What you need to know
- Apple's Phil Schiller questioned how long the company could charge 30% fees in the App Store.
- Epic Games released emails from Schiller as part of its trial against Apple.
The fees on the App Store were almost cut for developers a decade ago.
As reported by Bloomberg, Phil Schiller, who was previously Apple's Senior Vice President of Worldwide Product Marketing, talked about reducing the fees on the App Store when it hit $1 billion in profitability almost ten years ago.
Phil Schiller, who runs the App Store and was previously Apple's marketing chief, in 2011 asked Eddy Cue, the head of services, whether "we think our 70/30 split will last forever?" The question refers to the 30% cut Apple takes from developers for paid app downloads, in-app purchases, and subscriptions bought on apps within the store. In a July 2011 email, Schiller said he was a "staunch supporter" of the fee, but didn't believe it would remain "unchanged forever."
The 30% fee and the rules regarding in-app purchases are two of the central issues to Epic's lawsuit against Apple, alleging the iPhone maker's actions are anticompetitive and unfairly deprive Epic of revenue. The fight blew up in August when Epic added its own payment system to the popular game Fortnite for in-app purchases, circumventing Apple's system and, therefore, its fees. Apple then removed the game app, cutting off access for more than 1 billion iPhone and iPad customers.
Instead of a 30% fee, Schiller floated the idea of reducing it to as low as 20%.
Schiller, in the email, suggested that if Apple were to eventually make a change to its fee structure, it should do so from a position of strength. "One thought," he said, would be to adjust the fees once the App Store reached $1 billion per year in profit. He suggested a 25% or 20% fee if that would still generate the $1 billion in annual profit.
"I know that this is controversial, I just tee it up as another way to look at the size of the business, what we want to achieve, and how we stay competitive," Schiller wrote in the email presented Monday during the trial.
Apple has made changes to how fees in the App Store work since Schiller wrote that email. In 2016, the company lowered the fee it takes from apps to 15% for every year after the first. In 2020, it also started the App Store Small Business Program, which reduced fees to 15% for all developers making less than $1 million in revenue per year.