Difference in payment and estimated revenue

[spol]

We finally got our remittance notice from Nokia this evening. The difference between estimated revenue as per the Ovi website and the payment is huge.
Our estimated revenues are 64% greater than the payment value for the third quarter. Has anyone else experienced this? How could it be so large?

[jmagic]

I got the "netting" too. Mine is exactly 70%, so I guess the estimated revenue is without the Nokia's comission. Because the figures were already so low, I was hoping that the Nokia comission was already reducted.

1 euro item is 29 cents after Nokia's expenses (Finnish SMS purchase). And 70% of that is about 20 cents. With this kind of figures, it makes no sense to sell anything for under 5 euros. Average revenue for 1 euro items is 41 cents, ranging between 24 and 63 cents.

I guess it's ADIOS for my part, I'm leaving the items on the shelf, stopping all extra Ovi related activities soon and hoping that there won't be too many support mails so that I don't have to spend any more hours on this...

ps. I havent talked to my bookkeeper yet, but there was no VAT information in the receipt, so I'll just hope I don't have to pay 22% VAT out of the 20 cents as well

[spol]

I got the "netting" too. Mine is exactly 70%, so I guess the estimated revenue is without the Nokia's comission.

No. That's not the case. I've gone through the figures and calculated the estimated gross revenue from the unit sales. The estimated gross revenue is over twice the estimated net revenue. That is, estimated GROSS revenue is less than half estimated NET.

To clarify, our estimated NET revenues are 64% greater than the ACTUAL payment for the third quarter. Anyone have any ideas why?



On an aside, I understand completely jmagic. We plan to cease all development. All staff are gone. The money I invested from selling my apt is gone.

[pr3drag]

Same here. Our payment is only 63% of the estimated revenue. I think we should have some explanation by Nokia on how they are handling the estimated revenue and why we are getting much lower payments than expected. We are very, very disappointed because we put so much efforts in this project that is turning out to be less and less convenient each day that passes.

[modifed09]

As someone who's just about to begin publishing to Ovi, can I just clarify what's happening here?

Can we use some easy maths example unit sales figures?:

Say you've all sold 1000 units in the quarter at 1EUR each.
That's gross rev of 1000EUR and you're all expecting to receive 700EUR (70%-30% split) - correct?

But what you're actually receiving is approx 450EUR (i.e. 63%-70% of 700EUR) - correct?

Well, isn't it the case then that this (from the Publisher T&C) is being applied to the actual payment figure:
"For Content priced at or below 1.99 Euros (€ 1.99), fixed aggregator billing costs will be calculated at fifty percent (50%) of the purchase price paid for Your Content after all applicable taxes, returns, refunds and bad debt expenses are deducted."

So if you were to recalculate, you'd find that the difference between what you were expecting and what you got is down to the above costs. i.e. an unknown percentage of those sales accrued billing costs for SMS purchases, returns, refunds and bad debt expenses etc. Is there no reporting about this?

Now, if you were selling at 5 euros per unit do I take it that the 50% figure above doesn't apply? That there's a fixed limit that's applicable - i.e. 99 cents?

So if we do the sums again at a 5EUR price-point for 1000 units then gross revs would be 5000EUR and fixed aggregator billing costs would be maybe 1000EUR, leaving 4000EUR gross and a nett revenue of 2800EUR.

Does this make sense? If so, then it's all about raising your price-points I guess. If not, please help me with my basic sums!

[spol]

As someone who's just about to begin publishing to Ovi, can I just clarify what's happening here?

Sure.

That's gross rev of 1000EUR and you're all expecting to receive 700EUR (70%-30% split) - correct?

No. Our net figures on the publish.Ovi website are less than 50% of the gross. That means, the publish.Ovi site would show less than €500 estimated revenue according to your example. The gross amount is the number of items sold by the unit price. The net amount is the gross less the operator billing, taxes, Nokia revenue split etc.

But what you're actually receiving is approx 450EUR (i.e. 63%-70% of 700EUR) - correct?

No. The actual payment is roughly two thirds of the net amount (€500 in your example). That would make it €330.

[modifed09]

Sure.



No. Our net figures on the publish.Ovi website are less than 50% of the gross. That means, the publish.Ovi site would show less than €500 estimated revenue according to your example. The gross amount is the number of items sold by the unit price. The net amount is the gross less the operator billing, taxes, Nokia revenue split etc.



No. The actual payment is roughly two thirds of the net amount (€500 in your example). That would make it €330.

Thanks - I see - in my example the net is €700 and the actual payment is €450 (which is roughly two thirds of €700 and is also less than 50% of the gross).

But what you are saying is that if you sell 1000 units at €1, the cost of that sale is roughly €500. And so you'll end up making around €350 (€500*70%)? - yes?

[spol]

Thanks - I see - in my example the net is €700 and the actual payment is €450 (which is roughly two thirds of €700 and is also less than 50% of the gross).

But what you are saying is that if you sell 1000 units at €1, the cost of that sale is roughly €500. And so you'll end up making around €350 (€500*70%)? - yes?

Yes but the unit sales price is above the 1.99 mark. So to arrive at €1000 gross revenue, say you've sold 333 items at €3. The net revenue is 50% of €1000. Operator billing should be 40% but not all items are paid via the operator. A substantial number of sales are in the U.S. where operator billing is not supported. Also the customer has a choice.

Perhaps, the estimated revenue shown on publish.Ovi site does not include the 30% taken by Nokia. I don't know, but if this is the case, then we're receiving around 30% of the total sales value.

