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

[ginkobiloba]

Its important to remember, at the time Apple came out with the App Store, the alternative was Windows CE based phones which had no restrictions on where to download your apps. Not that there were a lot of them, but I had two Windows CE-based phones. So there was already a industry and consumer assumption that a device you owned was just like a computer you owned, and that you could do whatever you wanted (within reason for Carrier connectivity of course) with your own device. Somehow Apple has gotten a lot of people to agree to living under this artificial restriction to pad Tim Cook's bank accounts.

At that time, it was Steve Jobs that was Apple's head, not Tim Cook. And at the beginning, he didn't even want 3rd party apps natively running on the iPhone, saying that WebApps could perfectly do that job and more secure ( than Windows CE equivalent, and viruses were common then on it).

It was only after a lot of pressure that he allowed native third-party apps and created the Appstore ( and that happened like a year or more after the 1st iPhone launch )

Anyone who owned smartphones before Apple's can remember how easy it was to install and pay for an app on the iPhone compared than on Nokias, Erricsson, Windows Mobile, Palm etc.. The ease and convenience of the Appstore literally created a viable industry that was no more than a niche before : Mobile apps development.

 

[ginkobiloba]

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.

To be honest , as a musician , I hand like 99% of what i earn to Spotify, so frankly I don't care much for their performative crusade. Meanwhile, Mats Ek is now richer than any artist in history.

 

[Hails09]

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 ?

Right but developers pay a fee
All apple does is process the fee

 

[Hails09]

Here's the thing though: Spotify was an early adopter of the App Store and they figured out how to avoid the commission entirely right from the start. The version of Spotify that could be downloaded from the App Store was free and advertising supported. Apple takes no cut from advertising in an app. The subscription version had to be purchased on Spotify's web site. Apple took no cut from that either.

So there was always a workable formula for entirely avoiding Apple's commissions that was available for any app developer to make use of.

If that’s the case then why is Apple wanting 30% for just processing the transaction

 

[Hails09]

To be honest , as a musician , I hand like 99% of what i earn to Spotify, so frankly I don't care much for their performative crusade. Meanwhile, Mats Ek is now richer than any artist in history.

Right but unfortunately he’s made a product that a lot of subscribers use

 

[turbineseaplane]

I was reading about this at Thurrott, with this headline:

Apple Exec Admits 27 Percent App Store Fee was Likely a Violation of Court Order​

Apple Exec Admits 27 Percent App Store Fee was Likely a Violation of Court Order

Apple executive Phil Schiller admitted in court that the 27 percent fee Apple imposed likely violated a court order in Epic v. Apple.

www.thurrott.com

Steve brings up an interesting point.
Between the blame shift and Tim personally paying 1MM to the Presidential inauguration fund (vs Apple as Co.)

Are Apple loading all the bad press onto Tim before he retires?

 

[ginkobiloba]

Right but developers pay a fee
All apple does is process the fee

Uh.... no. Apps aren't just magically sold like that into the ether. They have to build massive amount of servers to host the AppStore and the apps and the gigabytes of content that gets downloaded, massive internet bandwith for the constant worlwide downloads, pay people to run them, maintain the software that runs it, pay the employees that review and check every app that gets approved ( even if malevolent stuff slips through the crack from time to time, and only recently ), etc..

Apple doesn't just "process a fee" ( I'm talking of course about Apps hosted on the Appstore )

 

[Hails09]

Uh.... no. Apps aren't just magically sold like that into the ether. They have to build massive amount of servers to host the AppStore and the apps and the gigabytes of content that gets downloaded, massive internet bandwith for the constant worlwide downloads, pay people to run them, maintain the software that runs it, pay the employees that review and check every app that gets approved ( even if malevolent stuff slips through the crack from time to time, and only recently ), etc..

Apple doesn't just "process a fee".

right now Spotify don’t give apple a fee apart from the developer fee
But if they want to use inapp purchases with Apple they would then be charged 30% for processing the payment.

 

[laptech]

Wow. Is Phil throwing Tim under the bus now?

No, he is just telling the truth because if he doesn't and is later to have found he lied in court he would be in trouble. I doubt Phil is going to lie under oath for the sake of his boss.

 

[Hellokittystampmyfacein]

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.
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

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.

I just know that if they want to put it in their store they need to pay the fee If they don’t wanna pay the fee then they can make their own phone you come to my house Follow my rules right If you don’t like my rules you can move out As far as everybody else is concerned they’re making their money it’s all a circle

 

[platinumaqua]

Can't wait to find out what else about current Apple that I dislike is attributable to Tim Cook.

 

[I7guy]

Can't wait to find out what else about current Apple that I dislike is attributable to Tom Cook.

