Dirty Percent

http://daringfireball.net/2011/03/dirty_percent

by shawndumas • 15 years ago

111 94 15 years ago

protomyth• 15 years ago

> APPLE SHOULD NOT REQUIRE APPS TO OFFER IN-APP SUBSCRIPTIONS

I really don't buy the relation to the initial offering of apps, but I admittedly think this is one of two big problems with this whole scheme. For one, Apple is not providing an end-to-end solution by hosting the content and cannot really keep track of all the SKUs with their current system. Never mind and SaaS providers not getting hosting out of that 30%. The economics and mechanism of app delivery are different than content delivery.

I think Apple should say that if you provide no link to your purchase / subscribing site, then you don't have to use IAP. In other words, if your app downloads content for your account, but doesn't allow in-app sales or link to out-of-app sales, then all is well.

colinprince• 15 years ago

tl;dr

On businesses that can't afford 30%: Too bad, Apple wants to be the middleman

On price matching: Apple won't budge because their competitors (e.g. Amazon) insist on price matching

On the 30% slice itself: Apple is proposing that publishers (et al) will make more money at 70% than they'd make at 95% with someone else's business model

On (anti-)competitiveness: Apple is the only one which allows its competitors to have apps on its devices

Summary: iOS is a closed, controlled console system - more akin to Playstation or Xbox than to Mac OS X or Windows

oemera• 15 years ago

What I do not understand is why no-one is complaining about Playstation 3 and Xbox 360 as a closed system but about Apples iOS line.

WHY is Apple bad for closing a system but Microsoft, Sony and Nintendo are not? I really do not understand that.

WHY on earth has a cellphone to be open as a OpenSource project? Is there a reason for that? (Android has open sources but no-one can commit changes. It's all in Googles hands what comes into the next Android version which doesn't fit with OpenSource at all)

WHY is taking a 30% cut bad for all developers and Apps? (Jobs said that the 30% cut is not for SASS Apps but only for Newspaper Apps, right?)

Please give me some answers I'm starting to don't understand these discussions lately.

CaptainZapp• 15 years ago

A console is a very different biest from a mobile communication device, of which openness and interoperability is hugely advantegous to society.

Thus the line apple is toeing here is a dangerous one.

I wouldn't make the same argument for iPods, iPads or Macs.

Lewisham• 15 years ago

I used to be a big fan of Gruber, but I'm getting increasingly tired of his "defend Apple at all costs" mentality.

When Apple was the underdog, it all seemed to be about not what was possible, but what was fair, and what was right. Now it's a "Well, of course Apple would do that, wouldn't you?"

And he then punts on the biggest question of all:

What if Microsoft did this with Windows, and, say, tried to require Apple to pay them 30 percent for every purchase made through iTunes on Windows? To that, I say: good luck with that.

Not "well I'd certainly write a slam piece about it", not "well, that would definitely require competition regulators", not "that would be a dick move." Just "they couldn't do it anyway, so your hypotheticals mean nothing."

The way I put it (crassly) is "When you're Top Dog, you don't need to play like a bitch." Which is what Apple is doing, and honestly, they're turning me off from their products. And that's not about "Oh well, Apple likes to make money, and why shouldn't they be allowed to?" It's about looking like you're above it. Brands like Costco and Amazon make a huge chunk of change, but you don't see them getting into petty stuff like this.

fleitz2• 15 years ago

I don't believe Costco publishes their vendor agreements so you really have no idea how Costco treats their suppliers.

Also, no one complains that Google takes 32% of AdWords.

jrockway2• 15 years ago

They don't take 32% of the purchase price for purchases that were made by someone who clicked on an AdWords link, though.

natnat• 15 years ago

Google takes all of AdWords, since it's on their own site. They take a 32% cut of AdSense.

The thing is, advertisers could use other channels to put ads up on the web. They can advertise with Chitika or whatever and get a bigger cut than they would with Google. They typically don't, because AdSense adds a lot of value by targeting the ads well. On the other hand, if you want to sell software on an iOS device, the only way is through the app store. Apple doesn't need to add any value to protect their 30% cut from competition because they don't allow competitors.

zach3• 15 years ago

Well, we do know about Costco dropping Coca-Cola and Apple because Costco wasn't satisfied with the terms they were getting. They came to an agreement with Coke but Apple products are still gone.

