Apple has been fighting hard to ensure that it is still able to take a commission from app sales made through third-party stores. Its aggression in doing this landed it in hot water with the judge in the long-running Epic Games case.
The company has since submitted a proposal for a more toned down version with lower commissions, but it has admitted in new regulatory filings that it may not make any commission at all from these sales …
Apple’s battle for app commissions
Antitrust regulators around the world have objected to the fact that the only way developers were able to sell iPhone apps and in-app content was through Apple’s official App Store. This monopoly meant that the Cupertino company was able to set its own commission rates, and iPhone developers had no choice but to accept them.
The EU was the first place in the world to force Apple to allow third-party app stores, while a US court said that the company had to allow developers to offer in-app purchases and subscriptions through external payment platforms.
Apple greatly irritated the judge in the US case by imposing a 27% commission on the sale of in-app content, even when that purchase was not made through the App Store. Allowing for payment processing costs of around 3%, this meant the company was still taking exactly the same commission whether or not developers made their sales through Apple’s store.
The judge said that this was clear abuse of the intent of her ruling, while Apple argued that the court had not specified an acceptable commission rate for external sales.
Lower commission rates
Apple recently submitted a proposal for more modest commissions on sales made outside of the App Store.
- 15% for standard apps, which are subject to a 30% in-app purchase (“IAP”) commission;
- 10% for the Video Partner Program (“VPP”), the News Partner Program (“NPP”), the Mini Apps Partner Program (“MPP”), and subscription renewals; and
- 5% for Small Business Program apps.
The company is hoping that the court considers these compromise rates a fair way to reflect its provision of Xcode and other tools to assist developers in creating their apps.
But admits it may end up with nothing
However, while Apple hopes it will be allowed to charge these lower commissions, it has admitted in a new regulatory filing that it may not be allowed to charge any commission at all on purchases made through third-party app stores and other external platforms. Per the Financial Times:
The iPhone maker […] warned in its latest regulatory filings that it “may not earn a commission at all” on purchases made through alternative payment systems. The disclosure is the clearest sign yet that years of court rulings and regulatory intervention in the US, Europe and elsewhere are starting to erode the commission fees that underpin Apple’s high-margin services business.
Analysts say this may see Services revenue start to fall for the first time, with an impact on the company’s valuation.
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