Thought Experiment - App Store Fees, etc

Let’s say Phil Schiller gets up on stage at WWDC and announces that they’re dropping the App Store fees to 10%.

What would happen as a result of that?

Presumably devs would be happier. But Apple is a publicly-traded company, and I’m wondering what the shareholder reaction would be. If my numbers are correct (70-ish billion in 2020 from the App Store), this would cause a 40-50 billion dollar revenue hit over the course of the following year. I can’t imagine there not being any blowback from that.

Any thoughts?

This assuming all other things remain the same - but they won’t. Could be increased activity (supply and/or demand) because of the lower fees.

I don’t see Apple dropping their fees again any time soon. I think it’s more likely Apple may be facing a legal fight over their requirement that all in-app purchases go through Apple’s payment process.

Most of the app store’s revenue comes from games and their in-app purchases. And in the closing minutes of the Epic trial Judge Gonzalez Rogers said to Tim Cook “You use gamers to subsidize Wells Fargo” “It’s disproportionate.”

Personally I think when all is said and done, the App Store will be much the same as it is today, except developers will be able to use 3rd party payment processors and notify users of this within the app.

If this is the judge’s determination, everyone expects Apple to appeal the decision. So we probably won’t know the final outcome for quite some time.


There’s no incentive at the moment to drop prices for anything. Regulatory and legal action can take years, and in that time the world will have changed and they’ll probably end up at 15 % overall, instead of 30% first year and 15% for those under 1Mio.

Services revenue is increasing across the board, so at that time an app store drop won’t be very noticeable in the quarterly stats.

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Which will be a very good basis for a mistrial or appeal.
This will take years, and certainly go up to the highest courts.

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Really? My legal expertise is limited to hiring lawyers to handle various matters for the companies where I worked, so I wouldn’t know. But I suspect regardless of how this trial ends, it won’t be the last time Apple has to defend this practice, either in this country or another.

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I would imagine there could be increased developer activity. I’m wondering if devs would drop prices by 20% though, or if they’d leave them where they are.

I grant both points. What I’m asking is, “if a company like Apple intentionally did a thing like this, what would the market effect be?”

Basically, if Epic had challenged Apple, and Apple had said “okay, y’know, we’ve been thinking about this - 10% across the board sounds good to us.”

Would shareholders have put up with that? What would the market effects be?

I have no idea, it would probably have a very very short term effect, and would then be swamped by good iPhone sales numbers. So I’d expect the announcement to be at the September event as a “good news for Devs”

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Got it :wink:

If it is correct that the App Store makes most of its money from games, then Apple lowering their rate should mean a substantial drop in the source of (currently) 28% of their total revenue. Without something to offset the loss I imagine the stockholders would not be happy.

IMO, many app prices are already ridiculously lower than they should be. LumaFusion for $19.99? Current app prices are probably the main reason for the move to subscriptions, so I wouldn’t expect anyone to lower them.

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I imagine developers would receive a flood of demands to lower their prices.

But why would Apple intentionally transfer wealth to developers? It seems Apple’s view is that the developers need Apple more than Apple needs them – given the almost 2 million apps on offer, there is no end of developers willing to put something on offer in the store.

Why a mistrial? Because he’s showing his bias? Just curious.

Many believe the death of the Windows Phone was mainly due to Microsoft’s failure to attract developers.

Steve Jobs failed to see a need for it in the beginning, but there is an argument to be made that the App Store was as important to the success of the iPhone as Apple’s excellent hardware.

I think Apple needs developers ever bit as much as they need Apple.

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I don’t know that they would. But this is the sort of scenario that many are clamoring for - so I’m wondering whether giving them exactly what they asked for would be good for Apple, good for devs and users in the long term, etc.

Perhaps. But “good for Apple” / “good for developers” / “good for users” is not necessarily an equivalence. I really believe a developer will think “I charged $100 and received $70 gross; now I receive $80 gross after Apple cut its commission; so I’ll stick with $100 as the price”.

I’m too much of a stark capitalist to think that either Apple or developers care about one another or customers.

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That’s what I’m wondering, too.

If there were a jury and the judge made (effectively) a finding of fact from the bench, yeah - I can see it getting tossed. But in a judge-only trial I’m not sure how somebody could be showing “bias” at the end of a court case. If he said it at the beginning that would be one thing - but the end of the case is when the judge has to rule…isn’t it?

Also let’s remember that a mistrial is when the whole thing gets thrown out because it’s invalid. An appeal is when you can argue that there’s a reason something should be reconsidered.

I’d have a hard time seeing a mistrial here. Both sides will almost certainly appeal though if they lose. :smiley:

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My assumption was the case had not ended yet? (did not follow the news on this one)

The hearings have, we’re now waiting for the verdict (in 1-2 months?)

Maybe the Devs should buy AAPL stock.

If you can’t beat 'em, then join 'em.

It wouldn’t affect services revenue (e.g. turnover), but would affect profit from the app store. I’m not sure that’s as high as you’re suggesting.

Services turnover for the last 4 quarters was $56bn dollars. Even if the whole of it was App Store revenue on which Apple gains 30% that would come out at $16.8bn. 15% is $8.5bn.

Apple Services Revenue includes The ‌App Store‌ but also iCloud services, ‌Apple Music‌, ‌AppleCare‌Apple TV+‌, ‌Apple Arcade‌, ‌Apple News‌ +, Apple Card, Apple Fitness+, and Apple One.

Of course for anything which is Apple Branded, there’s no 30% cut, but there are costs. Based on an estimated profit from the App Store of about $4bn, a reduction from the 30/15% split to 10% could reduce it by less than $2bn i.e. less than $500m a quarter.

For Apple’s $300bn a year turnover and $76bn a year profit, it’s not nothing, but based on the fact that Apple Services revenue increased by $3.7bn from Q3 2020 and Q2 2021 (the last quarter announced) it could quickly be recovered by increases in Services revenue within 12 months.

Will they reduce it to 10%, I doubt it, but they could reduce it to 25%/15% any decrease would be welcomed by devs.