If you're a retailer willing to drop Coca-Cola, we can pretty much assume you're a strong-willed company. Whether that leads to triumphs of principle over practicality or displays of pettiness is, I'd say, a matter of perspective.

calloc• 15 years ago

But Costco does publicise how much markup they put on their products as a maximum:

_Costco's maximum markup on merchandise is 14 percent, and "a lot of products don't come close to 14 percent," Sinegal said. By comparison, supermarkets commonly mark up merchandise by 25 percent and department stores by about 50 percent._

http://www.gazette.com/articles/costco-33279-springs-store.h...

Costco is extremely cut-throat, there have been several articles about Costco and how if they aren't receiving the lowest price for a product they just won't have it on the shelves, the Coke dispute was pretty big [1].

Overall I find that Costco is pretty transparent when it comes to the products they offer, and how much they charge for them. So far Costco has been a great value for me as a consumer!

[1] http://www.wbur.org/npr/120590548/price-fight-coke-isnt-it-a...

siglesias3• 15 years ago

Ad hominem. You should address logical flaws and false statements.

And he was critical of Apple in two of the four points, so your premise is false.

Edit: This discussion is also something of a strawman, attacking none of the important arguments made in the article.

The point about what Gruber would say if Microsoft had done this is simply a preemption of an ad hominem attack against himself and it's quite unfortunate that he chose to address it. It has absolutely nothing to do with Apple's fairness in charging 30%, which is what we should all be talking about because it's a very important topic.

Very sorry to see this community of rationalists fall for a refutation of something that's irrelevant to the main discussion.

sutro• 15 years ago

Does anyone know of a browser plugin that will automatically eliminate from view any Hacker News comment containing the phrase "ad hominem?" Ad-Hom Block Pro or some such?

solutionyogi• 15 years ago

Ad Hominem? He said only one thing about 'Gruber' that he is tired of him. Rest of his comment was about Gruber's arguments and non arguments. I didn't see any Ad Hominem attack in the original comment.

And how is Gruber's overall argument right if he is critical of Apple in two of the four points? How does that even make sense?

asr• 15 years ago

Definitely agree. Plus defending every single part of Apple's policies makes him set up straw men and false dichotomies like nobody's business.

Take his summation: "iOS isn’t and never was an open computer system. It’s a closed, controlled console system..." The implication being that iOS users have no right to complain because they signed up for a "closed" system.

Systems are never just "open" or "closed." Apple's move here is making the system more closed.

ra88it2• 15 years ago

Brands like Costco and Amazon make a huge chunk of change, but you don't see them getting into petty stuff like this.

Is the following statement (from the article) false?

As for ruthless profiteering, consider that Amazon, with their e-book publishing, originally took the fat end of a 70-30 revenue split with authors.

apike2• 15 years ago

This was true until iBooks came out. Keep in mind that a 70% cut for the publisher for books is better than most authors traditionally get. Meanwhile, record labels' cuts are usually more than 90%.

martythemaniak• 15 years ago

I found it pretty hilarious when Gruber quoted Upton Sinclair: "It is difficult to get a man to understand something when his salary depends upon his not understanding it.”

Gruber owes his good fortunes to being the premier Apple shill, and no amount of logic, reasoning, facts or ethics is going to change that.

http://daringfireball.net/linked/2011/02/23/dhh-it-dept

ugh• 15 years ago

Does he?

He earns money from ads, do you think he would earn less should he write critically about Apple?

(All of this seems very much beside the point, though. Discussions about Daring Fireball have become so predictable. Nobody seems to be even interested in talking about the arguments, everyone wants to throw dirt around.)

mbrubeck2• 15 years ago

What I like about Gruber, even when I disagree with him, is that I think he understands, better than any other outside commentator, how Apple's management team thinks and works. He's not a leading expert on business, or on technology, but I'd call him a leading expert on Steve Jobs' mind.

This understanding is part of why Gruber often seems like an Apple apologist. Even when he disagrees with Apple' decisions, he can generally give a good explanation of why the decision was made and why Steve and Tim and company probably think it is the right one. And of course, when he is writing from the point of view of Apple Inc., the primary question is always "What is best for Apple?"

