Epic Games, maker of the popular game Fortnite, sued Apple in August over its fee. A month later, 13 companies and groups, including Spotify and Match Group, formed the nonprofit Coalition for App Fairness to fight the “app tax.” And American and European regulators are investigating Apple for anticompetitive behavior, partly because of its commission.
“The only good thing about this cynical, Machiavellian ploy by Apple to split developers with selective handouts is that it shows they’re sweating,” said David Heinemeier Hansson, a prominent software developer whose company, Basecamp, will still have to pay the 30 percent commission.
Tim Sweeney, Epic’s chief executive and another of Apple’s toughest critics, also accused Apple of trying to divide developers. By charging smaller companies less, “Apple is hoping to remove enough critics that they can get away with their blockade on competition and 30 percent tax on most in-app purchases,” he said in a statement. “But consumers will still pay inflated prices marked up by the Apple tax.”
In its news
release, Apple included comment from several smaller companies that welcomed its change and that said it would help them reinvest in their businesses or offer more free features to users.
Apple introduced its 30 percent commission in 2008 with its App Store, which had just 500 offerings. Now the App Store is one of the world’s largest centers of commerce, facilitating half a trillion dollars in sales in 2019.
That has made the commission the biggest driver of Apple’s internet-services business, which brought in more than $53 billion over the past year.
Apple charges 30 percent of all sales of “digital goods and services” in an app, such as a virtual item in a game or a subscription to a music, TV, news
or dating app. (In the second year of a subscription, Apple’s cut drops to 15 percent.) Apple doesn’t take a cut of physical goods or services, such as an Uber ride or shoes bought in the Amazon app.
With the world’s migration online, particularly during the pandemic, the App Store has become an increasingly crucial gateway to customers for companies of all sizes. Apple’s growing power has prompted both lawmakers and developers to call its 30 percent cut “highway robbery.”
No company has fought Apple’s commission harder than Epic. In August, the company baited Apple into kicking its wildly popular Fortnite game off the App Store, and then quickly sued Apple and rolled out a sophisticated public-relations campaign against it. This week, Epic expanded its legal fight to Australia, where the laws could favor its complaints.
Epic has argued that Apple could charge a more reasonable rate. Epic runs its own online marketplace for games, taking 12 percent of other companies’ sales — and turning a profit of 5 percent to 7 percent, the company said.
Apple has argued that 30 percent matches other companies’ rates, including app stores run by Google, Microsoft and Samsung, and game stores from Sony’s PlayStation and Microsoft’s Xbox.
Still, Apple has not applied its cut evenly. Bigger companies with services that Apple wanted on iPhones, to make the devices more attractive to buyers, have negotiated better rates. Documents released by House lawmakers in July showed that Apple executives offered Amazon a 15 percent commission to release its Amazon Prime Video app on the App Store in 2016.
Apple said it would use the combined sales of all of a developer’s apps in the previous calendar year to determine which rate to charge a company. Any developer, including new ones, with $1 million or less in the prior year will pay the 15 percent rate for the year, even if its sales surpass $1 million that year.