Criticism of Apple‘s (NASDAQ: AAPL) The 30% cut in digital sales on the App Store has intensified over the past year. Antitrust regulators are reportedly hanging around, possibly preparing to launch formal investigations into the company’s practices to determine whether App Store policies undermine competition. CEO Tim Cook agreed to testify before the House Judiciary Committee next week alongside CEOs of peer tech giants. Amazon, Alphabetand Facebook.
Before that appearance, Apple has released a study it backs that suggests its 30% cut is worth it.
Image source: Apple.
Most digital platforms charge 30% (or more)
The Mac maker commissioned the study from Analysis Group, the same group of independent economists who also conducted an analysis last month of just how big Apple’s mobile economy really is. One of the apparent objectives of that previous study was to highlight how much commerce Apple facilitates but does. no Get a cut of, namely, sales of physical goods and services that accounted for around 80% of App Store bills last year.
The new study attempts to compare Apple’s commission rates with other prominent digital platforms to determine whether it is excessive or not. Apple’s cut in subscription revenue drops to 15% after the first year. Analysis Group notes that all of the dominant Google app stores, Amazon, Microsoft, and Samsung have similar commission rates of 30%. Google Play is banned in China, and many local companies have established Android app stores that can charge 50% or more.
Analysis Group also reviews physical retail stores and notes that consignment stores can sometimes charge 50% to 75% commission. Since digital distribution is so much cheaper, the study suggests that the 30% cut from the App Store seems relatively good. “We found that sellers generally get a substantially smaller share of total distribution revenue through physical stores and markets than through digital markets like the Apple App Store,” the authors write.
Arguably, this comparison is out of place in some contexts, but it’s worth noting that certain software products like video games can be sold physically or digitally. According to the study, selling a physical copy of a video game in a retail store only gives the developer 45% of the sale price after taking into account retail margins and physical distribution costs, compared to 70% that developers maintain if they sell the same game digitally.
“To promote their success, Apple offers developers distribution, search and review services, as well as a set of tools to create and monetize applications,” says the study. “Apple also invests in the security of the App Store and in the development of new technologies and functionalities.”
What the study does not say
While Analysis Group concludes that the App Store’s commission rates mostly match competing platforms, it sidesteps the key competitive concern: the App Store is the only place to buy digital stuff on iOS. On most of the other platforms mentioned, users have alternative ways to get content on their devices.
Rather, Apple maintains tight control over iOS, and developers have sued the company alleging that the App Store represents an illegal monopoly on iOS app distribution. Developers looking to sell iOS apps to the more than 900 million iPhone users have no choice but to go to the App Store and pay.
