Apple has come out all guns blazing, to defend itself against anti-trust and anti-competition accusations. The company has launched a new App Store website, which details how Apple reviews and curates apps for the App Store, and all the models available to developers. This is perhaps a response to the recent ruling by the Supreme Court in the US that consumers can take Apple to court for its App Store pricing practices, and the extended battle with music streaming service Spotify in the European Union (EU) over what is known as “Apple Tax”.
There are two issues at hand. The first is the US Supreme ruling that has ruled consumers can bring a class-action suit against Apple for its App Store pricing practices. A series of events basically led us to this. Apple, like Google, takes a percentage of every sale or transaction that users make for an app, an in-app purchase or a subscription. This is currently at 30 percent of every transaction. Some app developers have constantly criticized this. Spotify for instance, charges $12.99 per month for its Premium subscription if you sign up and pay via the iOS app—the transaction is routed through the App Store. If you sign up from the website, for instance, Spotify will charge you $9.99 instead.
Apple starts off by saying that developers on the App Store platform have so far earned more than $120 billion from distribution and sales made on the App Store. The App Store can be accessed by 1 billion users worldwide, and there are more than 20 million app developers who are part of the Apple Developer Program.
It is perhaps interesting to point out that Apple also charges the same revenue share for every transaction done via the Play Store for Android devices. “For apps and in-app products offered through Google Play, the transaction fee is equivalent to 30% of the price. You receive 70% of the payment. The remaining 30% goes to the distribution partner and operating fees,” reads Google’s transaction fees policy.
“Like any fair marketplace, developers decide what they want to charge from a set of price tiers. We only collect a commission from developers when a digital good or service is delivered through an app. Here are some of the ways developers commonly make money on the App Store,” says Apple on the new website. Apple also lists the different categories of apps that are available on the App Store—free, free with advertising, free with physical good and services, free with in-app purchases, free with subscription, paid, reader and cross platform. In this list, it is the cross platform app which is the most interesting. “These are apps that offer digital goods and services for sale within an app and also allow users to make those purchases on other platforms. In both cases, users can consume those goods and services in the app on Apple devices,” is how Apple describes these type of apps. They also reaffirm that they only earn a commission on the purchases made directly in the app on the Apple device, and receive no commission from the purchases made on other platforms and then used within the app. For instance, if you were to subscribe to Spotify from the Google Play Store and then use the same credentials to also use the Spotify app on an iOS or macOS device, Apple would not get any revenue share from that subscription transaction. Google would, instead, in this case. The App Store and the Google Play Store work in the same way, essentially.
The second is the anti-competitive allegations that Spotify has levelled against Apple, in the EU. The streaming service alleges that Apple tilts the balance in favour of its own streaming service, Apple Music. Earlier this year, Netflix stopped letting users subscribe to its video streaming service via the App Store and the Google Play Store. For a long time now, Amazon, has only allowed users of its Kindle app to buy books via the web browser only.
This is where the new App Store website takes pains to illustrate how they ensure consumers know about the competing apps for each of their own services too. For instance, if you are an Apple iCloud cloud storage service user, Apple wants you to know that you can also use Google Drive, Box, Dropbox and Microsoft OneDrive. If you use Apple Mail, the competing apps include Gmail, Microsoft Outlook, Spark and Yahoo Mail. All the competing apps categories on the App Store include Calendar apps, Camera app, cloud storage, mail clients, maps and navigation, music streaming, notes, podcasts, TV streaming apps, video chat apps and web browsers.
Apple also does say that “Today, developers have lots of choices for distributing their apps — from other app stores to smart TVs to gaming consoles. Not to mention the open Internet, which Apple supports with Safari, and our customers regularly use with web apps like Instagram and Netflix.” The message is clear—if you don’t like Apple’s App Store policies, you are free to distribute your app or service on the other platforms available. However, app developers also know that being on the App Store has huge financial rewards. According to a report released by research firm Sensor Tower in February, iPhone users in the United States alone spent an average of $79 on App Store purchases for apps and games in 2018—this is 36 percent higher than in 2017. In July last year, App Annie revealed stats that in the five years leading up to 2017, Apple users are willing to pay more for apps than Android smartphone users. While Android users accounted for around 70 percent of the global app downloads on mobiles, they only combined for a 34 percent share of of total app consumer spend. The rest of the chunk is largely owned by Apple’s iPhone and iPad users.