Phil Schiller, the Apple manager in charge of the App Store, raised the possibility that the company would cut its commission from 30 percent to 25 or even 20 percent in 2011 in response to competition. Schiller brought the idea in an email to then Apple CEO Steve Jobs and Apple Services Head Eddy Cue. The email was made public as part of the company’s legal battle with Epic Games. Bloomberg was the first to report on the email exchange.
“Do we think our 70/30 split will last forever?” Schiller’s email begins. “I think one day we’ll see enough challenge from another platform or web-based solutions to want to adapt our model.” Schiller goes on to suggest that if Apple were ever to change its fee structure, it should do “from a strong position rather than a weakness,” and floats the idea that Apple will cut its commission rate once the App Store generates more than $ 1 billion. in annual profit.
“I know this is controversial, I’m just using it as another way to look at the size of the company, what we want to achieve and how we stay competitive,” Schiller wrote. “Just food for thought.” Attached to the email is a Wall Street Journal 2011 article which discussed the possibility for developers to use web apps to bypass Apple App Store charges.
Apple’s 30 percent commission on many in-app purchases is central to the legal battle with Epic Games, which accuses the App Store tied to iPhones and iPads of being a monopoly. Epic is required to use Apple’s payment method for in-app purchases within Fortnite (and thus paying a 30 percent commission), and it was the company’s move to offering its own in-app payment system that prompted Apple to kick the game from the App Store.
In response to the email, Apple said there is no evidence that the App Store’s fees are linked to earnings, and the 2011 email did not confirm that the store made $ 1 billion in profits. Bloomberg reports. Analysis of Sensor Tower has the App Store’s commission revenue around $ 22 billion in 2020, and Epic quotes a witness who claims his win rate is around 80 percent.
Apple has adjusted its commission structure over the years, but has never lowered the standard wholesale rate to 25 or 20 percent. In 2016, it lowered its commission to 15 percent for subscribers who have signed up for a service for more than a year. Then, last year, it lowered its rate to 15 percent for developers making less than $ 1 million in sales in its store. The move was pushed back by Apple’s critics, with Epic CEO Tim Sweeney calling the decision “a calculated move by Apple to divide app developers and maintain their monopoly on stores and payments, again breaking its promise to treat all developers equally. “