People talk a lot about how much Apple charges for its App Store, especially that 30% “Apple Tax.” But what about the profit margins of the companies selling software on the store? Is there a reasonable profit level they should aim for? It’s a question rarely asked, even though it’s really important.

Why Do Big Software Firms Want to Keep Their Profits High?

Major software companies, especially those making billions, want to sell their apps outside of Apple’s store. They aren’t doing this to lower prices for consumers. Instead, they want a bigger piece of the pie for themselves. Apple’s 30% cut cuts into their profits, and big firms see that as money they should keep.

When these companies push to open up other sales channels, they’re really after the margins. They prefer to keep their software sales outside Apple’s system so they can avoid paying the commission. But if they succeed, Apple might have to raise fees or increase costs for developers who stay in the store. That could make Apple’s system less appealing and hurt smaller developers who rely on it.

What Do Experts Say About Profitable Margins?

Aswath Damodaran, a well-known finance professor, keeps track of profit margins across industries. According to his data, Apple’s 30% App Store margin is tiny compared to the margins for software companies. Software firms, on average, enjoy margins of around 72%. That’s huge.

This high margin shows how profitable software is. It also means that government subsidies, or the money spent on licensing and software, are a small part of the bigger picture. Big firms like Microsoft have margins near 44%, and other high-margin industries include retail real estate, pharmaceuticals, and financial services. Even tobacco companies enjoy margins close to 62%. So, who is really taxing whom here?

What Value Does the App Store Provide?

Despite the high margins for software firms, Apple’s App Store offers a lot of value. It provides global reach, protection from malware, developer tools, customer support, fraud prevention, and secure payment processing. Last year, Apple blocked $2 billion worth of fraud.

All these services cost Apple money. So, what should be a fair profit margin on the store itself? Apple’s share seems modest compared to the high margins in software. The real money comes from selling the software, not running the store. The App Store revolutionized software sales by eliminating physical distribution costs, allowing developers to earn more from each sale.

But the debate continues. Critics want other companies to create their own stores without Apple’s restrictions, which might lower quality and privacy protections. These alternatives might not offer the same level of support, privacy, or security that Apple provides. Still, they want to keep margins high without discussing what’s a reasonable profit margin.

Ultimately, this is about money. Some argue that business should be based on what customers are willing to pay. Others push for government intervention to limit profits. But the real issue is who’s controlling the profits—Apple or the big software firms? It’s a fight over margins, control, and customer experience.

Instead of innovating or improving efficiency, some companies prefer maintaining the status quo, supported by governments that seem more interested in generating revenue than protecting consumers. The focus should be on fair profits and good service, not just maximizing earnings at the expense of customers. As the saying goes, follow the money—because that’s where the real story is.

Inspired by

• https://www.computerworld.com/article/4040367/life-after-the-apple-app-store.html

Sources

• gmpg.org
• applemust.com
• nyu.edu
• applemust.com
• vivaldi.net