ClassPass built its business by helping people book exercise classes at local gyms. So when the pandemic forced gyms in the United States to close, the company switched to virtual classes.
Then ClassPass received a troubling message from Apple. Because the classes he sold on his iPhone app were now virtual, Apple said he was entitled to 30 percent of sales, above any previous fees, according to a person close to ClassPass who spoke on condition of anonymity out of fear to annoy Apple. The iPhone maker said it was simply applying a rule from a decade ago.
Airbnb experienced similar demands from Apple after it started an “online experiences” business offering virtual cooking classes, meditation sessions, and drag queen shows, increasing the in-person experiences it started selling in 2016, according to two familiar people. with the problems.
Airbnb They discussed Apple’s demands with the offices of House lawmakers investigating how Apple controls its App Store, according to three people who spoke on condition of anonymity to discuss private conversations. Those lawmakers are now considering Apple’s efforts to charge an Airbnb and ClassPass commission. As part of his one-year antitrust investigation at the largest technology companies, according to a person with knowledge of your research.
Those lawmakers are set to question Tim Cook, the chief executive of Apple and the chief executives of Amazon, Facebook and Google in a high-profile audience on Wednesday.
Apple’s disputes with smaller companies point to the control that the world’s largest tech companies have had over the pandemic’s change to online life. While much of the rest of the economy is struggling, the pandemic has further entrenched its businesses.
With millions more employees working from home, Amazon and Google are selling more cloud space online, and revenue from Amazon Web Services and Google Cloud soared in the first quarter of the year, which included the start of the pandemic. Facebook and YouTube, which is part of Google, some of the largest meeting places on the Internet, saw increased traffic as people were unable to socialize in person.
Apple has also generated more revenue from its online services business, primarily on the back of its App Store, and its Mac, iPad, and iPhone have become even more important tools.
With the gyms closed, ClassPass abandoned its typical commission on virtual classes, transferring 100 percent of sales to the gyms, the person close to the company said. That meant Apple would have taken part in hundreds of independent fitness centers, yoga studios, and boxing gyms.
Apple said that with Airbnb and ClassPass, it was not trying to generate revenue, although that’s a side effect, but was trying to enforce a rule that has been in place since it first released its enforcement guidelines in 2010.
Apple said that waiving the commission in these cases would not be fair to the many other app developers who have paid the fee for similar businesses for years. Due to the pandemic, Apple said it gave ClassPass until the end of the year to comply and was continuing to negotiate with Airbnb.
“To ensure that each developer can create and grow a successful business, Apple maintains a clear and consistent set of guidelines that apply equally to everyone,” the company said in a statement.
ClassPass was told it must comply with the rule this month, according to the person close to the company. Instead, it stopped offering virtual classes on its iPhone app, since those classes were subject to Apple’s commission, according to Apple. As a result, fewer potential customers now see classes advertised by their gym partners.
In 2016, Airbnb started a business that offers travelers ‘experiences’ in person, such as tours, bars, and cooking classes with locals at their vacation destinations. In early April, when the pandemic destroyed the company’s travel plans and results, Airbnb began selling virtual versions of similar experiences, though it quickly expanded that business to more prominent offerings, such as cooking classes with famous chefs and sessions of training with olympic athletes.
Later that month, Apple reached out to say that when the online experiences were sold on Airbnb’s iPhone app, the company would have to pay Apple’s fees, a person familiar with their exchanges said.
Apple said it believed Airbnb intended to offer virtual experiences for a long time, not that the business was created simply because of the pandemic, and that it would continue to do so once the world has normalized. Apple also noted that Airbnb had never paid Apple money despite the fact that it built its multi-billion dollar business with the help of its iPhone app.
Airbnb is still negotiating with Apple. In June, Brian Chesky, CEO of Airbnb, said the online experience offering was “the company’s fastest growing product” and that it had earned $ 1 million in revenue. Apple said that if the two companies couldn’t reach an agreement, it could remove the Airbnb app from the App Store.
Many companies and app developers complain that Apple is forcing them to pay their commission to be included in the App Store, which is crucial in reaching the estimated 900 million people with iPhones. Apple said the App Store had 500 million visitors from 175 countries each week.
For months, economists and lawyers at the Justice Department have held meetings with companies and application developers about the App Store as part of their antitrust investigation into Apple. Music service Spotify and another large company that declined to be named also said they had had recent conversations with multi-state attorneys general on the matter.
Unlike Spotify, Airbnb and ClassPass do not offer services that directly compete with one of Apple’s digital products.
Many companies complain that they are also subject to what they call Apple’s whimsical enforcement of their rules, which can lead to the removal of their apps from the App Store, killing some of their business. If Apple removes an app from the App Store, the developer would be unable to get new users for the app and would not be able to update apps that are already on people’s phones, which would eventually break them.
Apple said a small fraction of iPhone apps were subject to its commission, which is in line with the fees charged by other platforms, according to a study released by Apple last Wednesday. Airbnb, for example, charges a 20 percent commission on experiences.
“If you are not in the App Store today, you are not online. Your business cannot function. So they are the gatekeepers to something every business wants, ”said Andy Yen, CEO of ProtonMail, a Switzerland-based encrypted email service that effectively competes with Apple’s own email service. “If you want to go through their doors, they will charge you 30 percent of your income.”
Yen said his company had been fighting with Apple since 2017 for its commission, with Apple sometimes restricting the ProtonMail app on iPhones. To account for Apple’s fee, ProtonMail began charging 30 percent more for subscriptions purchased on its iPhone app compared to those purchased on its website, which are not subject to Apple’s fee. “The only way we could support this fee was actually passing the cost on to the customer,” he said.
But when ProtonMail informed iPhone users of the lowest price on its website, Apple restricted its application. Then, when the company tried to make it clear that 30 percent of the subscription price went to Apple, Apple restricted its app again. “You only hide something like this if it’s wrong,” Yen said.
When asked about the ProtonMail experience, Apple said that its rules require certain applications to use its payment system and prohibits them from telling people to buy their products or services elsewhere.
