TWIT 776: Phat Boyin' It All Day

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I think the core issue with Apple’s App Store cut is the rent seeking nature of it. Yea Apple has expenses related to maintenance and upkeep of the store, but 30% of revenues is just egregious. More to the point, CNBC estimated the app store’s sales at $50 billion in 2019. That would give Apple over $10 billion in revenues from the store. It‘s hard for me the believe that’s all being plowed into site maintenance.

Ideally Apple would take a cut equivalent to what they require to operate the store without a loss, and leave profit generation to hardware. That’s more in line with their culture anyway.

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Apple, Steam, Google and Microsoft all charge 30% (I think). I agree it is way too high but I find it funny how this was never even an issue ever talked about until the Epic Games Store came along (~2 years ago) with a rate of 12% or less.


It will be interesting if Epic do all the card processing and are the Merchant. We have seen Apple do lower rates for some. These have been Subscriptions, where the scheme usually offers a lower interchange and the risk of dishonour is lower as it is a repeat payment. The other model could be for the larger companies where they may be the Merchant themselves, with Apple (or Epic) only providing the ‘shop’, not the payment services.

Revenue is one thing, but what are the cost, and hence the Profit. If Apple is paying away 15-20% in fees to their Bank, the Scheme, etc. then there is less left over to ‘run’ the App Store. I am happy for arguments about Apple forcing the use of the App Store and forcing payments via Apple. However, the 30% is a minor issue in the typical cost of online transactions given the global reach, currencies, reporting, fraud management and settlement.

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I’m going to note that Apple offers long term subscription fees at 15% instead of 30% so it’s very clear it doesn’t cost anywhere close to 15%.

Bank fees are negotiated based on volume (among other things.) The standard bank fees are on the order of 3%, 4% and 5% for Master Card, Visa and Amex respectively. There is no way on earth Apple is paying more than 5% for money moving fees.

Equally, the downloads of apps and updates from the store is a mere rounding error compared to the traffic for OS updates, iCloud updates and backups, and other services that Apple offers like their music service. The $99 developer fee could probably cover all the download costs for the app for the rest of its existence, never mind taking a cut of the selling price of the app.

But NONE of this would matter if Apple would just be transparent about what it actually costs. Just because we could find out they could run the whole shebang for a 7% fee doesn’t mean that Apple would be obligated to lower it.

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I don’t know about the USA, but over here, debit cards (most used form of payment) charge the merchant 0.5% to 1.6%, credit cards are around 3%.

I very much doubt that it costs them the 2-figure billions a year to run the servers and keep the backend working.

The problem I have, is that a company, like Basecamp, work out what the cost of the service will cost and their profit margin, set the sale price and then Apple comes along and says, “oh, and we’ll take 30% of what you charge your customers, you can only use our service for in-app payments and you can’t charge more for the product through our store, even if we are taking 30%.”

That last bit is the problem. If the company is already running its own servers and already paying for a merchant service of a few percent and they have calculated, say a 20% profit on the price, suddenly having to pay Apple 30% is going to kill the service or they are going to have to hike the prices everywhere and therefore punish their non-Apple customers.

This is especially egregious where we are talking about a $99 subscription. on a 99c games, they are saying it costs 30c to run the service, but for the mail application, which has its own infrastructure, it suddenly costs $30 to push those same bits around? I get the argument about having to subsidise free software. But there has to be a fairer way than taking a flat 30%… Say, a scaling with 30% of the first $10, then 10% to $50 and 5% of the rest?

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I wonder if there are all that many $99+ subscriptions actively managed through the store. A lot of them still manage content subscriptions outside of the ecosystem. Amazon prime and ForeFlight come to mind.

Anyway, the ultimate problem with Apple’s system is they’re trading good will of developers and users for profit. Eventually that well will run dry.

I knew there was something I had heard I wanted to comment on… That is the trouble with listening to podcasts on the go, you have an argument all lined up, but by the time I get to my destination, I’ve forgotten all about what I was going to comment on, let alone my argument. :smiley:

Anyway, it was the Apple Pay argument. On Android, I use my banks App to make payments. The payment is made directly from my banking account, I see the transaction details and the money is deducted straight away. On the iPhone, I’d have to hope Apple Pay supports my bank (I think they currently support around 20% of banks in Germany), register my account with Apple Pay and on my bank account I just see deductions for Apple Pay (as far as I understand it), so I need to reconcile my Apple Pay transactions in Apple Pay and with my bank account (the same would be true for Google Pay, Samsung Pay, Huawei Pay etc.).

