“Apple is planning a departure from the pricing formula that has defined the economics of digital media for a decade, which would cut the 30 per cent fee music, video and news companies pay on subscriptions through its App Store,” Tim Bradshaw and Shannon Bond report for The Financial Times. “The iPhone maker is discussing new commercial terms with media companies, people familiar with the matter said, to change the 70/30 ‘Apple tax’ pioneered by Steve Jobs when its late founder launched the iTunes music store in 2003.”
MacDailyNews Note: Some perspective: The Financial Times has long attempted to skirt Apple’s 70/30 subscription rules. More info:
• Via Reuters, Financial Times claims Web-based app more popular than App Store app, offers no hard proof – September 22, 2011
• Financial Times hopes against hope they can skirt Apple’s iPad app subscription rule – April 4, 2011
• Financial Times owner Pearson threatens to go ‘somewhere else’ over Apple’s iPad app subscription rules – March 1, 2011We just searched the U.S. App Store for “Financial Times” and they do have a single app (Financial Times Chinese) available as of October 2014. We assume they’re paying the “Apple Tax” for any subscription revenue, if they do have subscriptions, in that app. Their main English content is accessible only via Web browser.
“Apple paid out $10bn to app developers last year, from in-app payments and subscriptions, and has hundreds of millions of iTunes accounts. Its 70/30 split has been mimicked by rival digital content platforms run by Google and Amazon,” Bradshaw and Bond report. “Today, rival music services such as Spotify, Deezer and Rdio which charge the same $10 monthly fee must pay out a 30 per cent share when subscriptions are purchased through Apple’s in-app payment system on iPhones and iPads. That looks set to change, according to people briefed on the plans, not just for music services but also video subscription services such as Netflix, Hulu and HBO Now, and publishers on its Newsstand portal, including Condé Nast, Time Inc, and the New York Times. The Financial Times operates outside the App Store using a browser-based app.”
“Apple has already begun to test a more generous split for some premium content services on its Apple TV box, Re/code reported in April,” Bradshaw and Bond report. “It remains locked in negotiations with US broadcasters over an internet TV service of its own, to be accompanied by a revamped set-top box that incorporates the App Store, people close to the discussions have said. However, Apple’s previous hopes to launch both the TV hardware and service next week have been pushed back until later in the year, they say.”
Read more in the full article here.
MacDailyNews Take: With over one billion iOS devices sold to date, surely Apple has significant costs associated with maintaining and running the App Store. The so-called “Apple Tax” certainly doesn’t seem to have hurt it so far. Perhaps Cook & Co. see this as a negotiating tool – especially where it comes to Apple Music and the company’s over-the-top Internet TV plans. After all, it’s not like Apple needs to profit from the App Store or the iTunes Store – they both exist in order to make high-margin hardware even more difficult to resist.
SEE ALSO:
Apple Music to offer users three months free; Apple to largely abandon 15-year-old iTunes brand – June 5, 2015
All-new Apple Music subscription service, rebuilt iTunes Radio to arrive with iOS 8.4 in late June – June 5, 2015
Maybe an 80/20 split? Anything they can do to make it even more enticing and force Google & others to match it and make less profit would be good. Drain any avenue of income for Google as possible. Apple has nothing to lose since they gain elsewhere.
Bring back something Bank of America pioneered in taking out. Cost/Fee caps.. Used to be you do a balance transfer and it would be something like 3% of amount with a max fee of $50.. So if you transferred anything less than about $1670 you would pay up to $50.. If you transferred a higher amount up to your credit limit you would only pay $50. Media companies would surely jump for that deal.
The 70/30 split hasn’t hurt Apple, for sure. Paying out more than $10B to “developers” means Apple’s top line revenue for the AppStore was nearly $4.3B. Remember, too, that Apple is often in the Top 10 lists for Mac/iPad/iPhone app sales, and those 30% cuts don’t get cut at all.
While there is cost associated with maintaining the AppStore, the revenue cut means Apple has $4.3B to pay for the AppStore, et al. In the Q2 filings, Apple listed R&D at $1.9B and SGA at $3.5B. I don’t know under which category AppStore costs are reported, but it doesn’t really matter, right? If those costs are annualized, the Apple portion of developer payout would cover a lot of those costs, which I do know isn’t how Apple budgets (Selling, the “S” in SGA, is not paid for by AppStore income).
I’d love to see the Apple cut dropped in half. I’d love to see developer tools and services more aggressively attended to with whatever funding is responsibly needed to accomplish this.
Put simply, Apple can reduce their cut. And/or Apple can reinvest their income into the service that can bring them more money.
Apple could easily afford an smaller split.
Google could afford it, but it would hurt.
Amazon can’t afford squat, but then again, their shareholders don’t seem to hold them accountable for actually making a profit.
How do YOU know Apple “could easily afford an [sic] smaller split”? Do tell.
Virtually no one on this site knows Apple’s cost structure for its curated online stores. It costs Apple a significant amount to make as sure as possible that the music, videos, and apps it hosts are not riddled with malware like some of the other big name sites. And Apple does not charge a fee for that up front. It’s part of that 30%.
It owe that claim Apple could cut its fees down to 10% or 5% or less are just delusional.
Calm down, your Shadowness! We know that Apple can afford a smaller share of the split because Apple made $39.5B in profit last year. Apple could certainly afford to run the App Store at break even or a loss. And, if that translated to greater hardware sales and/or significant pain to Apple’s competitors, the it might be worth it.
Oh, yeah – lay off the arrogant [sic] additions, especially for a missing “d”. Your response has a much more significant error in the last sentence. Many people are typing quickly on virtual keypads, and it is easy to make a simple error. In my response, I meant to type “then,” but got “the.” No big deal…
Every app is freemium nowdays. Even with a 99/1 plan, I’ll stay Apple.
And freemium absolutely sux! Apple should change the revenue sharing split on in-app purchases to 5/95 in favor of Apple. Given many of the outrageous in-app costs, 5% would still be more than the developers deserve. They destroy gameplay with a scarce resource and blast you with advertisements, to boot. Please bring back the flat purchase cost – $2.99, $4,99, $9.99 – whatever makes sense for a particular app. But $99.99 in-app purchases for “good” that will only advance you a little farther is criminal.
It does serve one purpose – I am teaching my kids patience and to avoid being ripped-off. There are no in-app purchases on my account!
Good is gold
Hundred-dollar in-app purchases? What are you talking about? Who does that?
Do you let your kids use free apps that expose them to advertising? Is that a method of teaching patience?
Would this work: 80/20 split for apps without in-app purchases, 70/30 with them?
Given the route UE4 went… 5%.. you coudl go from 35% to a better %?
Phew.. there will be shit games a plenty coming to i/OS/x. But also, there will be some amazing break outs as well. If they can just get it to work with an updated apple TV that outmatches a PS4.. and hardware wise that would be automatic in apples case…
We might see a huge shift in the video game industry. I hope apple cuts it to baseline operations cost.