I’ve lived in the USA since 1986. I have lived without the support of the British West Indies community for a very long time. Without a British West Indies immigrant population in this part of New Jersey, I have forgotten most of our customs and food. The culture is becoming a distant memory only sparked once now and again by some random thing.
Tonight Bhavna cooked bay scallops.
I apologise to Nicola for the ranty response. Still, this whole “It’s Apple’s fault that independent software developers can’t make a living wage” is lazy thinking.
Brent Simmons and others are ignorant and have no real clue are about markets. I don’t have more recent data, but in 2017 retail giant Wal-mart’s total corporate gross margin has been about 30%. It varies depending on the market. According to Wal-Mart, the NET profit is about 1.5%.
In general, it seems the average wholesale or distributor markup is 20%, although some go up as high as 40%. It varies by the industry for retailers: most automobiles are marked up 5-10% (and there is consumer haggling). In comparison, it’s not uncommon for clothing items to be marked up 100%. Consignment stores can sometimes have a markup of 50% to 75%.
But let’s talk software. In 2019, Microsoft had US$125 billion in revue. Gross margin was US$82 billion or 50%. Net revenue (after expenses) was US$31 billion or 30% profit margins. Apple’s cut of subscription revenue drops to 15% after the first year.
Apple has money because they properly manage costs against profit and do not operate any business areas at a loss. Apple is a business, not a charity. Tim Cook would have to show that reducing the 30% to 10% would lead to increased revenue or that keeping the 30% would lead to decreased revenue. FYI, Google takes 30% of the revenue made on each Android app sold and gives the rest – 70% to the developers and gets similar complaints from Android OS developers.
So what do you get for that 30%?
- Full commercial use of a commercial-grade SDK
- Enterprise-level secure payment processing.
- App hosting, and basic marketing.
- Cloud storage for your apps
- A global audience
What is the value of securely processing credit cards, dealing with fraud, hosting apps, providing a method of distribution (with updates), ensuring copy protection, providing exposure, and giving the consumer the same peace of mind as big-name chain stores in terms of security and privacy?
It’s important to keep in mind that the markup is the ratio of gross profit to sales price, not net profit to sales price. In some circumstances, overhead and other costs not included in the net cost calculation can mean that even a high markup percentage will generate only a modest net profit.
I think the problem with some independent is they are simultaneously arguing that independent software is undervalued by Apple while also arguing that Apple’s software, server and bandwidth costs are negligible. It’s disingenuous. The problem isn’t Apple’s 30%; the problem is that software developers have created a market where consumers want quality software cheap or FREE but software developers are not pricing their software correctly to earn a living. I think that many independent software developers spent so much time thinking about engineering the product that they completely neglected the marketing and sales aspect of the product.
I think the problem is that an expectation was created back in the early years when the price of entry to riches as an app developer was downloading of X-Code and a few months of perseverance. That time has passed. Actual programming, for the most part, is a commodity trade these days. But the real software professionals have arrived, and consumer expectations of quality are higher. Software developers are among the highest-paid individuals in the USA. Their starting salaries are higher than for most college graduates, and they have much higher salaries than nurses, teachers, etc. Mobile developers may command higher wages for mission-critical business software.
In other words, mobile app development is big business, but many developers are still behaving like hobbyist.
Brent mentioned salaries and about his friends at the Omni Group. The Omni Group is located in Seattle, Washington. Seattle Washing has a cost of living index of 172.3. That means it’s 1.7 times more expensive than the average of the USA. Seattle is the most costly part of Washington State. The area where I live is 1.94 times more expensive than the national average. It’s also of the most expensive places to live in New Jersey.
Suppose Omni Group relocated to some other part of Washington State or a cheaper part of the USA, e.g. Austin, TX. With the lower cost of living of Austin, TX, that $50,000/year example salary in Seattle, WA would be like getting a 56% raise in Austin, TX.
These types of conversations can be summed up as more entitlement bullshit: “I work hard to write code as a small independent software developer. Why don’t I have a million dollars in the bank, a 4000 square foot home, two luxury cars in the driveway, and tuition for my kid’s private school like Mark Zuckerberg?”
What are these independent software developers going to do when the software developers in India start competing with them? In India’s tech hub in Bangalore, which is often described as “Little Silicon Valley“, the average monthly income is US$698 after taxes. In Seattle, it’s $5,646. Perhaps the OMNI Group should relocate to Bangalore. US$50,000 goes a long way in Bangalore. The 2018 average US mobile app developer yearly salary was $107,000 while the 2018 average Indian mobile app developer yearly salary was $4,100.
What are independent software developers going to complain about if someday, Apple opens the Mac and iOS App Stores to open source software? Yes, it’s unlikely to happen, but it would depress sales. Just ask the Android developers trying to make a living while competing with free and open-source software on Google Play.
There is a lot of useful information on the Business of Apps website. Still, I found the information in multiple places.
- Cost of living Bangalore vs Seattle, WA: https://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=India&country2=United+States&city1=Bangalore&city2=Seattle%2C+WA
- Cost of living Seattle, WA vs Austin, TX: https://www.bestplaces.net/cost-of-living/seattle-wa/austin-tx/50000
- Wikipedia article on Bangalore: https://en.wikipedia.org/wiki/Bangalore#Economy
- How to Calculate Markup and Margin for Retail: https://thegrocerystoreguy.com/how-to-calculate-markup-and-margin-for-retail/
- What Is a Normal Markup Percentage: https://smallbusiness.chron.com/normal-markup-percentage-80750.html
- The Ultimate Guide to Smart Software Pricing Strategies: https://www.toptal.com/product-managers/product-management/software-pricing-strategy-and-architecture
- Microsoft Annual Report 2019: https://www.microsoft.com/investor/reports/ar19/index.html
- PROFIT MARGINS: YOU’RE DOING IT WRONG!?: https://bimpos.com/blog/defining-profit-margins-in-your-business-are-youre-doing-it-wrong
- Don’t Roll the Dice: 4 Rules for Pricing Your Software Product: https://www.impactbnd.com/blog/pricing-your-software-product
- Opinion: Google’s 30% cut of Play Store app sales is nothing short of highway robbery: https://www.androidpolice.com/2018/09/22/opinion-googles-30-cut-play-store-app-sales-nothing-short-highway-robbery/
- App Developer Salary Guide (2018): https://www.businessofapps.com/app-developers/research/ios-android-developer-salary/
Submitted for the 100DaysToOffload project.