(This also explains why I hate Gruber's writing about competiting companies like Microsoft and Google. I don't think he understands how those companies think and work at all, so his commentary on them totally lacks that insight and usefulness.)

jonknee3• 15 years ago

> This understanding is part of why he often seems like an Apple apologist. Even when Gruber disagrees with Apple' decisions, he can generally give a good explanation of why the decision was made and why Steve and Tim and company probably think it is the right one. And of course, when he is writing based on Apple's point of view as a corporation, the primary question is always "What is best for Apple?"

Yet he rarely qualifies that with, "While I don't agree" or something similar. He does sometimes, which leads me to believe that he usually is talking about what he believes.

icarus_drowning2• 15 years ago

I think where this gets annoying is when it becomes impossible to discern when Gruber is just "explaining what Apple is thinking" and when he is putting forth his own opinion. Its tiresome to criticize his Apple apologism and constantly run into the counter-argument that "he isn't really saying that its OK for Apple to engage in X practice, he's just explaining it", because it is often difficult (if not impossible) to discern if that's the case.

I do think Gruber intentionally blurs that line to insulate himself from criticism. And I think that's pretty dishonest and petty-- much like his irritatingly self-satisfied one-off comments aimed at his opponents. (Technology related and otherwise).

EDIT: Minor grammatical correction

jad• 15 years ago

"well, that would definitely require competition regulators"

No offense, but the idea that the government needs to step in is a nonsensical argument that is getting repeated with increasing frequency whenever Apple does something controversial. There is not a single market in which Apple competes where they have a monopoly (caveat: tablet computers right now, but that market is revving up to be hyper competitive in the very near future, and who would want the government intervening there at this nascent stage). A monopoly is required for antitrust investigations.

Do you know who Apple's "competition regulators" are? Google, Microsoft, RIM, Nokia, Palm/HP, et al.

sedev• 15 years ago

Your comment essentially assumes "someone who disagrees with me so much, couldn't possibly be sincere!" Please don't do that, that's bad discourse.

<em>Brands like Costco and Amazon make a huge chunk of change, but you don't see them getting into petty stuff like this.</em> No, you don't - because you're a developer, not someone who has to argue with them in the areas where they <strong>do</strong> do petty shit like this.

zach3• 15 years ago

Rhapsody, Sony and Instapaper were all geared up for the old subscription rules. That loud noise you hear from them is from the grinding of gears. They'll get back up to speed, but they sure had to downshift when they weren't ready to. They may not be able to take the same road they were expecting to, though.

I think one outcome you're going to see from publishers is that there will be separate plans for iOS users. Before, there was naturally only one option and the App Store app was just a client to the same subscription. Now, I can see where it makes a lot more sense to have an a la carte iOS subscription for these publishers.

zavulon• 15 years ago

Some Gruber's articles feature a lot of insight, and are highly enjoyable. And some of his articles may be easily dismissed as blatant fanboyism. Unfortunately, this is an example one of the latter and not the former. I stopped reading after the second blatant "pull-it-out-his-ass" assumption he makes about the "complainers".

kondro• 15 years ago

I'm pretty much in agreement with everything Gruber said (first time for everything).

The one thing that really annoys me though is that Apple have decided is that if you offer a subscription-model outside of the app store, you now have to offer it at the same cost inside the app store.

Instead of paying 1-4% credit-card transaction fees with 24 hour payment terms, you now have to potentially pay a 30% app-store transaction fee with payments taking a month or more if your users decide to take up the option of paying via the app store.

Now I can see why Apple can't discount their 30% as this is the margin they seem to give to stores selling iTunes cards (yes, Apple makes nothing on apps bought with iTunes cards). But to require all apps to be forced to use the in-app subscription model is just ridiculous. What next? A native SAP client forced to sell their $100k product through the app store?

swombat• 15 years ago

Steve Jobs has already commented, in an email, that this isn't meant for SaaS apps:

http://www.macrumors.com/2011/02/21/steve-jobs-email-suggest...

mechanical_fish• 15 years ago

Moreover, such arguments are silly. Nobody buys an iPad and then looks through the app store for $100k apps to run on it, or even $5k apps. If you are in the market for such an app, you buy the app and then go shopping for the hardware.

