Apple Proposes 15% External Purchase Fee
Apple has again failed to earn a stay for fee calculations in its ongoing legal fight with Epic Games. Apple's case will be heard by the Supreme Court in the term that begins in October, and Apple asked the U.S. District Court for the Northern District of California to pause proceedings until then, but the court said no [PDF].
U.S. Supreme Court Justice Elena Kagan today granted Apple a one-day stay in its legal fight with Epic Games, giving Apple more time to outline the fees it wants to charge developers for linking out to purchase options on the web.
Apple tried to freeze the entire thing while they appealed to the Supreme Court – and the Supreme Court denied the freeze. But they didn’t deny hearing the case – yet. That’s why they’re pausing the proceedings for now (after Judge Gonzalez Rogers denied the same request), while they weigh Apple’s appeal. But before they do that, they’re basically likely to decide today – again, it was just a 24-hour delay – whether they should grant a longer stay. Presumably if the court thinks they’re unlikely to hear Apple’s appeal, they may not grant that longer stay. Or if they think Apple filing their number won’t harm their business, they’ll let it proceed. But Apple will argue that if the longer stay isn’t granted, it will cause major harm to their business because again, it will effectively end the App Store cut as we know it.
Juli Clover (Engadget, The Verge):
Apple today submitted a court-ordered proposal outlining the commission it believes is reasonable to collect from U.S. apps that link to purchase options outside of the App Store.
Apple is asking for half of its commission on standard apps, so apps that would pay 30 percent for an in-app purchase would pay 15 percent when linking to a web purchase option. Small Business Program participants that would normally pay 15 percent would pay 5 percent.
[…]
The appeals court suggested the commission could be limited to the direct costs of facilitating link-outs, and under that approach, the fee would be zero. Apple says a zero commission would not reflect the value that it provides developers, and its suggested commission gives it fair compensation for the App Store platform.
[…]
The district court will now evaluate Apple’s fee proposal and hear a response from Epic Games , and Apple will need to implement the fee the court sets.
Unlike cost-only based commissions, Apple’s revenue-based commissions incentivize continued investment. Apple charges developers a $99 annual fee for the Apple Developer Program. May 17, 2021 Trial Tr. at 2762:21–2763:13. This modest fee—designed to prevent fraud and expressly not intended to compensate Apple for the use of its IP-protected tools, technologies, and services (id.)—allows developers to build apps using Apple’s offerings and deliver experiences to iOS and iPadOS users worldwide.
The annual developer fee is nominal. Apple relies on percentage-based commissions to recoup and profit from its investments. See id. ¶¶ 87–93. Apple is incentivized to invest in IP- protected tools, technologies, and services that generate revenue for developers (and benefit users).
[…]
Dr. Carlton explains that “reduc[ing] Apple’s incentive to invest and provide the technology and services that benefit users and developers” would harm users and developers, as well as Apple.
I like the part where Apple’s expert argues that its normal commission rates are so high that it would still be profitable for developers to pay the proposed linking commissions on top of what they would pay to Stripe or Paddle. In other words, paying Apple for “IP” almost twice what it admits the other companies charge for “full-service, turnkey payment processing.”
If the point [of the $99] is just to prevent fraud, why do we need to keep paying $99 yearly FOREVER? Is 10 years not enough to prove I’m not a fraud?!?
If the fee doesn’t help pay for Apple IP, then it’s even more blatantly unfair that a minority of apps have to pay for ALL apps to access Apple IP. Free apps, no matter how big or how much $ they make via ads, get access to Apple IP from OUR REVENUE CUT, and not even their $99 counts.
That’s what that enormous hardware margin from customers is already supposed to be paying for — Apple IP! In the early 00’s, I gladly paid the “Apple tax” (PowerBook G4) to get access to the Mac OS X software/ecosystem, including all the Unix and dev tools. I’m not sure why anyone thinks that double-dipping is fine on all the non-Mac platforms, App Store or not.
Jeff Johnson (2):
Schiller’s [previous] testimony about the previous program is extremely misleading, because the new program began in 2008 at the same time as the App Store, so there was no previous iOS developer program, and Mac Developer ID did not begin until 2012, so Apple Developer Program membership was not actually required to distribute Mac apps!
Fourth, it appears that Steve Jobs was wrong: the $99 fee didn’t prevent developers from flooding the App Store with a lot of junk.
I want to quote another remarkable passage from Schiller’s testimony, again with questions from Apple’s own lawyer.
Q. And Mr. Jobs says, “And also just to make it a little clearer, we don’t intend to make money off the App Store. I mean, we don’t make a lot of money off iTunes, and the split with the music companies is about the same, so in the case of the iTunes Music Store, we give all the money to the content owners, and we are basically giving all the money to the developers here. And if that 30 percent of it pays for running the store, well, that will be great, but we just want to create a very efficient channel for these developers to reach every single iPhone user.” Is that a statement that Mr. Jobs made back in March 2008?
A. He did.
[…]
I won’t quote the following passage in which Schiller testifies about his internal email suggesting that Apple limit itself to $1 billion per year in profit from the App Store, hand-waving away the suggestion as merely “spurring conversation.” Of course the email also seems to contradict Schiller’s (absurd) testimony that Apple does not specifically calculate profit from the App Store, only company-wide profit. Apple’s public financial statements also appear to contradict Schiller’s claims.
Previously:
- TabControl Scam and the App Review Queue
- Apple Asks Supreme Court to Review Epic Ruling
- External Purchase Fee Stay Reversed
- Lower App Store Fees in China
- Lower Google Play Store Fees and Registered App Stores
- Apple Granted Stay Over External Purchase Fee
- “Reasonably Necessary” External Purchase Fee
- Testimony on External Purchase Fee and Scare Screens
- App Store External Purchase Fee: 27%
