Comment by michaelt

> and that's very little overhead for then.

Do you actually know this or are you making an assumption? The App store seems to me like it would have some significant overheads both in cost and executional complexity.

This[1] article posits that Apple made $4.2bn p.a. from app store revenue share in the period 2008 - 2018.

Here are some of the things I would put into the cost lines for Apple's app store P&L (the company operates a combined P&L):

1. Multiple data centres dedicated to the app store and routing third-party notifications. That's both hosting of the apps and ongoing cost associated with e.g. push notifications, software updates. Each of these data centres has energy, staff, hardware costs. That is to say: there is both opex and capex here, which means Apple isn't only netting ongoing costs from revenue but also thinking about the cost of the capital invested in infrastructure up front.

2. The card processing charges associated with customers buying the app in the first place, and subsequent in-app purchases.

3. The cost of Apple's App Review Teams (three dedicated offices: Cork, Shanghai, Sunnyvale). That's 300 people.[2] There are costs behind them, too (for example: recruitment, HR, management).

4. Product and engineering costs associated with the team Apple has working on internal systems and services dedicated to app review.

5. An apportionment of costs associated with customers seeking technical support in-store and online due to third-party apps.

6. An apportionment of costs associated with the development and maintenance of services and APIs which Apple develops and makes available to app developers. (For example, sign-on with Apple.)

In 2018 the app store had seen 130 billion apps downloaded[3], with an average app size of 38mb[4]. That's 4.94 exabytes of data excluding updates.

Microsoft for many years charged Xbox developers for certification of games and patches, in part because of the bandwidth costs of distributing those patches to its customers, but also because providing this sort of service is mired by multiple perilous overheads -- which, I have to say, people on the web tend to misunderstand/ignore/dismiss.

I think what you might mean to say is that the app store is still a wildly profitable endeavour for Apple. I actually don't know if that's true or not. I know that Apple doesn't usually do things for free or at break even, but equally they run a combined P&L because breaking out the profitability of every single revenue line is very difficult.

In this instance, you could say: iPhone is a very profitable product, and app store is part of that. But dismissing the overheads or complexity of delivering a consumer app store on this scale seems clumsy, at best.

[1] https://www.theverge.com/2019/3/20/18273179/apple-icloud-itu...

[2] https://www.cnbc.com/2019/06/21/how-apples-app-review-proces...

[3] https://www.appannie.com/en/insights/market-data/data-behind...

[4] https://sweetpricing.com/blog/2017/02/average-app-file-size/

> they do count pennies

Counting pennies means saving money. It does not mean driving revenue through low-cost licensing sales.

I think your point is that Apple has such significant scale that just charging a few bucks a year to a fraction of their users means that they make what you or I would consider to be significant revenue.

> if only 10% of its users buy a new cable every year at $1 net profits that is $150m a year

My points, summarised:

1. As someone who is extremely familiar with Apple's business, MFI looks like it's as much about minimising costs and preserving CSAT than driving revenue.

2. We can at least infer that even if the ludicrous (sorry) assumptions you've made are true, we're talking about a business line which contributes less than 1% to Apple's bottom line. The total revenue generated by MFI is likely to be far, far less than that: I imagine in the order of $80m USD a year, on a company which -- again -- does $250 BILLION a year of revenue.

The crux of my argument is: Apple does not care sufficiently about selling you cables and dongles to derange engineering decisions on their products. Nobody at Apple is saying "let's not switch to USB-C because we can keep making money from MFI and lightning dongles."

People constantly make this bullshit claim that Apple makes engineering decisions so that they can sell you a dongle or a cable, and it's so patently illogical that nobody should feel happy repeating it.

Can you please substantiate why you believe there to be zero expenditure associated with the MFI program? The MFI certification team at Apple do not work for free.