Posts tagged Forrester Research

The question comes down to this: Is 30 percent a fair price for Apple to charge? I do not employ the word “fair” the way my children often do. I am not whining about Apple’s right to charge whatever it wants. Apple may do whatever is best for shareholders in the short- and long-run…

But none of that questions the ultimate morality of Apple’s decision or its rights.

I use the word “fair” to refer to a state of economic efficiency.

A fair price is one that maximizes not just individual revenue, but total revenue across all players. Such revenue maximization cannot be achieved without simultaneously satisfying the largest possible number of consumers with the greatest possible amount of innovation.

It is on that basis that I declare Apple’s 30 percent pricing unfair. How do we know what a fair price is? In an efficient market, fair prices land somewhere close to the cost of delivering services. This happens thanks to competition: As long as there is excess profit in the system, a rational competitor will lower prices to attract more customers until margins are thin enough to survive on but not amply so.

Forrester Research’s James McQuivey on the economic value and “fairness” of Apple’s latest push into paid subscription services for developers.