At its court hearing on May 3, Epic Games presented an old email of Apple Fellow Phil Schiller to claim that Apple’s top executive wanted to reduce App Store’s 30% commission rate, a decade ago. Bloomberg reports that in 2011, the topic came under discussion when the company’s digital marketplace hit $1 billion in profit.
Epic Games has taken Apple to court, primarily, over the App Store’s in-app purchase 30% share cut. The developer is arguing that Apple’s high share cut forces the developer to increase prices for in-app purchases which hurts the consumer. and in that reference, Epic has used Schiller’s old email as evidence that Apple’s commission rate is high.
The Cupertino tech giant categorically denies the allegation and says that the money is used to make the app store a safe and secure place for the users and to provide technical support to the developers.
In 2011, Phil Schiller 2011 suggested reducing App Store 30% fee to stay competitive
As per the report, In 2011 Schiller wrote to Apple’s senior vice president of Internet Software and Services Eddy Cue expressed that he supported the 30% fee rate but did not believe that the share cut should stay the same “forever”. He suggested that the company should reduce it by 5% to 10% once the digital marketplace starts to make $1 billion in profit per year.
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?” In a July 2011 email, Schiller said he was a “staunch supporter” of the fee, but didn’t believe it would remain “unchanged forever.”
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.”
In its defense, Apple said that Schiller did not mention if the company was earning $1 billion from the App Store in 2011.
Apple, responding to the email, said Schiller didn’t say in 2011 whether the App Store made $1 billion in profit and there is no indication the fee structure is tied to the profit produced by the App Store.
Last year Apple revised its App Store fee structure for small developers. The company reduced the 30% share cut to 15% for all developers who earn up to or less than $1 million annually. And it is reported that 98% of developers are covered under the new program.
During the proceedings, Epic Games also filed its financial report for the years 2018-2020, which revealed that its mobile gaming app, Fortnite earned more than $9 billion in the first two years. One can logically question, is 30% fee a large sum to pay for a multi-billion dollar company? Let us know what your thoughts on the lawsuit are in the comments section.