Everybody vs the App Store!
A host of companies, including Facebook Inc., Spotify Technology SA and “Fortnite” maker Epic Games Inc., are challenging the way Apple Inc. runs its App Store.
The App Store generates at least $15 billion in annual sales for the tech giant, according to analysts’ estimates. Critics say Apple takes too big a cut of app makers’ sales and wields monopoly power over the gateway that connects hundreds of millions of users to mobile apps.
Apple disputes that characterization, saying that it collects only a portion of sales from a small percentage of the almost 2 million apps available on the App Store and that its practices are in line with competitors’ app marketplaces. Here is an overview of recent challenges to the App Store model and what they mean for consumers and the company.
Apple takes a 30% cut on sales of paid apps and digital goods sold within apps. Numerous companies have complained that the fee is excessive and are pressing Apple to allow alternate payment systems to process digital transactions. Apple’s fee is in line with those charged in Google’s Google Play store and Samsung Electronics Co.’s Samsung Galaxy Store. Apple said the commission helps cover overhead costs such as security and privacy.
Last month, Epic Games attempted to skirt Apple’s commission by adding its own payment system to the version of “Fortnite” played on iPhones and iPads. Apple quickly removed the shooter-survival game from the App Store, saying Epic violated its rules. The two companies are now suing each other over the matter, with Epic claiming “Fortnite” should be allowed back into the App Store with its payment system intact and Apple saying Epic should be restricted from engaging in what it calls unfair business practices.
A judge ruled last month that Apple can keep “Fortnite” out of the App Store for now, but the company can’t block Epic’s access to developer tools used to update software. A court hearing in the case is scheduled for Monday. A trial is likely to take place next year.
Apple’s 30% commission on digital goods and services means that a customer’s payments to Epic for “Fortnite” weapons are subject to the fee, but purchases of coffee in Starbucks Corp.’s mobile app aren’t. For subscriptions purchased via the App Store, Apple’s cut falls to 15% after the first year. Apple also collects an annual fee from developers who submit software to be distributed via the App Store, with exceptions for nonprofits and government entities.
To sidestep Apple’s cut, Netflix Inc., Spotify and other companies have shifted to selling subscriptions and downloads via their websites instead of their apps. Apple bars companies from mentioning in their apps where consumers can go to subscribe, and it doesn’t allow companies to say they are offering higher prices in app purchases to offset Apple’s fee.
Companies switching from selling real-world goods to digital ones amid the pandemic—such as Airbnb Inc., which now sells travelers virtual experiences such as cooking classes—have complained that Apple wanted a cut of those sales.
Some app developers say Apple limits competition and ranks its own products ahead of rivals’ products in App Store search results. Spotify filed an antitrust complaint in Europe last year claiming that Apple, whose Apple Music service competes with Spotify, made it difficult for rival services to market themselves in the App Store.