App stores that take a 30 percent chunk of developers’ earnings are parasites, according to Tim Sweeney, CEO of Epic Games.
“The system is pretty unfair at the moment,” Sweeney said during a keynote speech on the future of graphics and games development in the U.K. “These app stores take 30 percent of your revenue for distribution … That’s strange because MasterCard, Visa and other companies that handle transactions take 2 percent or 3 percent of the revenue…. So they’re pocketing a huge amount of profit from your order – and they aren’t really doing much to help us anymore.”
The criticism from Sweeney — whose company created the Unreal Engine that powers many games, including Epic Games’ smash hit Infinity Blade — isn’t just about companies taking money from developers. It’s also about what he sees as an increasingly lopsided deal for game-makers.
“There was a time when there were just a few releases every week and you had a pretty good chance of being near the top of the charts, but nowadays the top of the charts are completely dominated by a few games with $100 million marketing budgets,” he said. “There’s not really room for ordinary developers to compete. So what they have to do is spend money on user acquisition [via] Facebook, Twitter, Google Search…. Companies are paying something like $3 per install to get users to install a free game, and that really sucks.”
He described the results as a “market failure” that “we should be angry about.” And he referred to the 30 percent cut taken by companies like Apple as a “parasitic loss.”
Apple’s take on things
Apple, for its part, promotes how much money it has paid developers since opening the iOS App Store back in 2008. In a website launched earlier this year, Apple noted that U.S. developers have earned over $16 billion in App Store sales worldwide. Apple claims that 1,530,000 U.S. job are in some way attributable to the App Store ecosystem.
The App Store also provided developers with a new way to distribute apps that was not available before.
Nonetheless, for developers that do not rake in money with in-app purchases in cash-grab games, it’s easy to empathize. Especially when indie coders see Apple taking almost a third of their revenue in exchange for running the App Store. Still, until Apple is put in a position where it has to change — or lose money — things will likely stay the same.
Who do you side with on this? Leave your comments below.
Source: Games Industry.biz
Luke Dormehl is a U.K.-based journalist and author, with a background working in documentary film for Channel 4 and the BBC. He is the author of The Apple Revolution and The Formula: How Algorithms Solve All Our Problems … and Create More, both published by Penguin/Random House. His tech writing has also appeared in Wired, Fast Company, Techmeme and other publications.
10 responses to “Leading developer says we should be angry at ‘parasitic’ app stores”
Instead of reducing the cut they take, I just wish they’d do more to promote smaller developers. I’d rather get more sales and downloads than get more money per sale.
Are you aware that Epic also takes a 30% cut from developers? It’s a bit hypocritical of Sweeney to bash others when they charge the same rate.
But Epic does more for them. Apple doesn’t do anything except host. No marketing help, no nothing.
Apple’s providing them with real estate in the Apple Store to sell and promote their product, and Apple’s also guaranteeing that the app won’t be malware or sold among a slew of malware products.
Is it worth it? It is if that’s what the market will bear, and it’s not if the market says “no that’s too much.” So far, the market’s saying that the space in the store is worth it. What Apple’s doing more fair than the slotting fees of retailers and it’s democratic in that everyone pays the same percentage, rather than being able to pay more for better positioning in the store.
The Apple Store is not a “market” (in your sense). It is a monopoly. Apple doesn’t (as quoted in the article) provide a new way to sale iOS apps, it provides the ONLY way. Perhaps if developers had a choice of embracing the App Store’s curation/malware protection/distribution support for 30% of their profit or “going it alone” and selling product on their own web site (or sites) we could properly judge whether the App Store was “worth it”. But that isn’t the case … and it’s not “democratic” since the “citizens” (app developers) have no say in the running of the “government” (the App Store).
Since the earliest days of jailbreaking, there’ve been alternate ways to put apps on an iPhone. There still are alternate ways. Developers could choose to go-it-alone. They don’t. As for being a market, the App Store is a market among markets. One could choose to leave it for another like Google’s or Samsung’s or Microsoft’s, or BlackBerry’s etc. All of these are markets. Selling through the Apple App Store is a choice to use Apple real estate to promote and sell your product to a group of buyers who actually buy things like apps. What proof do I have that this is true? Apple’s annual and quarterly reports. The fact that it’s a controlled marketplace doesn’t make it a non-market. Otherwise, every stock market that limits what gets bought and sold through its market (all of them) would be a monopoly as well. A market is where buyers + sellers come together for an exchange. If one half of that equation doesn’t show up, poof! No market.
Jailbreaking. I’ll just assume your joking about that. People running an App business do not want to start out with “Welcome to our web site. Before downloading our App please hack your iPhone/iPad”). In the real (business) world it’s “My (Apple’s) way or the highway (no iOS App). A forced choice is not a choice (compare and contrast iOS store [App Store only] vs. Android stores [note plural]). A “choice” to forgo the iOS market entirely is not equivalent to a choice to forgo the App Store and sell you app on your own (as is possible, e.g., in the Mac App Store but not in the App Store).
Or, to paraphrase a scene from the classic movie “The Princess Bride” (see it if you haven’t):
“Vizzini: … CHOOSE.
Inigo Montoya:
You keep using that word. I do not think it means what you think it means.”
Note: not saying there are no benefits to using the App Store (not including actually being able to reasonably distribute an iOS App) or judging whether App Store is better (by some measure) than various Android stores … just not a fan of draconian behavior.
Sorry for misunderstanding your use of “market” (I thought you were speaking in terms of open or competitive environments). Apple does indeed have a closed/monopolistic market for iOS apps (I’ll not judge whether it’s “parasitic” or not).
Again, just not a fan of authoritarian behavior … even when it’s “for your own good”. Sometimes willing to make an exception … but don’t think Apple deserves one.
I used to have a few apps I made and sold trough iTunes. It didn’t work for me but I don’t blame apple’s 30% cut for that.
As a one-man team I could never have setup an international distribution and payment system. I did not have to spend any money upfront (other than the $100 a year) and I was able to receive revenue from all around the world. I had tried similar things in the years pre AppStore and I was lucky
I also appreciate that apple makes X-Code free (if you own a Mac) along with many iOS courses in iTunes university, also for free.
In a way, the App Store also gives some protection from customers that would buy, use and return the purchase expecting a full refund after having benefited from the purchase.
Also I thank Apple for making it much harder for pirates than it used to be.
I never used in-app purchases, but I know they are huge money makers and most likely would not exist in a significan scale without app stores. Having to setup payments trough different means in every game or app would make people less willing to do this type of payments.
Discoverability is an issue in all markets. Welcome to Earth.
Tough being a small business… it is even tough being a large business.
Eventually the cut Apple takes will be reduced, similar to how they now offer subscriptions with a lower cut than one time purchases. But Apple is also a business and will try to grab as high a margin as possible for as long as possible… they have shareholders, are listed on the exchanges, and are expected to make money for the “owner / investor” class because of this.
Also, App development keeps getting easier as code generation becomes easier and easier. In the olden, olden days is was bit level coding, then assembly (I was there), then higher level execute at run time, then higher level compiled, then library linking, then object oriented, then higher level with API’s… so it is no longer necessary for a programmer to have a Phd, MS, or BS degree… just a good idea and a lot of concentration.
As an independent contractor, I feel the pain, but have no choice but to adapt.
As others have noted…. sometimes more exposure is better than more money. In this respect, Apple could do a better job.