Decoupling the App Store from profitability works in an environment where hardware sales continue to grow but that may not always be the case.
You could also try to draw a parallel with free trade among nations where a rising tide lifts all boats. But that falls apart when you dig beneath the surface. Nations will drop tariffs in order to funnel more business towards privately held companies within their borders. This will yield greater tax revenue for the state via other channels. But again, the focus comes back to these privately held companies matching their costs with their revenue dollars. There is no parallel between trade tariffs and one company allowing competitors to use it’s costly infrastructure free of charge.
Whoever at Apple made the decision to allow third parties to offer subscriptions on their App Store and not pay their fair share of the overall cost of the App Store made a huge mistake. Be it Steve Jobs or Eddie Cue. If I had been working at Apple I would have made the case that if there are companies accessing our customers and using our infrastructure to distribute their software and not wanting to share the revenue, they don’t belong on the App Store, period.
And if Apple’s competitors want to allow these software competitors to use their infrastructure free of charge? Great, Apple can sit back and watch their competitors products become more expensive and they’ll get the life sucked out of them. Rule number one in competition, if your opponent is committing unforced errors, stand back and enjoy.
I’m sure at the time the thinking was that subscriptions were a small part of the mix and so it was no big deal. Well, if subscriptions grow in the future, it’s going to be a big deal. For now, they will tolerate subscriptions like they do their return policy, as long as the cost is low they can look the other way.
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