Perhaps Apple has now ceded the market for mobile clients of $100k enterprise Java applications to Android. If so, I doubt they are losing much sleep in Cupertino.

Obviously Apple's pricing model makes no sense for markets that they are not actually in. What matters, however, is the competitive landscape of the market that they are in.

jonknee3• 15 years ago

For now. They can change that at any point like they did for publishers.

erikstarck• 15 years ago

I just know one thing: the moment Kindle is removed from the app store, I'm selling my iPad.

pederb723• 15 years ago

I'd love for Amazon to remove the DRM from their books, and just sell books in epub format which can be read on any device without a Kindle app. That would solve Amazon's problem with iOS/Apple, and also be an ideal solution for end users. EDIT: what I mean is, music is now sold without DRM. Why do we still need DRM for ebooks? I'd love to be able to just put all my ebooks in a Dropbox folder, and not depend on Amazon to create an app for every platform where I want to read my books.

lwhi5• 15 years ago

But if you'd like Amazon to make a concession as large as this, surely Apple should be asked to make a few concessions too?

Both companies sell IP - and both rely on a various forms of DRM to enforce scarcity. I think selling IP will eventually be seen as a fruitless (and unsustainable) pursuit - but for the time being this is a way both these companies are making a profit selling digital goods.

jonursenbach• 15 years ago

Or just send the Kindle over to Cydia.

ctyrider• 15 years ago

You can do this yourself (you can Google for how-to). The process of stripping Kindle DRM-MOBI format and converting it into ePUB is about as simple as ripping a DVD.

thalur• 15 years ago

I may be wrong, but I thought the choice between DRM or not for books was up to the publisher and not Amazon?

kmfrk4• 15 years ago

Apple have done a great job of undermining their impending iPad 2 launch. I was on board for buying one (or the iPad 3), until the 30% subscription debacle ensued.

kenjackson4• 15 years ago

Whoever at Apple said that the iPad2 was a speedbump and the real glory was iPad3 kind of killed the iPad2 for me. Who's going to buy a tablet that is going to be obsolete in 6 months?

kmfrk4• 15 years ago

This feels like Gruber wanted to write an article from Apple's side, and felt an obligation to do so, but couldn't come up with any arguments nor solutions, yet still continued to write the piece out of obligation to his cause.

saturdaysaint• 15 years ago

I think Gruber is ignoring the competitive disadvantage Apple is putting themselves in by shutting out the "middle man" apps. Kindle, Spotify and Netflix are deeply entrenched, best-of-breed services - consumers have deep investment with their Kindle devices, Netflix accounts, etc. These are not minor points. People will give up their Kindles and use iBooks the day they uninstall iTunes and start using a Zune.

So Android, which is already very feature competitive and may have a bigger install base, could have no competitor in distributing a range of very popular, rapidly growing services. Vic Gundotra must be grinning ear to ear.

alanh• 15 years ago

No, Gruber has stated that he does not believe Apple is ignorant of the consequences of taking 30% of Kindle sales or Netflix subscriptions via iOS — after all, Apple built Netflix support directly into AppleTV. He believes the company has probably been in talks with Amazon, Netflix, and similar companies for some time.

kenjackson4• 15 years ago

There's a lesson here. Build your brand inside of iOS and you're screwed. Apple can choke you. Build it outside of iOS and you have a chance to have reasonable terms. As nice as iOS is, w/o middlemen, established outside of iOS, like Kindle and Netflix -- it probably gets killed by Android.

efnx• 15 years ago

bit.ly told me that daring fireball was potentially problematic... http://bit.ly/a/warning?url=http%3a%2f%2fdaringfireball%2ene...

jsm386• 15 years ago

think it has to do with the fact that he is running a URL shortener himself (i would guess bit.ly pro?) when he tweets it: http://df4.us/h8h

msg• 15 years ago

Grubers gonna grube :(

Talk about burying the lede!

"But leaving aside the revenue split, there are technical limitations as well. The existing in-app purchasing system in iOS has a technical limit of 3,500 catalog items. I.e. any single app can offer no more than 3,500 items for in-app purchase. Amazon has hundreds of thousands of Kindle titles.

"Something’s got to give here. I don’t know what, but there must be more news on this front coming soon. I don’t believe Apple wants to chase competing e-book platforms off the App Store."

