Apple's Phil Schiller Initially Opposed 27% App Store Fee on External Purchases

[MacRumors]

Apple Fellow Phil Schiller testified in court on Monday that he initially opposed the 27% commission Apple now charges on purchases made outside the App Store, citing compliance risks and potential developer backlash (via AP News).

Schiller, who oversees the App Store, said he had concerns that the fee would create an "antagonistic relationship" between Apple and developers, and worried about Apple becoming "some kind of collection agency" that might need to audit developers who didn't pay.

"I had great concerns about the collections of funds from developers," Schiller said during his three-hour testimony in the ongoing legal battle with Epic Games. He specifically worried about "the change in the role of the App Store to now an organization that needs to collect money from developers."

Despite his reservations, an Apple pricing committee that included CEO Tim Cook, former CFO Luca Maestri, and Apple's legal team ultimately decided to implement the commission structure.

The reduced 27% fee (down from Apple's standard 30%) was established after the 2021 Epic Games lawsuit ruling. Judge Yvonne Gonzalez Rogers rejected claims that Apple operated a monopoly. However, she ruled that Apple's anti-steering conduct was anti-competitive, and ordered the company to allow developers to link to alternative payment methods outside the App Store.

Apple complied by creating a system where developers can apply for a "StoreKit External Purchase Link Entitlement" to direct users to external payment options. However, Apple still demands a 27% commission on these transactions made within seven days of clicking the link. For developers in Apple's Small Business Program, the rate is 12% instead of the usual 15%.

Epic Games CEO Tim Sweeney previously criticized Apple's approach as "bad-faith" compliance with the court order, arguing the minimal commission reduction and other restrictions undermined the ruling's intent to foster more competition.

The current hearings are scheduled to continue until Wednesday, and are focused on determining whether Apple has violated the original court order. Judge Gonzalez Rogers has expressed frustration with Apple witnesses' hazy recollections about how they developed rules for the alternative payment system.

According to court documents, Apple extensively analyzed how the "less seamless experience" of external purchases would affect transaction completion rates, which helped the company work out when developers would likely return to using Apple's in-app purchase system.

The dispute between Apple and Epic dates back to 2020 with Epic seeking to overturn Apple's App Store rules requiring content purchases within iOS apps to go through Apple, which takes a 15% to 30% cut of the revenue.

Article Link: Apple's Phil Schiller Initially Opposed 27% App Store Fee on External Purchases

 

[Pitogyro]

Wow. Is Phil throwing Tim under the bus now?

 

[Kraszim]

Sorry Apple but this business model is gone. I am paying all subs through providers websites, because they are just 30% cheaper. Let go of it. Don't fight your clients

 

[wanha]

Phil was right then and he is right now. Not that it matters in today's hyper greedy world.

 

[Velli]

The balance of my admiration of Phil vs Tim has shifted immensely over the last few months.

 

[wanha]

It's too bad "good will" isn't an item on the balance sheet. If it was, corporate leaders might actually pay it some attention.

 

[zahuh]

Please please WIN epic games!!! This is RIDICULOUS! Apple itself makes about 38% margins. They are TAKING 12-27% from other developers! Leaving them with 26% or 11% left! I can't believe we're in 2025 and they are still getting away with this! I can't believe if I offer another form of payment that's on MY WEBSITE that Apple gets a 27% cut!!! Please epic games WIN! I will remove ALL in-app purchases from my app and only do transactions from PayPal and my website!

 

[ginkobiloba]

Sorry Apple but this business model is gone. I am paying all subs through providers websites, because they are just 30% cheaper. Let go of it. Don't fight your clients

But why should Apple provide developers the whole AppStore infrastructure for free of they’re all going to direct the payment outside the Store ?

No software store provides their infrastructure for free, why should Apple be the only one ?

 

[ginkobiloba]

Please please WIN epic games!!! This is RIDICULOUS! Apple itself makes about 38% margins. They are TAKING 12-27% from other developers! Leaving them with 26% or 11% left! I can't believe we're in 2025 and they are still getting away with this! I can't believe if I offer another form of payment that's on MY WEBSITE that Apple gets a 27% cut!!! Please epic games WIN! I will remove ALL in-app purchases from my app and only do transactions from PayPal and my website!

Okay, but then why should Apple hosts your app on their store for free ? You ( and by You, i mean the developer, not the consumer) seem to assume they have a moral obligation to offer you access to the Appstore while you’re entitled to direct all the payments for your app to your website . They don’t have any moral obligation to do that. I don’t know any software store that does.

Tim Sweeney’s own Epic Store doesn’t either. They take a 12% cut.
And let’s not be naive about Tim Sweeny. Just check all the fake news he’s been spreading lately on his Twitter about Apple.

Not to get political , but the fact that China’s giant Tencent owns 40% of Epic might give you a hint…

 

[wanha]

But why should Apple provide developers the whole AppStore infrastructure for free of they’re all going to direct the payment outside the Store ?

No software store provides their infrastructure for free, why should Apple be the only one ?

Agreed. There's a middle road here that should be pursued, rather than going with a black and white, all or nothing, argument that just makes us all idealistic and blind to the actual issue.

 

[brofkand]

Schiller has been on the right side of a lot of these issues, but not all.

 

[brofkand]

Okay, but then why should Apple hosts your app on their store for free ? You seem to assume they have a moral obligation to offer you access to the Appstore while you’re entitled to direct all the payments for your app to your website . They don’t have any moral obligation to do that. I don’t know any software store that does.

Tim Sweeney’s own Epic Store doesn’t either. They take a 12% cut.

If they don't want to host apps, that's fine. Let me download it from the developer's website and install it myself.