Why would I want to intermediate the transactions, adding yet another data collector in the middle? At least the bank is covered by tough legislation that stops them using or selling the data (in Germany).

This is one of the things that stops me going back to iOS. I have both my bank accounts (personal and joint) set up on my phone and can select at the checkout, which account should be used by opening the relevant app (or letting the OS open the default banking app). No intermediation, no “anonymous” transactions appearing on my bank account a couple of days later. I know at all times, whether it is a valid transaction and how much money I have left in the account.

I’m still trying to figure out this Basecamp thing. Maybe a possible ATG on what it is? It appears to just be another email service that charges $99 a year. What makes their product special that I should pay them over using gmail? Heck, even my Gsuite account isn’t even that much per year. What makes their product special?

You’ve read all this? I’m not a user, and not advocating for it/them, but that seems to be their marketing spiel.

Wait, why should Apple only make profits on hardware, at a time when device sales are slowing and replacement cycles are lengthening?

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Deductions appear immediately and they list the merchant not “Apple Pay”. I typically use Apple Pay with my American Express card, and the AmEx app will ding with a notification and merchant details before I put my phone back in my pocket. I used it after lunch today with my checking account and looking more at my back online I see the transaction with the merchant details (I don’t have the back app installed).

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Yeah, I read it and still don’t see what makes it worth $99 a year.

Thanks for the information, that is better than I thought it would be. But I still don’t understand, why you would intermediate your transactions through yet another third party. Why not do it directly with the bank app?

Maybe it is a difference in upbringing, but I want my privacy and don’t want to share such information with yet another third party. Especially one that isn’t bound by the financial and privacy protection laws that financial institutions are bound to, at least in Europe.

All fair concerns, but I trust Apple and I appreciate the convenience of a single app that aggregates my payment options. Similarly I use the Outlook app to aggregate email accounts because I don’t want to check multiple apps throughout the day.
Update: thinking about this further I definitely trust Apple more than I do my bank or credit card companies to design and implement a secure app. None of the banking or credit apps I’ve used here even offer TOTP for second factor. Also, I like that Apple Pay does not share my card number with merchants, who are the biggest security risk; they only get a one time code. I don’t have any experience with European banking apps so maybe they offer all of the same security features and more. If you have time you might read through Apple’s overview of Apple Pay:

I guess that is the difference.

All the banking apps here have to be secure and they have to use 2 factor - I can set my phone as a preferred device and then I only have to authenticate myself once a month (optical TAN, which means I have to use a second factor using an external device that generates a one-time code based on its internal secret and a code which it reads from the screen of my phone or PC), the rest of the time, I just need my fingerprint or password.

Likewise, the banks are very tightly controlled and they are not allowed to share or sell personal or transaction data.

From your point of view, I can see that Apple Pay might be more secure. From the organisation of the banks here, Apple are just an additional security risk added to the chain for no real gain.

(I don’t mean that Apple security is lax, just that it is another point of potential failure in the chain.)

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One other thing about Apple Pay is the now nearly ubiquitous presence of mobile pay terminals across the US. From my recollection, it really took off about 4 years ago as vendors started refreshing their PoS equipment.

The real victory was getting target, Walgreens, cvs, et al on board. They were holding out since they still wanted to collect customer data based on CC numbers. Apple Pay tokenizes the card numbers it gives out, making data collection harder.

Nowadays I rarely pull out a physical card. It’s just two clicks of a button to arm Apple Pay on the watch, hover over the terminal, and ding, payment complete.

The NFC terminals were brought in here about 18 months before Google launched their contractless payment system. The banks have been handing out NFC cards for longer than Google and apple have had their systems.

I’ve been a longtime listener to TWIT and listen while I’m out running sometime during the week. I’ve had an ongoing irritation that TWIT’s (and only TWIT’s) panel and host talk as if Apple and iPhone are the dominate tech. Never better expressed than by Leo in this week’s episode. (Text taken from YouTube’s automatic transcript of the show):
“in no country does Apple have more than say 50% market share I don’t know what is the market share in the u.s. maybe in the u.s. they have 80%”
Obviously, not true. I suggest you try to get a more balanced panel.
Thanks. I still am a loyal listener.