February 22, 2015

On App Store revenue share

Jeff Hunter of AnyList wrote an open letter (let’s not dwell on that…) to Apple CEO Tim Cook. He suggests a tiered revenue share, instead of the 70/30 split between app developers and Apple of today’s App Store.

For an independent developer, the difference between their gross revenue and their net revenue after Apple’s 30% cut could very well be the difference between being able to work full-time building for the App Store or not. At $100K in net revenues per year, you may be a successful independent developer. At $70K in net revenues per year, your spouse could be telling you to get a day job.

I had intended to pass Hunter’s post up, but too many linked to it, and sent it to me for that matter, with the general consensus that this is something Apple should do. Give more money to the developers, and we’ll get more and better apps. Win-win, right?

Except that Apple is already winning with the App Store, and with a growing ecosystem, which in turn means that the App Store continues to win some more. The 70/30 split isn’t unreasonable, it’s the industry standard. There’s no win-win when only one party is giving up something, because if things were bad for app developers they’d go elsewhere, if they could. They can’t, but that’s not Apple’s problem, nor responsibility.

Then there’s the tiered approach, and Jeff Hunter’s reasoning behind it. If the app developers got $100,000 instead of $70,000, they’d be more likely to make a living of it. Why not $150,000, or $200,000, before Apple takes its cut? Hell, why not skip taking a cut altogether and solely rely on hardware sales? It’s good for the App Store and the ecosystem, thus it’s a win-win, right?

That’s obviously wrong too. It’s another one party win, because it solves a problem that isn’t there for Apple. As for app developers and what they make, there’ll always be a defining line where it’s enough and when it’s not. The necessary amount will be individual, and someone will always feel that if Apple just tiered differently, they’d be in the clear.

I applaud Apple for taking the clear and concise route with the App Store. The split is 70/30, crystal clear. That’s good, it keeps things simple. At the same time, I do understand why Jeff Hunter and others want Apple to change things. They feel that they could do more, and that the ecosystem would benefit, if they earned more money. That’d mean better apps, leaps forward for iOS, and whatever else they can think of. Sure, that might be true, probably is in some cases, but in others there’s still the need for more money before the leap can be made. A tiered revenue share isn’t the solution to anything, it just muddies the water.

Let’s say Apple agrees, and app developers get to keep substantially more, perhaps all, of the money earned on an app up to $100,000. What’s to stop app developers from focusing on smaller apps with that potential only, and produce more of those? Most apps won’t make much more than $100,000 anyway, and I’d wager that clever developers would figure out how to break up what should be one app with the likely earnings of below $200,000, to several apps that on their own would make below $100,000, but generate more money for the app developer thanks to the tiered revenue share. Where’s he benefit for the ecosystem, and the end user, in that? We don’t need more one trick ponies or novelty apps if iOS is to grow as a platform, we need apps of higher quality.

I would much rather see Apple solve the problems surrounding charging for updates, because forcing an app to launch as a new version on the App Store isn’t good for customer retention, nor is it a good user experience. In other areas, Apple have already taken steps, with app bundles for instance. Those sort of things makes more sense to me, and have a larger potential of improving the ecosystem than fiddling with tiered revenue share.

Thoughts? Let @tdh know on Twitter, or find me elsewhere. There is also a newsletter.