Apple: We didn't take commission on 90% of App Store sales and billings

Apple and Epic Games have delivered their final arguments in their California bench trial, but Cupertino is still ratcheting up the charm offensive, revealing the App Store "facilitated" a 24 per cent hike in billings and sales in 2020 to a record $643bn. The data comes via a study [PDF] from economic consulting outfit The …

[Falmari]

Charm offensive

I don’t think Apple are doing themselves any favours with this charm offensive trying to look like they are the good guys. It looks like the Judge has already seen through this with his question on apps like Epic’s subsidising the free apps. Yet still they continue this strategy.

15% on app makers who are below a certain revenue level does not look like helping smaller app makers it looks like they are ripping off the bigger ones. An app maker on 30% who generates twice the revenue of an app maker on 15%. If they were charged the same % of revenue generating twice the revenue gives Apple twice the money taking 30% means Apple get 4 times the money. The costs to Apple having the App in their store, security review etc are the same no matter how many sales there are.

Now 90% of transactions Apple don’t take a commission means that the app makers generating 10% are paying to support makers of apps that generate 90%. Looks like the few are subsidising the costs of the many. Some of those many are generating more revenue having an IOS app than Epic. Uber for one and Amazon way more than anyone else.

That does not make Apple look like good guys. It makes them look like dictators who with absolute control of the store can do what they like. Extort certain sections of the market gamers and game makers so other sections get cheaper or free apps.

[mevets]

Re: Charm offensive

The charm offensive isn't for the judge; it is for the politician that will over ride the judge. It isn't whether or not you bribe, it is how you maximize your influence to the point permitted by law.

[razza]

Re: Charm offensive

True. A vile and filthy business it is to, but still...

This is a biggie though for the future of the web and Apple lose whatever the result. U cant hide from web-apps Apple. They are here, we all use them daily and the walls of your 2000's-style walled garden crumble to the trumpeting sound of the next-gen telling you that ur bullshit post-hippie bollocks is out of date, Grandpa.

You are old tossers. We are the new tossers. Our toss is fresh and more suited to the next-gen.

"They’re selling Hippie wigs In Woolworths"

[RyokuMas]

Re: Charm offensive

"U[sic] cant hide from web-apps Apple"

Google and the like have been trying to push us to web-apps for years - the truth is that if the app in question is something you download from the relevant store for your device, the expectation is that its UX is in-line with that of the device. Apple users want iOS apps to look like iOS apps, while Android owners want their apps to look like Android apps, and these half-baked attempts to create an app that is actually just a webviewer pointing at a website are often deemed clunky and less user friendly. This is why the concept of the native app persists.

Then of course, there's "games" (although I use the term lightly as most seem to be about flogging IAP or delivering ads more than actual gameplay) - the biggest share of the mobile market. Ultimately, game developers are looking for performance, which will always be better running on native hardware than in a browser. And since most game engines give the option to build for native, I can't see any game developer voluntarily take a performance hit for no reasonable pay-off.

[doublelayer]

Re: Charm offensive

Web apps versus native apps is already Apple's argument. They're using your argument to support their walled garden. Keep that in mind.

Web apps are inconvenient for lots of reasons, which is why most apps are still native. While the systems exist for JS to do most of the things a native app always could do, most web apps don't really function like native apps. Most of them are tied to a backend service which does all the work, don't maintain persistence of everything, require network connections where a native app doesn't, or just run more slowly. Many app developers who like using JS use a framework where they write the frontend in that while keeping backend stuff in whatever on-device language they like. That often makes for a better user experience.

[Anonymous Coward]

Re: Charm offensive

Web Apps are inconvenient and a poor experience for a lot of reasons, but have the overwhelming advantage of Apple not having a veto.

It doesn't matter how much better a native app would be if you have no way of releasing it.

[RyokuMas]

Re: Charm offensive

"... but have the overwhelming advantage of Apple not having a veto."

While potentially suicidal from a PR perspective, Apple has the capacity to block web requests at the OS level, so technically, Apple could control the availability of web-apps on their devices.

[coconuthead]

Re: Charm offensive

The judge is female (Yvonne Gonzalez Rogers).

[Schultz]

Walled Garden

So Apple tries to defend their walled garden (think Disneyland), where everybody entered by their own volition and is happy to pay in FantasyPark money (we'll take it from your credit card with a 30% markup, thank you). Only the garden is more like a market place, where the evil count taxes every trade and has his goons ensure that nobody deals on the side.

