Why is Microsoft taking such a large bite from developers pockets?

OldHippie

Microsoft Windows 8 will feature a built-in App Store, just like Apple's OS X Lion. In a case of mistaken identity, Microsoft has decided to not only copy the App Store, but also the extremely high profit margin of 30% from the sale of every app. On the one hand, developers will be hard-pressed to find a more convenient way of selling their products to new customers. On the other hand, this is a fairly exorbitant sum compared to the percentage markup that software development companies usually persue (10%-20%). Why are Microsoft doing this? They are likely to push smaller developers towards 3rd party markets rather than developing happier developers.

Topic: Software
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Smail Buzzby
Vote Up (39)

You answered your own question - Apple has shown that some people are willing to pay too much for the illusion of luxury and now everybody is starting to see the world through even more money colored lenses.  HP talking about dumping the worlds largest selling PC business because they don't make Apple-like margins.  All the tablets and phones that would be priced cheaper if Apple hadn't paved the way for stupid greed. 

The fad that is Apple will subside once there is serious competetion - a different OS and nice hardware.  That is coming soon.  The attempts to gouge everybody for everything will linger much longer, I fear.

junkdubious
Vote Up (37)

I don't think MS can provide Apple level service without completely owning the software(OS&firmware) and the hardware. You would need a Microsoft PC of some kind not the cadre of PC's running Win 8. Before we even buy a PC, PC makers have a choice of which OS to include. Windows 8 still has to compete with Vista, Windows 7 and in some cases XP. It kind of makes it difficult to encapsulate features to monitize them into services. The bottom line is MS just wants to sell you an OS and services to go with it. Intel, Lenovo, Asus, Western Digital and the many thousands of PC components makers would not have a horse in that race. They would want a slice of that pie. Again you would need a Microsoft PC. Which you can only market to consumers. Businesses, which would rather have thin clients, would have no part in this. My solution, time for a new XBOX/PC.

jlister
Vote Up (34)

Microsoft isn't just copying Apple's profit model, they're copying the business model by offering to check each Metro app for sale to insure that it isn't malevolent code, which offers the customer some piece of mind that the $3 app they just purchased isn't rootkitting their hard drive or emailing their Quicken data to some hacker in Somalia. This means Microsoft will need to staff up a substantial team to check the apps and authorize them, and to deal with customer complaints after the fact. 30% is not that big of a cut until you start hitting $100, and since this covers the Metro apps exclusively, there might be very few apps that are priced over $10 if developers choose to follow the successful pricing models of Rovio, PopCap, and Inventive Inc.  The main thing is to make up for low prices by selling lots of high-quality apps.

jimlynch
Vote Up (27)

Apple set the precedent, and now Microsoft is following in their footsteps. That's really all there is to it. Plus you know that Microsoft is quite greedy on their own, and if they think they can get away with it then they'll try it. It's how they've always behaved.

Of course, no developer has to put their apps in Microsoft or Apple's store. People can still buy apps elsewhere and install them. But there's definitely a convenience factor that will appeal to a lot of people so it's probably worth doing.

Scientific Bob
Vote Up (20)

The store runs on a big-a*s data center.  There is a certification process for the store apps and this requires people.  This datacenter and those people costs loads of money.  It needs to be paid for some way or the other. 

 

Consider the analogy of an actual physical store instead of a digital one.  Would you, as a product manufacturer, be able to sell your stuff in some store and get 100% of the money it goes for at that store?

Off course not.  In fact, that physical store will keep a LOT more then 30%. 

 

Now, consider software in a physical store.  If your piece of software costs 50 bucks at the store, how much of that 50 bucks will YOU, as the manufacturer, actually get?  Far less then 70%, I can guarantee that.  Now also consider that you will have additional costs in that scenario as well: boxing, cd burning, cd labels, transport, etc....  So, really, 30% is not bad at all.  In fact, I'ld dare to say to you wouldn't be able to do it otherwise and do better!

 

Having said that, the 30% drops to 20% once your app hit the $25k mark in revenue.

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