Comment by bryanlarsen
1 day ago
My understanding was that the retailer margin was 50% and the distributor margin was 10%. So Apple/Steam/etc went "half of 60% is a great deal".
Of course the retailer margin is never actually 50%. That's theoretical if 100% of product is sold at MSRP. Actual retail margins are about 25% because of sales, write-offs, et cetera.
OTOH when there's a sale in Steam, they still get their full cut (of the reduced price).
I remember writing apps for PalmOS (long time ago) distributors like PalmGear took over 60% from international developers like me, plus they held your earnings until you hit a minimum payout threshold. Add bank fees on top of that, and it was basically not worth developing for the platform. 30% felt like a godsend in comparison. (I'm not defending the Apple / Google tax)
From what I could find, it does seem that major retailers back in the day (CompUSA, Circuit City, etc) were only making 15% margin on software sales. This is much lower than other product categories - but also software didn't take up much floor space.
its agency model vs retail model. Recall - Amazon hated the agency model, where the publisher sets the price (and 30% cut goes to app store - Jobs sold this as amazing deal). Retail model the retailer sets the price, and the publisher is guaranteed the wholesale price. Amazon preferred the latter because they competed on dynamic price setting. this was so long ago we forget.
It coupled the small floor space with high prices, and an extreme overall easiness of management (low weight, resistance to small impacts, possibility of stacking, etc).
So that margin not only had to pay for small management costs, and had small opportunity costs on the floor space, but it also was divided by a large unitary price.