Most modern societies did away with arbitrary taxation by local powers. Remember that the opposite was quite common throughout most of human history: you could be born with the right to tax (or be taxed, go complain to your villager parents), you could buy or bribe your way into the position of a for-profit tax collector (doesn't everybody love Julius Cesar), and you could even buy a monopoly from fairly modern governments, e.g., guaranteeing your income whenever someone would light a match. Didn't create all too stable societies though and came at a cost to the economies.

[Jason Hindle]

I think Apple will partly lose this one

I’m not expecting a complete win for either side, but I’m expecting the final judgement to blunt some of Apple’s sharper practices. Apple’s walled garden is, in effect, Apple’s house and of course Apple gets to decide who gets invited to its house party. What happens beyond Apple’s house, on the other hand, is an area where Apple should have less influence. I’m therefore expecting two significant changes:

- Links to developer sites unrestricted in both the App Store and the App, facilitating a more direct relationship between the developer and end user.

- And I think also differentiated pricing between App Store and developer website.

For most smaller developers it’s going to be business as usual. Letting Apple take care of payments processing will continue to make sense. Likewise, for most end users who will continue to find the path of least resistance is to hand over their fingerprint (or face) and let Apple take care of the rest. But Apple will likely have to expect the loss of a fairly hefty chunk of revenue.

[Anonymous Coward]

Re: I think Apple will partly lose this one

> "Links to developer sites unrestricted in both the App Store and the App"

I'm (nearly) certain there is also a clause in the contract between the app store owners and the app developers not permitting out of band transactions.

Suppose an alternative to the out of band contract is offered - then what alternative metric and method will Apple use to calculate a price? The only ones I can imagine are something like X * yearlyFee + Y * usageTime + Z * bandWidth, and the developer will be billed.

But since Apple still has a monopoly on iOS phones, and Apple and Google together on all consumer phones, than why would you expect the X,Y,Z pricing to end up any cheaper?

In conclusion, it doesn't seem to me that charging a % fee and imposing a no-out-of-band payment condition is the issue - the issue for Epic is the lack of competing app-stores who will lower their prices to get the business of Epic and similarly sized app companies.

[Pascal Monett]

Revenue $15bn, cost $100m

100 / 15000 is a ratio of 0.0066%.

As I have repeatedly said, 5% is largely enough.

[gnasher729]

Re: Revenue $15bn, cost $100m

Pascal, please go back to your school and ask for a refund for your maths education.

And I bet that Congress critter estimating the cost at $100 million has some real experience running businesses. Mostly into the ground.

The annual cost of WWDC alone is about $50 million.

[Falmari]

Re: Revenue $15bn, cost $100m

@gnasher729 "The annual cost of WWDC alone is about $50 million."

What has that got to do with the cost of running an app store? They would be running the WWDC even if they did not have an app store. They have been running it annually since 1987 long before the app store. So obviously they think it is cost effective to run, it benefits them to have WWDC, it is not a cost of running an app store.

[gnasher729]

Re: Revenue $15bn, cost $100m

Falmart, who do you think pays for WWDC?

[doublelayer]

Re: Revenue $15bn, cost $100m

Apple pays for it. Out of their general revenue. Because they think it benefits them. They also charge the participants for some of the costs and could increase the ticket price if they needed to. It is not a value to the vast majority of developers on their platform who don't go to it and it has nothing to do with their store as it preexisted the store.

[Fruit and Nutcase]

Re: Revenue $15bn, cost $100m

WWDC - the attendees pay

[Anonymous Coward]

Re: Revenue $15bn, cost $100m

Given how much they make from each device sale, every device purchase easily funds the app store activity for the device's lifetime, and then some.

Treating or comparing it to an some ongoing overhead expense is ridiculous, the app store is integral to the device experience by Apple's own design and choice. If there was an app store with no apps, the iphone would be an untenable product.

It's some weird logic - like expecting sim card operators to pay a fee to use iPhone microphones, because there was a development cost to put a microphone in, and pretending the phone purchase didn't pay for it already

[Rol]

Re: Revenue $15bn, cost $100m

Apple, can if they so wish, counter the congress critter's estimation with the real, audited amount. They can also, if they wish, just keep wafting vague numbers into the air and avoid the plain truth, that they are taxing their customer base with a very mean and absurdly arrived at value as per VAT.

Here in the UK, the government grubs 20% on "luxury" item purchases through value added tax, and in return it funds a wealth of public services and welfare assistance.

