Apple executive emails revealed in the Epic Games vs. Apple lawsuit highlight how the company came to its conclusion to take a 30% cut on all App Store transactions in a way that ensured it wasn't "leaving money on the table."
One email thread from 2011, spotted by The Verge, features Apple services chief Eddy Cue discussing the commission that the company should charge providers for content subscriptions accessed via Apple TV (an App Store on the set-top box didn't exist at the time.) Apple execs considered charging a 40% one-time cut, a 30% one-time cut, a 30% ongoing fee, or individualized deals with different providers.
Apple's team eventually decided to require the same 30% fees as it does on the iTunes Store and the App Store. Another email also discusses how Apple should negotiate referrals, where Apple TV apps link out to a provider's website for customers to subscribe directly to the service.
One executive said they wanted to ensure they protected the 30% fee that had long been enshrined in the App Store, but stated they would remain open to other deal structures.
"I don't want to do any deals where we get less than 30%. That is what it is on the app store and we can't be making a different deal here. If that is not possible than I want a one-time bounty but we need to very careful here so this doesn't spillover to the app store," one exec wrote. (The emails are threaded such that it's hard to tell who is replying to whom.)
Overall, the email thread appears to suggest that discussions evolved extemporaneously amongst Apple executives when it came to provider fees during the early development of the Apple TV platform, with maximum profit the main concern.
Amid increasing scrutiny over its App Store practices, Apple in November announced the Small Business Program, which saw App Store fees slashed to just 15% for developers earning under one million dollars per calendar year. The App Store commission remains at 30% for developers making over one million dollars per year.
The program has since received praise from many developers, but some larger developers including Epic Games criticized the move, saying it undermines the App Store's rules. Epic Games is ineligible for the reduced commission since it exceeds the $1 million earnings threshold. Apple said the program will benefit the "vast majority" of App Store developers.
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You should see the markup on tangible products to wholesalers or wholesalers to retailers.
EDIT: For the sake of clarity, the average markup of a wholesaler or manufacturer to a retailer or wholesaler is 20-40%. Apple is charging 30% by acting as a middleman. If you reject Apple's 30%, I suggest you reject every retailer where you purchase any services or goods from.
Forget what the emails actually say. Look at how it's written! That's appalling! It's not properly capitalised! Noteworthy is that "the App Store" isn't even capitalised! And my Mac just automatically capitalised it for me as I wrote it here so there's no excuse for that. And there's even a word missing. "we need to very careful here". "be". Please write full sentences when you're an exec writing emails like this... And "than" is comparative. "Then" is the word you wanted there. God damn
So Apple leadership is figuring out how much to charge for something, and they go with their existing standard fee that’s also in line with the rest of the market. Is there supposed to be some sort of smoking gun here?
Who gets to decide that. Funiture and clothing have 300 and 400 percent markups. Jewelry too. Apple is successful because they generally require a 35% profit margin to release anything and to do a few things very well. They strayed from this while Jobs was in exile and nearly went out of business. Most of their competitors from that era no longer exist.
30 percent is actually much lower if you look at their costs. They manage the support, they eat the 3% credit card processing fees, they host the apps in cloud, they provide free marketing and drive the platform via ads and other methods, they maintain the platform, with constant and consistent updates to APIs and security. They protect companies from piracy that plagues other platforms, and keeps them from being run out of business.
