This is a very important topic as of late, especially when the battle between Epic Games and Apple is officially going down in court today–all in the efforts to try to bring some reason to the app store marketplace scene so that companies and individuals can more effectively be able to offer something enticing to their users/customers.
The spotlight is on Apple due to this case, but this also applies to some of the other app stores (as per Apple’s defense). You see, they were charging Epic Games 30% of their profits made within their app store for in-game purchases and other profits made through the game “Fortnite”. The popular game with over 100 million registered users using the iOS platform came to an abrupt end (for Apple users at least) when Apple booted them right out the door. The reason was that Epic Games created their own in-app purchase system within their game that bypassed Apple’s own system for taking payments for this. By doing that, Apple doesn’t get their cut.
So on one side, Epic Games is using Apple’s marketplace to distribute its game to everyone using an iOS device. Without the app store, users wouldn’t have access to it (well, on their iOS devices at least). However, on the other side, 30% can be a lot of money to ask for. Credit card companies don’t even come close to asking vendors/retailers for this kind of a cut. This would causes prices everywhere to noticeably jump in order for them to make any profit. Raising these fees to 3.5-5% is enough for many stores to stop accepting certain (or all) cards. So, it makes a little bit of sense that Epic Games would rather research alternative options in order to help loosen the squeeze being applied to them.
Apple says they are charging a competitive price compared to other app store solutions. Even so, do these other solutions have a monopoly on the payment system so that you can only go through their gateway? That tends to lean more towards the feeling of extortion in ways vs a fair system for all, regardless of their budget or what they are trying to offer.
Consider companies like Netflix who have to pay out Apple’s cut for subscription revenue made from iOS users. Thankfully, Netflix and Apple did cut a deal to lower this to 15%, but these kinds of fees likely tower over the cut that is going to the individual companies behind all of the movies and TV content being consumed on Netflix. The same goes for services like SiriusXM or Pandora. How much does each artist get (you know, the people that put in the hard work to create all of the content you are paying for to consume) compared to this?
For example, One of our staff here has a band on the side where they have a number of tracks available for purchase or stream. They make as high as $0.80 a track for purchases (after the fees of everyone else on a $1/track estimate), and just a few pennies for the streams when it comes to side by side comparisons. This is because these streaming services have to break up anything beyond their own profit to a breakdown of all of the organizations responsible for collecting royalties for the artists that were streamed by a user in any given month. In the end, the artists are getting a small fraction compared to any other fan interaction with their content. Now, remove 30% from the total monthly subscription fee and see how that affects those already small numbers.
As for everyone else (like Epic Games), it cost a fortune to keep those games running, for the programmers that made it all, and the work put into continuing its development, improving security, expansions, marketing, and everything else that goes into creating a new game like that. Apple is asking for nearly one-third of its profits just to be able to offer it to their iOS users via their store.
It does seem like quite a lot, especially when the profit is earned thanks to Epic’s own work, servers, and resources. However, for Apple, they just have to provide a platform to download the app from that offers security, license management (where needed), reviews, and other interactive features for their iOS users.
What do you think? Is it fair? Should Apple reconsider its rates to something reasonable for all? Do you think the court will force them into this? Do you think app developers should have the right to options when it comes to payment gateways for in-app purchases? Do you think Epic is going to take a beating in this case and this will lead to a continued stream of bullying by Apple against other developers? Share your thoughts in the comment section below!
30% is a lot, but it might be fair if Apple really provided the best experience. The real issue is the MFN contract clause that means this 30% fee can’t be passed on to the consumer, or allow the consumer to save that money by shopping a competitor with a lower fee. For a long time even the existence of this fee couldn’t really be disclosed.
The other major issue is that there’s no option for a competing store on Apple platforms. This is a murkier issue when compared to game consoles which engage in a similar practice but it is tolerated because the consoles are typically sold at a loss.
In both cases though, Apple (and to a lesser degree other platforms) have tried to reduce transparency and consumer choice as much as possible.