Apple grubs 30% from its customers, and returns just a fraction of a fraction of that in their service offerings.

On the other hand, just as communism finally chewed off its own foot and the wall's came tumbling down, rampant inhuman practices will eventually destroy capitalism as an economic doctrine, and the more Apple like companies that exist, the sooner it will happen.

People don't like paying taxes to the government, but once they realise they're paying double tax to private corporations.....the worm will turn...and suddenly, the 1% will feel very vulnerable.

[Anonymous Coward]

Re: Revenue $15bn, cost $100m

@"Here in the UK, the government grubs 20% on "luxury" item purchases through value added tax, and in return it funds a wealth of public services and welfare assistance."

Out of date and inaccurate, VAT is only one tax collected, income tax may be more significant to state service funding

[Rol]

Re: Revenue $15bn, cost $100m

whoosshhh!

[Strahd Ivarius]

Re: Revenue $15bn, cost $100m

Pretty sure that as usual the VAT collected is several orders of magnitude higher than any income tax...

[Joseba4242]

Why not Amazon?

Amazon, Netflix, etc - why are they allowed to use their own payment gateways and hence not pay the 30%?

[Kibble 2]

Re: Why not Amazon?

Perhaps the biggie companies own a large enough chunk of Apple: I. don't know however.

[doublelayer]

Re: Why not Amazon?

Well, if you're accepting Apple's logic, because Amazon's products are physical and not digital (excluding those products which are digital and still use Amazon payments), they don't come under the requirement. Or maybe just Amazon wouldn't accept it and they know it.

[Anonymous Coward]

Re: Why not Amazon?

> if you're accepting Apple's logic, because Amazon's products are physical ...

Doesn't hold water for Netflix's products though, unless I've seriously misunderstood what "streaming video" is all about.

> Or maybe just Amazon wouldn't accept it and they know it.

Sounds more like it.

[Falmari]

Re: Why not Amazon?

Netflix are not allowed to use their own payment gateway on IOS though I think they are on the 15% charge.

[gnasher729]

Re: Why not Amazon?

You can’t pay for Netflix through the Netflix app on iOS. You can guess why Netflix doesn’t let you.

[Falmari]

Re: Why not Amazon?

Let me guess.

I got it, because Apple will not let Netflix use their own payment gateway. Do I win a cookie?

If as you state you can't pay for Netflix subscription in app on IOS it is because Apple won't let them use their own they have to use Apples, so Apple can take a cut. That's the whole bloody reason for this case.

[gnasher729]

Re: Why not Amazon?

The rule is: Anything that goes in your device goes through Apple _if_ the purchase is made through the app. Anything that goes elsewhere or is purchased through the internet doesn’t.

Amazon goods don’t go on my phone. Amazon Prime isn’t paid for on the phone. Netflix isn’t paid for on the phone. Uber is a taxi service, it doesn’t go on your phone. Epic can sell little figures that you put on your physical desk through their own system.

[Gordon861]

Just Make it Physical

Instead of charging players for their in-game money sell them postcards that you actually send to the customers address.

Each postcard then comes with free in-game currency that we will email to you immediately, please enjoy your postcard.

[Dan 55]

Re: Just Make it Physical

Apple would just change the rules so physical objects linked to a digital currency aren't allowed unless Apple's own card processing was used to buy it and companies would be stuck with a bunch of useless postcards.

[gnasher729]

Re: Just Make it Physical

You are making that much too complicated. Pay through the website, pay through an Android app wit different terms. Apple charges only for purchases made _from within the app_.

[Ottomatic]

Apple prohibiting alternative payment methods is exactly what eBay used to do when they ran PayPal. Paypal was the ONLY way you could pay for a purchase. It was the eBay way or the highway. That mentality screwed over the sellers, the buyers and everyone in between. That was finally changed but it took 20 years to do so. Even if Epic wins, Apple will drag this out in the courts for decades.

[TRT]

It changed, I expect, because they found a way to make money doing it the other way too.

[Anonymous Coward]

I have zero background knowledge about this, but I am curious about how Epic prices it's games on different platforms. I can see on the website www+epicgames+com/store/en-US/ that the game "Red Dead Redemption 2" currently costs $40.19. The site FAQ says "The Epic Games Store is a curated digital storefront for PC and Mac".

I am curious - before being banned, did Epic set the Android/iOS price to cover the extra charge = $57.41? Or do they for some reason keep the price the same on all platforms?

