Follow-Up on GM’s ‘Edsel’ Pipe Dream for Tens of Billions in Annual Services Revenue: Apple Makes Most of Its Services Revenue From the App Store

In my piece yesterday digging into the numbers on GM’s plan to generate $20–25 billion in annual subscription services revenue by the end of the decade, I originally neglected to mention (but have since added) the single largest source of services revenue for Apple: the App Store. Here’s Kif Leswing reporting for CNBC in January this year:

On Tuesday, Apple said it has paid $320 billion to developers, up from $260 billion as of last year, a jump of $60 billion. Developers receive between 70% and 85% of gross sales, depending on if they qualify for Apple’s reduced rate.

If all developers paid a 30% cut to Apple, Apple’s App Store grossed more than $85 billion in 2022, based on a CNBC analysis. If Apple’s commissions were all 15%, the App Store’s estimated gross would come in lower, around $70 billion.

I’m not quite sure how to square these estimates with Apple’s figures from their quarterly reports — according to Apple’s reports, the company only booked a total of about $80 billion in services revenue for 2022. And we know from the Apple v. Epic lawsuit that 70 percent of App Store revenue comes from gaming.

[Wait wait wait I figured it out: My bad for misreading the numbers (which I think were confusingly described). I mistakenly thought Leswing was saying that Apple’s commissions were $70-85 billion last year. That’s not what he meant and that’s obviously far too high. But the math is really rather simple. $320 billion is the sum of Apple’s cumulative payments to developers from 2008 to 2022. $60 billion is what Apple paid to developers in 2022. Duh. Of course they didn’t pay $320 billion last year alone. So let’s assume that Apple’s average commission from App Store purchases is 25 percent, which seems both fair (given that 70 percent of App Store revenue comes from gaming and in-app purchases carry a 70/30 split) and makes the math really easy for last year. With $60 billion in payments to developers in 2022, Apple’s take was $20 billion. So about one quarter of Apple’s services revenue comes from App Store commissions — that squares perfectly with a common sense estimate. (Also: the fact that almost 20 percent of the App Store’s cumulative revenue was generated last year alone goes to show just how much it’s still growing.)]

How in the world does GM CEO Mary Barra think they’re going to replicate anything like this? Why drop support for the much-liked CarPlay — a feature Apple says 79 percent of new car buyers in the U.S. want — to chase a pipe dream? I can’t put it better than James Dempsey quipped on Mastodon: “It’s like CurrentC, but for cars!”

But it’s even worse than that, because at least the CurrentC consortium’s ill-fated scheme to avoid supporting Apple Pay at brick-and-mortar retail stores came at a time when Apple Pay was nascent. Back in 2014 a survey never would have found that 79 percent of U.S. shoppers wanted Apple Pay support at the register. GM is making this move now, after CarPlay has become both standard and liked by an overwhelming majority of buyers — including GM’s own customers.

Wednesday, 17 May 2023