One of the most powerful aspects of Apple’s brand has always been framing itself as an underdog going up against the giant corporate machine . For decades, that machine was represented by IBM and Microsoft. Even as Apple grew, it continued to cultivate a loyal following based on the idea that the Mac (and later the iPhone) was the device for the individual. It was personal.
Lately, however, Apple has become the machine.
Well, actually, Apple has been a machine for quite some time when you consider it’s the most profitable company in the U.S., and one of the most valuable companies in the world, with a market cap over $1.3 trillion. It got that way by dominating the technology and devices its users care about most– primarily the iPhone .
Apple has faced considerable criticism over its App Store practices, especially the way the company takes a 30 percent cut of all revenue generated through apps and doesn’t allow developers to implement alternative ways to bill customers for subscriptions or in-app purchases. Oh, and it doesn’t allow developers any other means to make their apps available on iOS devices.
Apple recently got into a very public spat with the developers of Hey, an email app that required users to sign up on its own website to create an account. According to Apple, that violated its policies that apps have to allow customers the ability to sign up within the app, thereby sending a cut to Apple.
At the time, Apple indicated it had no intention of changing its policy, though it does make some exceptions for apps like Amazon Prime Video and enterprise apps that require external subscriptions (like a CRM app, for example).
The company is also facing increasing scrutiny from regulators in the U.S. and across the Atlantic, with the European Union announcing it was looking into opening an antitrust investigation into the company. Here in the U.S., Apple has caught the attention of federal regulators and Congress, the latter of which is holding a hearing Monday at which Apple’s CEO, Tim Cook, is expected to testify.
Over the years, Apple has argued that it created a marketplace that didn’t exist, and as a result is completely justified in taking a cut from the purchases in that marketplace. It has also pointed out that it plays an active role in promoting the platform and the apps that are a part of it.
Now, the company is doubling down on its position, releasing a study that it claims supports its position that the fee it charges app developers is fair and reasonable. That study points out that the 70-30 split model it uses is the same across a variety of other app stores, like Google Play, Samsung Galaxy Store, and the Microsoft Store.
I think you could also argue, however, that just as the platform is valuable to developers, the apps they create have added considerable value to Apple’s platform. The iPhone benefits from the availability of so many quality apps, whether they collect a cut from user purchases or not.
Except, for Apple, services like the App Store are by far the most valuable part of the company’s business. Services–which also includes subscriptions to Apple Music, AppleTV+, iCloud, and Apple News+–is the fastest growing division of Apple’s enormous business.
Personally, I don’t think the argument is whether or not 30 percent is too high a commission to take. The bigger problem is that it unfairly penalizes smaller developers. As I mentioned, Apple makes exceptions to its rules, though the reasons why aren’t exactly clear, and certainly aren’t defined as a matter of policy.
To some extent, that makes sense, considering developers are constantly thinking up new types of apps with different features, functions, and ways of engaging users. But the App Store’s exceptions seem tilted strongly in favor of large software developers.
Make no mistake, however, that the ultimate loser in this are smaller developers. That’s because Apple’s 30 percent cut serves as an innovation tax. Apps can be expensive to develop, and the cut Apple takes means that, as a practical purpose, developers who charge a fee for their app take 50 percent longer to earn back the cost of development.
For a huge game developer, that’s no big deal. For the little guy, however, it could make all the difference. And coming from a company that has long made a point of being on the side of the underdog, you’d expect a little more.
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