[modifed09]

Yes but the unit sales price is above the 1.99 mark. So to arrive at €1000 gross revenue, say you've sold 333 items at €3. The net revenue is 50% of €1000. Operator billing should be 40% but not all items are paid via the operator. A substantial number of sales are in the U.S. where operator billing is not supported. Also the customer has a choice.

Perhaps, the estimated revenue shown on publish.Ovi site does not include the 30% taken by Nokia. I don't know, but if this is the case, then we're receiving around 30% of the total sales value.

My understanding of that billing cost clause is that for items upto €1.99 there's a 50% fee. And then there's a max rate of €1 for items costing €2+ if they're sold via operator billing.

so it seems there's little point going for a price point less than €2.

[spol]

Perhaps it's changed. I remember thinking the same thing. But the terms and conditions now state:

For Content priced at or above the nominal price of 3.00 Euros (€ 3.00), fixed aggregator billing costs will be calculated at forty percent (40%) of the purchase price paid by End-Users after all applicable taxes, returns, refunds and bad debt expenses are deducted.

Does anyone know if this has changed?

[modifed09]

Perhaps it's changed. I remember thinking the same thing. But the terms and conditions now state:

For Content priced at or above the nominal price of 3.00 Euros (€ 3.00), fixed aggregator billing costs will be calculated at forty percent (40%) of the purchase price paid by End-Users after all applicable taxes, returns, refunds and bad debt expenses are deducted.

Does anyone know if this has changed?

That's a bit steep! 40%?! So that spins the ball the other way. I don't see a business case for a percentage like that - it should be just a flat rate - given that Nokia is trying to maintain and maximise market share you'd think they'd keep prohibitive costs down. After all, it's just bits moving across a network - the price-point shouldn't enter into it. It shouldn't be scalar. Effectively what this means is that instead of the industry standard 30/70 model they've moved to 65/35. And therefore your actual payment vis a vis your estimated revenue disparity becomes clear. That's the explanation you're after.

Is there anyone from Nokia who can enlighten us here?

[jimgilmour1]

Hi modifed09,
Check these notes.Before Ovi opened 21st March 2009 I expressed an analysis of the costs for U.K. Individual Developers.
This article was updated for with more detail when Ovi store was opened.
Overview of Terms and Conditions of Ovi Publishing for Individual developers

This was further discussed in the Nokia Revenue sharing
where some of use discussed the value of SMS sales.

The main worry here is that after currency charges (UK is not Euro economy) the £0.70 per Euro would result in a loss.


Jim

[spol]

Effectively what this means is that instead of the industry standard 30/70 model they've moved to 65/35. And therefore your actual payment vis a vis your estimated revenue disparity becomes clear. That's the explanation you're after.

Indeed, it looks that way. I got an email back from accounts giving me the same information as I received in the remittance notice. I didn't expect much more to be honest.

Considering developers only receive 30% of the total sales value then the store appears even less viable than it did yesterday. This percentage will decrease further after US operator billing is included.

In order to generate an income of €100,000 - an income any decent C++ contract engineer can earn - your apps would need to generate a total revenue of €333,000. That would put you right up there amongst the elite earners in the iPhone Appstore.

You'll probably need to generate substantially more than €333,000 gross revenue because you also have to pay VAT on your sales.

Forgetting about VAT for the moment and all the other cost associated with Ovi, selling an app for €3 means that you need to sell just over 300 units each day for twelve months. No-one selling on Ovi is coming near that figure. As I said that's an number more appropriate to the iPhone.

And if you're thinking of building up a portfolio of apps, think again. You're going to spend a lot of time re-engineering the UI over the coming year.

Ohh, and it appears that the majority of sales are in the high end devices and not in mid tier phones. That means, you've got to support two different operating systems over the next year. You'll be lucky if you can support one app over a twelve month period.
This is the reality of Ovi.

[proberts]

That's a bit steep! 40%?!

For PSMS billing, that's pretty good actually. Rates are typically 40%-60% based on price. It's totally screwed up, and that's why everyone wants the carriers to become dump pipes. Their 50% cut just to bill their customer (compared to credit card compaines that charge around 3%) has hindered the mobile app market more than anything. Why should a developer create a high-end app customers are willing to pay $20 when the carrier is going to take half just for the processing the billing transaction.

Well, at least IMO... :P

[modifed09]

Hi,
Before Ovi opened 21st March 2009 I expressed an analysis of the costs for U.K. Individual Developers.
This article was updated for with more detail when Ovi store was opened.
Overview of Terms and Conditions of Ovi Publishing for Individual developers

This was further discussed in the Nokia Revenue sharing
where some of use discussed the value of SMS sales.

The main worry here is that after currency charges (UK is not Euro economy) the £0.70 per Euro would result in a loss.


Jim

Jim - I don't think currency fluctuations enters into this do they? Aren't we talking percentages? Like I said up top, I'm about to publish an app here and I'm a little suprised that given Nokia's recent financial performance and smartphone market metrics, they're seeming to be squeezing the very people who are going to help them out.

My point is that say I have a 5Mb app - why should I have to pay more if I price it at €30 than if I price it at €10? I mean, surely this is not about a multi-billion dollar enterprise taking 40% off my margin just because my app is worth €30? Nokia should be encouraging quality by saying 'hey we don't care what the price-point is guys - we'll just charge you a flat €1. Whaddya reckon?