 

[The Phazer]

Okay, but then why should Apple hosts your app on their store for free ? You seem to assume they have a moral obligation to offer you access to the Appstore while you’re entitled to direct all the payments for your app to your website . They don’t have any moral obligation to do that. I don’t know any software store that does.

Tim Sweeney’s own Epic Store doesn’t either. They take a 12% cut.

They shouldn't.

They can charge bandwidth fees. Set a price per megabyte. That's entirely reasonable.

Of course, that's only reasonable if there is the option to not use it for distribution because code signing stops being Apple only.

 

[Tanax]

But why should Apple provide developers the whole AppStore infrastructure for free of they’re all going to direct the payment outside the Store ?

No software store provides their infrastructure for free, why should Apple be the only one ?

Not provide AppStore infrastructure for free, but allow developers to provide an app (via their own website) and allow that to be completely free.

That will attract more developers to make good apps for iOS. If there are good apps, consumers will buy iPhones/iPads. Like, having good apps is literally the differentiator between a good OS and a bad.

They provide MacOS for free and developers can create programs without paying anything to Apple. This is what makes Mac an attractive platform, especially for developers. This in turn creates more sales for Mac computers which will pay for the development of MacOS.

It should work the same on iPhones.

 

[Kraszim]

But why should Apple provide developers the whole AppStore infrastructure for free of they’re all going to direct the payment outside the Store ?

No software store provides their infrastructure for free, why should Apple be the only one ?

Because I paid full price for the phone and app store is one of the features of it. I would never pay as much for a phone if those pesky developers with their little apps weren't there. Besides if I can pay $10 on developers website, or $13 through Apple, then it isn't developer that pays this fee, its me. They get $10 both times.

 

[Aeronauts]

Apple should receive a fee for hosting apps on their AppStore but 30% is far too much. Should have been 10% from the start.

 

[wellye]

so basically Tim Cook and their lawyers are refusing to follow the federal court order. surprise, surprise.

 

[thefrost]

Just wow.

 

[ItsASpider]

What? Apple was well aware that charging 27% from developers for the privilege of not using your payment platform is insane?

Who'd have thought?

Apple should receive a fee for hosting apps on their AppStore but 30% is far too much. Should have been 10% from the start.

But they already do that, you have to pay to publish your apps in the App Store. If Apple isn't happy with that pay, they should just raise that instead of demanding 30% from every purchase that happens in the app (or 27% when they have entirely nothing to do with it).

But why should Apple provide developers the whole AppStore infrastructure for free of they’re all going to direct the payment outside the Store ?

No software store provides their infrastructure for free, why should Apple be the only one ?

As mentioned above, they aren't. But lets not pretend that it isn't ridiculous that companies like Spotify, YouTube and Netflix would have to hand of 30% of their income to Apple whenever a user gets a subscription on their platform. For Apple, that 30% is pure margin. The only cost they have is the processing fee, and that's one they've inflicted on themselves by demanding the use of their payment system in the first place. Meanwhile, the developers are left with all the actual cost of development, infrastructure, bandwidth, etc.

 

[springsup]

I’m just gonna say it - Phil Schiller would’ve been a better successor to Steve Jobs.

I know, he’s the marketing guy, and Steve always hated what happed to other Silicon Valley tech companies after letting marketing guys run the company.

But Phil was different. He understood Apple in a way that Tim Cook didn’t.

 

[Rogifan]

Phil was right then and he is right now. Not that it matters in today's hyper greedy world.

For those who defend this where does it end? Should my ISP and cellular provider be able to charge a commission? Without them the iPhone and App Store would be practically useless.

 

[klasma]

But why should Apple provide developers the whole AppStore infrastructure for free of they’re all going to direct the payment outside the Store ?

Because Apple does not allow app distribution outside their app store (except as forced by the EU), and because Apple profits immensely themselves from the app ecosystem for their hardware and service revenue. Without the app ecosystem (imagine for example that Apple had stuck to only allowing PWAs as originally envisioned), less people would buy iPhones and pay for Apple services.

 

[Rogifan]

I’m just gonna say it - Phil Schiller would’ve been a better successor to Steve Jobs.

I know, he’s the marketing guy, and Steve always hated what happed to other Silicon Valley tech companies after letting marketing guys run the company.

But Phil was different. He understood Apple in a way that Tim Cook didn’t.

i’m still conflicted on how much of this is coming from Schiller versus being mandated by Cook/accounting. Back in 2011 Schiller sent out an email saying:

“Do we think our 70/30 split will last forever?” Schiller’s email begins. “I think someday we will see enough challenge from another platform or web based solutions to want to adjust our model.” Schiller goes on to suggest that if Apple were to ever change its fee structure, that it should do so “from a position of strength rather than weakness” and floats the idea of Apple dropping its commission rate once the App Store is generating over $1 billion in annual profit.

Apple exec suggested cutting App Store commission to 20 percent as early as 2011

‘Just food for thought.’

www.theverge.com

He was right back then.

 

[Rogifan]

But why should Apple provide developers the whole AppStore infrastructure for free of they’re all going to direct the payment outside the Store ?

No software store provides their infrastructure for free, why should Apple be the only one ?

What about all the apps on the App Store that are “free”? What are they paying to Apple for infrastructure? What does Meta pay to Apple for infrastructure?

 

[hansmoleman]

I’m just gonna say it - Phil Schiller would’ve been a better successor to Steve Jobs.

I know, he’s the marketing guy, and Steve always hated what happed to other Silicon Valley tech companies after letting marketing guys run the company.

But Phil was different. He understood Apple in a way that Tim Cook didn’t.

Apple would be a very different company.
Likely smaller - perhaps much smaller - but much closer to the Apple I loved.