Apple is facing criticism from many for levying up to 30% commission on App Store purchases. The company is accused of unfair practices, and antitrust regulators are investigating certain App Store practices. U.S. Lawmakers will begin investigations and question, Tim Cook, tomorrow.
Developers and companies like Spotify have been unhappy with Apple’s commissions on App Store purchases. Right before WWDC, Apple sparked controversy by rejecting Hey! Email app as it didn’t offer in-app purchases. Later the company was forced to backtrack and approve the app. That apart, developers have also complained that the review process on the App Store is opaque.
Apple tightly controls the App Store, which forms the centerpiece of its $46.3 billion-per-year services business. Developers have criticized Apple’s commissions of between 15% and 30% on many App Store purchases, its prohibitions on courting customers for outside signs-ups, and what some developers see as an opaque and unpredictable app-vetting process.
Apple’s senior vice president Phil Schiller has defended App Store commission rates. He highlights how the App Store was launched in 2008 with a total of 500 apps. App Store, “Apple executives viewed it as an experiment in offering a compellingly low commission rate to attract developers.”
One of the things we came up with is, we’re going to treat all apps in the App Store the same – one set of rules for everybody, no special deals, no special terms, no special code, everything applies to all developers the same. That was not the case in PC software. Nobody thought like that. It was a complete flip around of how the whole system was going to work, Schiller said.
App Store rakes in billions of dollars of revenue for Apple. This is mainly possible since App Store guidelines require Apps to pay a commission of up to 30%. Even services like Netflix and Spotify are required to pay a commission. On the flip side, the App Store offers a much-needed exposure to new apps and developers. Moreover, Apple’s recent study points out 30% commission is not out of place and is an industry-standard. It will be interesting to see what authorities have to say about this.
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