App Store boss says Apple aims to level the playing field for developers

(Reuters) – On Wednesday, Apple Inc Chief Executive Tim Cook will face questions from US lawmakers about whether the iPhone maker’s app store practices give him unfair power over independent software developers.

FILE PHOTO: The Apple logo is displayed on top of an Apple store in a mall in La Jolla, California, USA, December 17, 2019, 2019. REUTERS / Mike Blake

Apple strictly controls the App Store, which forms the centerpiece of its $ 46.3 billion per year service business. Developers have criticized Apple’s 15% to 30% commissions on many App Store purchases, its bans on wooing customers for external subscriptions, and what some developers see as an opaque app research process and unpredictable.

But when the App Store launched in 2008 with 500 apps, Apple executives saw it as an experiment by offering a convincingly low commission rate to attract developers, Philip W. Schiller, Apple’s senior vice president of global marketing and senior App Store executive told Reuters in an interview.

“One of the things we came up with is that we will treat all applications in the App Store the same way: one set of rules for everyone, no special offers, no special terms, no special code, everything applies to all developers The same. That was not the case in the PC software. No one thought that way. It was a complete turnaround of how the entire system would work, “Schiller said.

In the mid-2000s, software sold through brick-and-mortar stores involved paying for shelf space and prominence – costs that could consume 50% of the retail price, said Ben Bajarin, head of consumer technologies at Creative. Strategies. Small developers were unable to enter.

Bajarin said the predecessor to the App Store was Handango, a service that around 2005 allowed developers to deliver applications over cellular connections to Palm users and other devices for a 40% commission.

With the App Store, “Apple took that to a whole different level. And at 30%, they were a better value, “said Bajarin.

But the App Store had rules: Apple reviewed each application and ordered the use of Apple’s own billing system. Schiller said Apple executives believed that users would feel more secure when purchasing applications if they felt that their payment information was in trusted hands.

“We believe that the privacy of our clients is protected in this way. Imagine if you had to enter credit cards and payments in every application you have ever used, ”he said.

Apple’s rules started out as an internal list, but were released in 2010.

Over the years, developers complained to Apple about the commissions. Apple is down where they apply in response. In 2018, it allowed gaming companies like Microsoft Corp, maker of Minecraft, to allow users to log into their accounts as long as the games also offered payments in the Apple app as an option.

“As we were talking to some of the biggest game developers, for example Minecraft, they said, ‘I totally understand why you want the user to be able to pay for it on the device. But we have many users who bought their subscription or their account elsewhere: on an Xbox, on a PC, on the web. And it’s a great barrier to accessing your store, ‘”Schiller said. “So we created this exception to our own rule.”

Schiller said the Apple cut helps fund an extensive developer system: Thousands of Apple engineers keep servers secure to deliver applications and develop the tools to create and test them.

Marc Fischer, CEO of mobile technology firm Dogtown Studios, said Apple’s 30% commission felt justified in the early days of the App Store when it was the price of global distribution for a company then small like his own. . But now that Alphabet Inc’s Apple and Google have a “duopoly” in mobile app stores, Fischer said, the rates should be much lower, possibly the same as single-digit payment processors charge.

“As a developer, you have no choice but to accept that position,” Fischer said.

Reporting by Stephen Nellis in San Francisco; Editing by Greg Mithcell and Steve Orlofsky

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