What you need to know
- Tim Cook took part in a House Judiciary antitrust hearing yesterday.
- One aspect of Apple's business scrutinized was its 30% cut off App Store Revenue.
- Turns out Apple at one point discussed making it 40% for recurring subscriptions.
Confidential emails used as evidence in yesterday's antitrust hearing have revealed Apple's Eddy Cue suggested the company should take 40, rather than 30 percent, of recurring subscription revenue.
In a hearing largely dominated by off-topic political grandstanding and a good chunk of nonsense (Mark Zuckerberg was asked why Donald Trump Jr. was banned from Twitter), Apple seems to have emerged largely intact from the hearing, with Google and Facebook taking the brunt of the beating. One interesting piece of evidence that was floated around during the hearing, however, was an email from Eddy Cue back in 2011 that suggested Apple should consider taking 40% of App Store revenue, and that 30% meant "leaving money on the table," in particular regarding recurring subscriptions.
Documents from the Hearing on “Online Platforms and Market Power: Examining the Dominance of Amazon, Apple, Facebook and Google" pic.twitter.com/42o2Ye13jIDocuments from the Hearing on “Online Platforms and Market Power: Examining the Dominance of Amazon, Apple, Facebook and Google" pic.twitter.com/42o2Ye13jI— House Judiciary Dems (@HouseJudiciary) July 29, 2020July 29, 2020
In the email Cue states:
For recurring subscriptions, we should ask for 40% for the first year only but we need to work a few deals to see what is right.
Specifically, Cue was referring to recurring subscription services like Hulu, noting that customers tend to stick around a bit longer with those types of subscriptions. He states:
So should we just ask for a 30% bounty of the 1 year subscription fee? After the first year they get to keep it all. (Is 1 year reasonable or do we want more). So in hulu's case, we ask for (hidden)... I think we may be leaving money on the table if we just asked for about 30% of the first year of sub.
Whilst Cue does explicitly mention a 40% cut at the start of the email, he also seems to have been toying with how long Apple should take revenue for, just the first year or longer? It is clear Cue was weighing up taking 40% in the first year if Apple then didn't take any revenue in the following years. As per Apple's App Store principles and practices, Apple settled on 30% for the first year, and 15% for "all successive years that the user remains a subscriber."
From the discussion, it seems that the 40% idea would not have affected regular one-time purchases of apps, or in-app purchases, but exclusively recurring subscriptions. And even then, a 40% cut was seen as a possible alternative to not taking any further revenue after the first year of a recurring subscription.