Hope you vote accordingly with your $$$. Because a successful team is one that is open to discussion.

 

[mrochester]

right now Spotify don’t give apple a fee apart from the developer fee
But if they want to use inapp purchases with Apple they would then be charged 30% for processing the payment.

3% of which is likely the actual payment processing fee, the other 27% is for running the store, subsidising free apps so they pay nothing and profit.

 

[Rogifan]

Uh.... no. Apps aren't just magically sold like that into the ether. They have to build massive amount of servers to host the AppStore and the apps and the gigabytes of content that gets downloaded, massive internet bandwith for the constant worlwide downloads, pay people to run them, maintain the software that runs it, pay the employees that review and check every app that gets approved ( even if malevolent stuff slips through the crack from time to time, and only recently ), etc..

Apple doesn't just "process a fee" ( I'm talking of course about Apps hosted on the Appstore )

Back in 2008 Steve Jobs said the plan was to run the App Store as break even. Of course then IAP happened and Apple realized how much money they could make from it. The majority of the 30% isn’t about processing credit cards or App Store infrastructure. It’s Apple saying you’re making money because of us and therefore we deserve a cut of it. That’s why they’re taking 27% of transactions that link out to the web. As far as Apple is concerned you’re their customer and no one else’s. Eddy Cue said Uber wouldn’t exist if not for Apple. The company has made similar statements about Spotify. I guarantee you if Apple could go back in time and force apps like Uber, Lyft, Door Dash etc. to use their IAP they would.

 

[Hails09]

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.

Your missing the point about the processing fee

 

[mrochester]

Back in 2008 Steve Jobs said the plan was to run the App Store as break even. Of course then IAP happened and Apple realized how much money they could make from it. The majority of the 30% isn’t about processing credit cards or App Store infrastructure. It’s Apple saying you’re making money because of us and therefore we deserve a cut of it. That’s why they’re taking 27% of transactions that link out to the web. As far as Apple is concerned you’re their customer and no one else’s. Eddy Cue said Uber wouldn’t exist if not for Apple. The company has made similar statements about Spotify. I guarantee you if Apple could go back in time and force apps like Uber, Lyft, Door Dash etc. to use their IAP they would.

And Apple sort of have a point. Where would these companies be if Apple hadn’t created the App Store to easily connect developers and consumers? Apple wants a cut of that huge value that they helped create.

 

[Hails09]

3% of which is likely the actual payment processing fee, the other 27% is for running the store, subsidising free apps so they pay nothing and profit.

Right but fundamentally they are still charging 30% for processing a transaction

 

[mrochester]

Right but fundamentally they are still charging 30% for processing a transaction

Well it’s for processing a transaction, running the store, subsidising free apps and profit. Apple doesn’t break down the % apportioned to each line item (although we got a hint that they apportioned 3% to payment processing when they reduced the % to 27% for apps that chose an outside payment processor).

 

[Hails09]

And Apple sort of have a point. Where would these companies be if Apple hadn’t created the App Store to easily connect developers and consumers? Apple wants a cut of that huge value that they helped create.

Right but right now they are not making any money from Spotify so how does that make good business sense

 

[mrochester]

Right but right now they are not making any money from Spotify so how does that make good business sense

That’s Apple’s prerogative to use part of the commission to subsidise free apps that monetise outside of the App Store.

 

[Hails09]

Well it’s for processing a transaction, running the store, subsidising free apps and profit. Apple doesn’t break down the % apportioned to each line item (although we got a hint that they apportioned 3% to payment processing when they reduced the % to 27% for apps that chose an outside payment processor).

Just think about it Spotify have made a product that is free on the App Store
If you subscribe to that outside the App Store it’s about 12.99 but if they use in app purchases they would have to charge about 15.99 why is that fair for their customers

 

[Hails09]

That’s Apple’s prerogative to use part of the commission to subsidise free apps that monetise outside of the App Store.

Right but right now Apple aren’t making any money from them at all from them so how does that make sense

 

[mrochester]

Just think about it Spotify have made a product that is free on the App Store
If you subscribe to that outside the App Store it’s about 12.99 but if they use in app purchases they would have to charge about 15.99 why is that fair for their customers

You’re paying for the convenience of being able to sign up there and then in the app using pre-stored payment information. Going to be the website is less convenient, but cheaper.

 

[mrochester]

Right but right now Apple aren’t making any money from them at all from them so how does that make sense

Like I said that’s apples choice.

 

[Hails09]

You’re paying for the convenience of being able to sign up there and then in the app using pre-stored payment information. Going to be the website is less convenient, but cheaper.

So you advocate for customers to get ripped off then by paying more for the same product.