There’s an interesting observation in this article that not enough people seem to realise:
Probably one of the biggest contributors to Apple’s revenue is the massively popular App Store, which was estimated as of May 2018 to have seen upward of 170 billion downloads in its 10-year history.
Most of those aren’t straight-up paid purchases — a massive percentage of the App Store’s revenue comes from in-app purchases in free-to-play games like Fortnite and Candy Crush and subscription apps like Netflix, Tinder, and YouTube. According to App Annie’s latest estimates, every single one of the 50 top grossing apps on the platform is either a major service that relies on subscription fees or a free-to-play game. Even the most popular paid apps like Minecraft or Facetune just don’t make the same kind of money as free apps that rely on in-app purchases, even with in-app purchases to help bolster their numbers. And Apple takes a cut of each of those in-app purchases and subscriptions.
As Nilay Patel points out, Apple’s services narrative – the pitch to stockholders that Apple can grow its services revenue – feels rather unpleasant when you realise that most of the App Store revenue is microtransactions in free-to-play and gambling games like Candy Crush. It’s a rather dirty public secret Apple would rather you not focus on too much: Apple’s services revenue comes, in large part, from scummy apps and games trying to trick little kids and less technology savvy people into spending their money on gems or gambling boxes or whatever.
Not exactly the kind of world-changing, holier-than-thou stuff Apple usually touts, now, is it?
As Patel notes, this is a huge problem for Apple, as the recent Spotify antitrust complaint highlights:
There is a clear disconnect between how much money Apple is making by charging a fee for users to take another turn in Candy Crush and how it wants people to think of the “app economy” — no one loves free-to-play games, but all the incentives of the store are aligned around them. So Spotify and Netflix saying the App Store tax is unfair causes a huge problem: if Apple changes the rules and allows alternate payment systems, it will crater App Store revenue because it’s all based on taking a cut of free-to-play games no one really wants to talk about.
Tim Cook’s Apple is a bean counter company, a company with no qualms about giving up their Chinese users’ privacy, working closely with the totalitarian Chinese government, or profiting massively from scammy free-to-play games.
Of course Apple is a bean counter company, they are run by a bean counter. Tim Cook is great at optimizing supply chains, which might be important for the busienss side, but is hugely boring and unimportant for the customer.
They need a new Steve Jobs, one that can provide the leadership they so desperately need to find their focus and drive their products and services in the right direction again.
They are a victim of their own success, they totally forgot how they came to the position they are in now. I know you can’t call a hugely profitable company for dying, but i think they are slowly becoming less relevant, and it is hard to see the current Apple keeping their market position in the long run, and even less them expanding it into new areas. Phones are disposable – this market can quickly change, and which business in their right mind would invest in Apple computing hardware when their commitment to the Mac line is unclear at best.
Agreed, but having tried almost every top line phone, I can’t argue with the premise that the iphone isn’t the best experience. Maybe pixels purchased every year comes close, but for a phone that you want to work just as well in an other three years, iphone is untouchable.
In app purchases on free apps is a developer strategy driven by human nature, not Apple. Apple could refuse to sell them, like grocery stores refusing to sell candy. Probably not going to happen.
Speaking of bean counter company, has anyone read the rumor last month about the modular mac pro design? Instead of doing the sensible, and enormously faster thing of restarting production of a G5 style case with a new motherboard, it appears they’ll put the motherboard, GPU, hard drives, etc, each in their own separate box that can be stacked together and connected with special proprietary cables. Unfortunately I totally believe this one because it just doesn’t take 3 years to crank out a desktop and at this point any “pro user” that actually requires updated GPUs left Apple a long time ago due to the “trash can mac.” Sure you can get an external GPU enclosure now, but that’s 126Gbps for PCIe, and 32Gbps for thunderbolt 3, quite an enormous drop in performance.