Another question - why does the fact that iOS and Google both charge 30% not bring about a claim of price fixing? (Of course it needs to be proven.) The fact that there is no competition seems to be the root of the problem.

[Anonymous Coward]

I seem to remember that part of the apple terms is that you could not offer the same thing elsewhere cheaper than the app store price (although I may be incorrect).

On the price fixing front Apple use the argument that other makes of phone are available with other app stores, Google use the argument that other app stores are available (but not pre-installed) via android phones and they have no control over the charges (or lack of them) made by the other app stores

[Anonymous Coward]

> I seem to remember that part of the apple terms is that you could not offer the same thing elsewhere cheaper than the app store price (although I may be incorrect).

If that is true - as the DC is claiming it is for Amazon - it is apparently basis for a lawsuit [arstechnica, "amazon-sued-over-policies-that-forbid-lower-prices-on-other-websites"]

> Google use the argument that other app stores are available (but not pre-installed) via android phones and they have no control over the charges (or lack of them) made by the other app stores

I did recently read (but can't find now) a statement by Epic as they gave up on alternative app stores, saying the gave up because the games would constantly be interrupted by warning messages.

> On the price fixing front Apple use the argument that other makes of phone are available with other app stores,

So there are two phone OS's, actually with one store each, and they both take exactly 30%.

It seems to me the real issue whether the app-store business is non-competitive, and there is price fixing going on.

From the FTC website

> Price fixing is an agreement (written, verbal, or inferred from conduct) among competitors that raises, lowers, or stabilizes prices or competitive terms. Generally, the antitrust laws require that each company establish prices and other terms on its own, without agreeing with a competitor. When consumers make choices about what products and services to buy, they expect that the price has been determined freely on the basis of supply and demand, not by an agreement among competitors. When competitors agree to restrict competition, the result is often higher prices. Accordingly, price fixing is a major concern of government antitrust enforcement.

> A plain agreement among competitors to fix prices is almost always illegal, whether prices are fixed at a minimum, maximum, or within some range. Illegal price fixing occurs whenever two or more competitors agree to take actions that have the effect of raising, lowering or stabilizing the price of any product or service without any legitimate justification. Price-fixing schemes are often worked out in secret and can be hard to uncover, but an agreement can be discovered from "circumstantial" evidence. For example, if direct competitors have a pattern of unexplained identical contract terms or price behavior together with other factors (such as the lack of legitimate business explanation), unlawful price fixing may be the reason.

Key point 'an agreement can be discovered from "circumstantial" evidence'. However, I don't know exactly how much teeth the FTC really has now, and if this is a case they would take on, and what the goal would be. The FTC also loses a lot of cases.

[John70]

Amazon

And it was the big players who benefited here, as demonstrated by Amazon.com’s top line for 2020, where revenues jumped more than 34 per cent to $215.9bn.

And yet you cannot buy any Kindle books through Kindle because Apple will take their 30% cut.

[Anonymous Coward]

From wikipedia

> Among aspects covered by the trial included:

> ...

> Apple's anti-steering policies, which prevent any app from directing or informing its users to a different storefront outside of Apple's iOS one to make purchases, were brought into question as related to potential antitrust charges. Anti-steering policies had been deemed acceptable in practice in the 2018 U.S. Supreme Court case Ohio v. American Express Co. as long as no harm was shown to either side of the two-sided market in considering the absence of anti-steering policies. Epic attempted to argue that with Apple banned developers from directing users to alternative payment systems and storefronts, they were taking a larger share of app revenues, and thus that these anti-steering provisions should be eliminated from Apple's policies.

The anti-steering policy is where Epic choose to make their frontal assault, putting up their URL for a separate storefront inside their Apple App.

However, I question whether "winning" the anti-steering battle will really be any benefit to Epic, because Apple can still bill Epic according to any other metric, for example any combination of flat fees/user usage time/user bandwidth used. Such a metric would be hell for Epic as it doesn't mesh with their current business model of per game sales. It could be used to punish Epic and force Epic into further legal battles.

It seems very unlikely the court would rule against anti-steering AND any other method of billing Epic. That is equivalent to zero-revenue for Apple. Even Amazon is probably paying a fee to Apple.

Anti-steering really doesn't address the fundamental issue for Epic - Epic is large enough to be a meaningful source of revenue for Apple/Google, but too small to have any leverage against the giants.

Maybe as an immediate outcome of the fear of anti-trust action, Google will reduce the % and no longer maintain parity with Apple instead behaving like a competitor, and Apple would go partway down to compete with that.