You may have an app that earns you a few cents a week, but Apple has the app store that earns it gazillions - but for what exactly? And is the market really as big as $1.22 billion a week?

Apple is having a tough time at the moment having lost 30% of its value because sensible people are choosing not to pay the over-inflated prices that it charges for the latest iPhones. Of course, a one-product company is always at the mercy of the market. But is Apple really a one-product company? It is very clear that it has been trying to build revenue from services and one of its oldest earners is the App Store.

It has a been a bumper holiday season for online retailers and Apple reports that:

"... App Store customers worldwide set new spending records over the holidays, wrapping up a record-breaking year. App Store spending topped $1.22 billion between Christmas Eve and New Year’s Eve."

And if this isn't enough:

"Customers also spent over $322 million on New Year’s Day 2019 alone, setting a new single-day record."

Personally I find it amazing that users spent so much on apps over the holidays and as for New Year's Day - why didn't they just sleep late and get over the hangover? So what motivates them most?

"Gaming and self-care were the most popular categories of app downloads and subscriptions during the holidays. Globally, multiplayer games including Fortnite and PUBG were among the top downloaded games over the holidays, along with Brawl Stars, Asphalt 9 and Monster Strike. Productivity, Health & Fitness and Education apps are already capturing the attention of customers in the first few days of the year with 1Password, Sweat and Lumosity charting in their respective categories."

Gaming, yes, but "self-care"?

Apple's commission on sales through the App Store is 30% so this means that the company made just over one third of a billion dollars in that holiday week and  just short of 100 million in a single day. For what exactly?

The model of the app store charging 30% feels a lot like the way that academic publishing works. Other people pay for the research, the researchers write it up and then a third party charges largish sums of money to allow the people who paid for it to read it. There is currently a growing backlash against this exploitation. In the app world other people pay to build the app and Apple takes 30% for services that cost a lot less than that. The only real reason is that Apple is the gatekeeper. If you want to sell on its platform you have to cede 30% of your revenue, leaving you 70%.. 

In the world of traditional publishing the 30%-70% would be considered good, or at least acceptable, but traditional publishing involves investment in each item produced. It costs money to get a book printed and this is a risk, borne by the publisher, that deserves to be compensated for.

What risk is Apple taking in accepting your app?

Ok Apple needs to get something, but 30% is a figure plucked from the air because the market, i.e. us, will stand it.

Given Apple has just discovered that the market will not always stand for a price that is "plucked from the air" to keep the iPhone profitable on falling sales, perhaps it is time for Apple to think about making the App Store fairer to the people doing the real work.

Phil Schiller, Apple’s senior vice president of Worldwide Marketing said.

“Thanks to the inspiring work of our talented developers and the support of our incredible customers around the world, the App Store finished off an outstanding 2018 and kicked off 2019 with a bang.”

In what sense are the "talented developers" Apple's?

Apple is facing a lawsuit brought by end users to break its monopoly of the App Store and now it seems that big publishers are moving in the same direction. The Washington Post claims:

"A growing number of software companies are looking to bypass the dominant app store gatekeepers at Apple and Google — selling their services directly to consumers and undercutting the tech giants that for years have controlled how most of iPhone and Android users discover, download and pay for their apps."

The company that inspired this paragraph is, of course, Netflix, which has decided that you can't sign up to its services via Apple. Instead you have to go to the Netflix site. The difference is that Apple used to get 30% of the sign-up fee - which earned it an estimated $257 million last year. This isn't a one-off however and Spotify recently moved from in-app payment, so cutting Apple's revenue by $10 million per month.

Of course, these are big companies with the resources to offer convincing alternatives to the end user. Most app developers aren't so lucky and, even if they were, it is difficult to work out how to defeat Apple's ability to claim 30% of revenue.

More Information

App Store caps record-breaking 2018 with blockbuster holiday week

The app-store war between Netflix and Apple is heating up

Related Articles

Apple App Store Antitrust Suit

Supreme Court To Rule On Apple App Store Monopoly

The Developer Union Wants To Negotiate Nicely With Apple

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