In other words, all the rest of the article, defending the Apple terms, is so much codswallop. Because Gruber believes that these terms are unacceptable, as in Dead On Arrival, to major users of in-app purchases and will have to change shortly to accommodate them.

And once you have figured that out, why not apply this to the other users of the platform, the rest of these arguments? "Eating margins will chase applications off iOS" and "Catalog limits are too low for many credible use cases" apply to many more developers than just Amazon Kindle.

But for some reason these arguments are dissociated from the ones Gruber wants to make. Instead of putting together the whole picture, he comes to these major stumbling blocks and writes the equivalent of "Does Not Compute."

zach3• 15 years ago

All this talk about Gruber, the fanboy that blindly defends Apple, seems to be missing one thing, which is why he should be unhappy instead.

John Gruber in general likes the way Apple does things. Right? Not a controversial position, well understood and, these days, pretty common. So first off, I'm never surprised when he posts about "here's the thought process and mechanics behind the way Apple does things" even if that's the top-level business decisions Apple makes.

So with that understanding, what kind of thing should he naturally be unhappy about? Things Apple does that are uncharacteristic, bad moves for their users, or just downright unethical (i.e. knowingly lying to customers). I truly believe that's it.

Let's toss aside the idea that this move is uncharacteristic (even detractors say "that's the way Apple likes things.") Second, he's explained how he thinks these rules seem good for users. And finally, although I know a lot of people think Apple is doing something unethical, I really don't think John sees things that idealistically when it comes to these kinds of things.

He did demonstrate some sympathy to criticism that Apple changed their rules, but I don't think he sees that at all as unethical. He's idealistic about design but I don't think he's idealistic about business and the marketplace. I actually don't think he really cares as much about the business angles, but that's where the interest is these days.

I really don't see any reason he should be unhappy with this plan. I think he's explained pretty well why he thinks it's a reasonable approach, and given that evidence I think you need to argue pretty forcefully to suggest he's being insincere.

kenjackson4• 15 years ago

Gruber shows his colors here:

This is what galls some: Apple is doing this because they can, and no other company is in a position to do it.

People aren't bothered simply because other companies can't do this. If Google, MS, RIM, Amazon, and HP all did the same thing people wouldn't say, "Great... everyone can do it!"

People are upset that Apple can do it, and they are.

People have long told me that Apple is a benevolent company. They point to the PC market and say, "Apple never did what MS did". And my retort was always, they couldn't, but if they could they probably would have.

Now we're seeing it play out. If Apple could squeeze Intel or Dell or Compaq they would have. Apple's benefit though is they're not a monopoly, and likely won't be one. But to the extent that they've captured a large share of disposable income they will drain their partners for every last cent. Because as Gruber has stated, Apple doesn't need you, but you sure need them.

ryanwaggoner• 15 years ago

Apple doesn’t give a damn about companies with business models that can’t afford a 70/30 split. Apple’s running a competitive business; competition is cold and hard.

These two statements are fundamentally at odds; it's highly unlikely that Apple is making more money from App Store purchases / subscriptions than from iOS hardware sales. Consequently, for Apple to be competitive, they need to offer as much value as possible to the user, so that more users will end up on their platform. Since many of the most popular apps are business models that can't afford a 70/30 split, Apple damn well better care about them. If I can't get Kindle, Netflix, Hulu, Dropbox, etc, etc. on an iPhone/iPad, I won't buy another one. Period.

Stormbringer7• 15 years ago

I think that in their quarterly financial calls they've consistently reported the iTunes store as running "about break even". They don't sound unhappy about it, so presumably they're on the positive side of break even rather than on the negative side.

The following Dickens quote springs to mind: "Income, twenty shillings a week, expenditure, twenty shillings and sixpence; result, misery. Income, twenty shillings a week, expenditure, nineteen shillings and sixpence; result, happiness."

However if Apple cut back to say 25% then it might mean that they are subsidising people's use of the store. This would be bad for Apple because they would be losing money. Boo hoo. On the other hand, if they were losing money with one hand in order to (as you suggest) gain it with the other, then they would open themselves to questions of dumping, price fixing, abuse of monopoly etc.

