Phil Schiller, the Apple executive in charge of the App Store, has raised the possibility for the company to reduce its commission rate from 30% to 25 or even 20% in 2011 in response to competition. Schiller pitched the idea in an email to Apple CEO Steve Jobs and Apple Services Manager Eddy Cue. The email was made public as part of the company’s legal battle with Epic Games. Bloomberg was the first to report the email exchange.
“Do we think our 70/30 separation will last forever?” Schiller’s email begins. “I think one day we’ll see enough challenges from another platform or web-based solutions to want to adjust our model.” Schiller goes on to suggest that if Apple were ever to change its fee structure, it should do so “from a position of strength rather than a weakness” and launched the idea that Apple would lower its commission rate once the App Store generates over a billion dollars. in annual profit.
“I know this is controversial, I’m just presenting it as another way of looking at the size of the company, what we want to achieve and how we stay competitive,” Schiller wrote. “Just food for thought.” Attached to the email is a the Wall Street newspaper 2011 article which discussed the possibility for developers to use web applications to bypass Apple’s App Store fees.
Apple’s 30% commission on many in-app purchases is at the heart of its legal battle with Epic Games, which accused the iPhone and iPad-related App Store of being a monopoly. Epic must use Apple’s payment method for in-app purchases in Fortnite (and therefore pay a 30% commission), and it was the company’s move to offering its own integrated payment system that prompted Apple to kick the game from the App Store.
In response to the email, Apple said there was no evidence that the App Store’s fees were tied to its profits, and that the 2011 email did not confirm that the store had made a profit of $ 1 billion, Bloomberg reports. Sensor Tower’s analysis indicates that App Store commission revenue for 2020 is around $ 22 billion, and Epic cites a witness who claims its profit rate is around 80%.
Apple has adjusted its commission structure over the years, but has never lowered its standard wholesale rate to 25% or 20%. In 2016, he lowered his commission to 15% for subscribers who have subscribed to a service for more than a year. Then, last year, he lowered his rate to 15% for all developers who make less than a million dollars in sales on his store. The move was pushed back by critics of Apple, with Epic CEO Tim Sweeney calling the move “Apple’s calculated decision to divide app makers and preserve their monopoly on stores and payments,” again breaking the promise to treat all developers equally. ”