Apple Inc. has embarked on a wave of deals in hopes of allaying concerns about anti-competitive practices with its popular App Store, but the barrage of puzzling – and in some cases tiny – changes have one thing in common: they keep the heart of Apple’s nearly $ 70. billion intact milking cows.
The main problem with the App Store is that it charges developers high commissions for in-app purchases, up to 30%, while not allowing them to offer alternatives that could avoid these fees. This practice has made the App Store an increasingly huge and important business for Apple, especially as the growth of the iPhone has slowed. For fiscal 2020, Apple’s services business, for which the App Store is the main revenue generator, recorded annual sales of $ 54 billion with growth of 16.2%, while sales iPhone numbers fell 3% on an annual basis.
According to an economist who testified at the Epic trial, the profits from Apple’s application fees are estimated to be astounding. He estimated that the App Store has generated profit margins of 75% and 78%, respectively, over the past two years. Apple does not specifically disclose financial results for the App Store.
More Therese: How Much Does Apple Make from the App Store? Even a historic antitrust lawsuit couldn’t reveal it
While Apple has removed small chunks of its App Store approach in recent settlement agreements – charging smaller developers a little less, allowing a certain segment of apps to direct users elsewhere – the ecosystem is largely unchanged, especially with regard to video games.
“They’re willing to concede around the edges and make sure they are aware of the larger context from a developer’s perspective, but at the same time have a major line in the sand and not have any concessions. when it comes to games and the main application Store Commerce, said Dan Ives, analyst at Wedbush Securities. “A lot of the concessions we have seen are low revenue concessions.”
Hot Antitrust Fall: Storm Clouds Approaching Apple from Multiple Directions
The biggest concession came on Wednesday evening, when Apple said it would allow developers such as Netflix Inc. NFLX,
and Spotify Technology SA SPOT,
provide their customers with a link to their websites within the app that will allow users to pay for their services outside of the App Store, avoiding fees. The fine print, however, shows how limited this change is: it only applies to “player” apps that provide subscription content such as news, books, music and videos, as well as music. content that users have already purchased elsewhere.
Spotify CEO Daniel Ek tweeted on Thursday that Apple’s deal may be a “step in the right direction”, but it doesn’t solve the problem.
“Our goal is to restore competition once and for all, not one arbitrary and selfish step at the same time,” Ek said on Twitter.
Ek made the comment even as Spotify shares jumped 6% on Thursday, as investors hoped to see the unprofitable music streaming company come one step closer to the black ink on the blotter. For an example that shows the unequal treatment Ek is denouncing, take a look at Match Group Inc. MTCH,
It seems unlikely that Match’s apps, which offer subscriptions to dating services such as Tinder, would fall under the “reader” app exclusion, although an Apple spokesperson declined. to comment on specific applications and that Match Group managers have not responded to a request. for comment. Still, he’s one of the main faces of the anti-app store movement after an executive testified at a U.S. Senate Judiciary Committee hearing on the anti-competitive nature of the Apple App Store and Alphabet Inc.’s GOOG GOOGL Google Play store that Match pays half a billion. dollars in fees to the two tech companies each year.
Likewise, video games aren’t mentioned in any of the regulations, as Apple is waiting to hear what Judge Yvonne Gonzalez Rodgers has to say about her battle with Epic. This means that the money will certainly continue to flow, as video games are said to generate the most sales in the App Store.
Epic vs. Apple: the (expected) verdict is in
These two regulations offer very few changes to the App Store and only add more confusion. Instead of just slashing their commission, Apple has some convoluted new rules that likely won’t result in cost savings for most developers, who still have to overcome a lot of hurdles to get an app approved by the App Store and have little to do with it. lucky to convince customers to jump through hoops to keep the app maker from paying Apple’s fees.
“The changes were made to settle a developer lawsuit and, like other recent changes, the impact will be relatively negligible,” Amit Daryanani, analyst at Evercore ISI, said in a note to clients. “We don’t think that many customers will choose to follow the instructions in the email and re-enter payment information because they do not benefit from helping the developer avoid Apple’s fees.”
The problem for Apple is that governments around the world are likely to see through this gamble and go straight for the heart of the App Store revenue model. In South Korea, lawmakers this week passed a bill requiring Apple and Google to allow other in-app payment systems, the world’s first such law. A similarly targeted bill, called the Open App Markets Act, was introduced in the United States last month by three senators.
To find out more: What is a platform and what must be done? The answer could determine Apple’s future
While Tim Cook and the rest of Apple executives are probably hoping that this game of shells of confusing little concessions will be enough to deter lawmakers, especially in their home countries, app stores are unlikely to escape. the current review without further major changes.
“Over time the fees are going to be under pressure and the writing is on the wall,” said Ives of Wedbush Securities. “Apple will continue to make some olive branch movements, which puts them in order, given the pressure they are under… but I think they will aggressively defend their moat.”
The fallout from this push will have ripple effects across all of the tech and could lead to big changes for consumers as well – Spotify, for example, said it has raised prices from $ 9.99 to $ 12.99 largely. to cover the costs of its app store. Major changes, however, could potentially cut deeper into one of Apple’s largest cash cows and slowly dig into the moat surrounding Apple Castle.