Selling at below cost is a typical strategy to keep new entrants out of the market, and so would be evil. But apparently taking 30% is evil too, so it doesn't matter what they do, somebody is going to be unhappy with them.

ajg1977• 15 years ago

Apple doesn’t give a damn about companies with business models that can’t afford a 70/30 split. Apple’s running a competitive business; competition is cold and hard.

Why not allow developers and publishers to set their own prices for in-app subscriptions? One reason: Apple wants its customers to get the best price

So on one hand competition is good, natural, and everyone benefits. But on the other, companies shouldn't be be able to compete with Apple's built-in subscription system?

mortenjorck• 15 years ago

One reason: Apple wants its customers to get the best price — and, to know that they’re getting the best price whenever they buy a subscription through an app. It’s a confidence in the brand thing: with Apple’s rules, users know they’re getting the best price...

So just like all the iPhone cases, laptop bags, headphones, and external hard drives at the Apple Store, then.

morganw• 15 years ago

"Kindle doesn’t use subscriptions. Kindle offers purchases." The Kindle app doesn't support subscriptions, but the Kindle device does.

$35.88/year for the New Yorker (47 issues/year) on (B&W) Kindle vs. $234.53/year in the New Yorker iPad app and about $50/year for the paper version which comes with access to the archive on the web.

http://www.amazon.com/The-New-Yorker/dp/B001O2SCKI/ref=sr_1_...

The xfinity iPad app now offers "Play Now" so it's not just a fancy remote control, but a content delivery app with a monthly subscription handled outside the app.

http://paidcontent.org/article/419-first-look-comcast-xfinit...

vacri• 15 years ago

I don't like Apple's business practises and never have, but this 70/30 split furore is hilarious to someone who has worked in retail and supply before. It is entirely normal for a retailer (apple) to take this kind of split in the retail price and the supplier/wholesaler to take 70%. In the retail industry I worked in, the retailer took a 35-40% portion.

This split is yawningly normal in retail. What's not normal is the huge numbers of "one-person" wholesalers... who have very little in the way of business experience and see that split as a "tax" rather than payment for a service.

Stormbringer7• 15 years ago

Thank you. There are plenty of legitimate things to criticise Apple for (they are far from perfect) without making stuff up.

BenoitEssiambre• 15 years ago

" (Going further, many charge cards offer cash back on each purchase — they can do this because the cash-back percentage refunded to the customer is less than the transaction processing fee paid by the retailer.)

So the same-price rule is good for the user, and good for Apple."

This type of arrangement is not good for users and is very anti-competitive.

Banks often offer reward points worth 1% of a purchase in exchange for the use of their credit cards which incurs something like a 3% fee on merchants. The merchants have to increase their prices to maintain their margins but since they are contractually obligated not to charge credit card users more, price is increased for everyone. Even those who avoid credit cards end up paying the banks for other's use of them. If fact those who use the cards pay a little less for than those who don't because they get the 1% kickback. Next time you spend $500 of airmiles or reward points, know that you imposed $1500 worth of fees on customers likely not even using the service. The bank gave you a $500 kickback and pocketed $1000.

This scheme basically amounts to imposing a tax on everyone and it's enabled by the one percent reward points along with the price matching rule.

It's the same situation when selling on iOS. In order to pay for Apple's fees and maintain competitive margins, merchants will have to increase the prices of their products across the board, even when they are sold completely outside the Apple ecosystem. This means that if Amazon keeps their Kindle app in iOS, Amazon will have to increase prices _on every devices_ and when someone purchases a book on an Amazon device, through Amazon only, they will be indirectly paying a portion of the sale to Apple. That, IMO, is screwed up. This type of rule is illegal in many countries (at least with regards to credit cards) because it is clearly anti-competitive.

Stormbringer7• 15 years ago

Funnily enough, one of the people on HN screaming the loudest about this 30% was essentially trying to cut Apple out of any revenue at all.

What they were doing for their app was giving it away as a free download, then charging a one off subscription. Ta Da! No $ for Apple. Apple closes this loophole, and this guy starts screaming blue murder.

I've got very little sympathy for anyone like him who is just trying to rort the system and get something for nothing.

----

All the people screaming about Apple's 30% cut should just pack up, shut up, and go to Android where Google will take a 32% cut of their ad revenue. Vote with your feet peeps.

Dirty Percent

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