essentials:
Apple requires all apps on the App Store to use Apple's IAP payment system, which charges 15% to 30% of sales from each transaction as a commission, which is called "Apple Tax."
2. In recent years, anti-monopoly agencies in the European Union, Britain, Russia, the Netherlands, Japan, South Korea and other countries have launched a number of anti-monopoly investigations and fines on the "Apple Tax".
3. The "Apple tax" raises the operating costs of app developers, and this cost is usually partially transferred to users.
4. In the era of the outbreak of the creator economy, the "Apple tax" affects the creator's income and the user's willingness to pay to a certain extent.
In recent years, antitrust has become a global megatrend, especially in the internet and technology fields. In China, the State Administration for Market Regulation has strengthened its supervision of monopolistic behavior, and leading Internet companies such as Tencent and Ali have received fines many times. In the international market, the Internet technology giants such as Apple and Google that we are familiar with have also been collectively resisted by developers due to long-term monopolistic behavior, and the debate around the "platform tax" has always been the center of the storm.
Just last week, Apple announced that it would allow Reader Apps to use external links inside the app to let users sign up or manage accounts. So-called "reader apps" refer to apps that allow users to access a library of content on their phones, including magazines, newspapers, books, audio, music, or video content, which means apps like Spotify and Netflix can bypass Apple's commission mechanism.
The new policy, which is available globally, is part of last year's settlement with Japan's Fair Trade Commission. Previously, Apple required all apps on the App Store to use Apple's IAP payment system, which would charge 15 to 30 percent of sales as a commission on each transaction, which could include paid subscriptions, in-app item purchases, and so on. The new policy will allow these apps to bypass Apple's commissions through backlinks.
For the "apple tax", countries have issued fines
Users of Apple's system must be deeply touched, not only most of the applications need to be downloaded from the Apple App Store App Store, but also want to spend in the app will be mandatory to use Apple's own payment system IAP, Apple will take 15%-30% commission from it.
Initially, Apple's commission ratio for in-app transactions was 30%, and in 2021, Apple issued a new regulation: reducing the commission rate for developers in the Apple Store to 15%, but the conditions are very strict, it must be under $1 million per year or independent developers, and most companies that do not meet this condition are still 30% of the commission.
Such "overlord clauses" have caused headaches for many app developers, and commissions of up to 15%-30% have also been jokingly called "Apple tax" by the media.
In August 2020, Epic Games, the developer of the game Fortnite, tried to bypass Apple's App Store payment platform, firing its first shot against the "Apple tax." Epic accused Apple of illegal restrictions on iOS app distribution, digital goods purchases, and IAP payment systems. In October 2021, the first instance judgment of the case was pronounced, and Epic's relevant market evidence failed. Apple countered that the area where it could compete effectively with Epic should be the broader digital video game (platform) market, where Apple has only 37.5 percent of the market.
The court finally ruled that Apple allowed developers to include in the app the option to guide users to use third-party payments, and could transact outside the app, but in the end Epic Games could not prove that Apple created a monopoly in the mobile game trading market.
After Epic Games tore a hole, the outside world protested against apple's App Store.
In Europe, anti-monopoly law enforcement agencies such as the European Union, the United Kingdom, Russia, and the Netherlands have opened investigations against Apple after receiving complaints from large developers such as Spotify and March Group. In Asia, Japan and South Korea have also joined the crusade, with South Korea trying to discipline the "apple tax" in the form of law amendments.
Last year, the amendment to South Korea's Electronic Communications Business Law was passed by the South Korean Parliament, which requires that Google and Apple's app stores can no longer force developers to use the platform's only payment system, and if the company violates the regulations, it will face a fine of up to 3% of its revenue in South Korea.
Spotify has been accusing Apple of anti-competitive behavior since 2019, charging app developers a 30 percent share of revenue from in-app purchases. Since Apple owns the music streaming app Apple Music itself, too high commissions will force subscription prices for competitor Spotify. In June 2021, the European Union said Apple had violated EU competition laws by unfairly putting rival music streaming services at a disadvantage.
In August 2021, the Dutch Consumer and Market Authority (ACM) issued an antitrust fine to Apple, finding that Apple had created a monopoly in the Dutch iOS dating app App Store service market. The Dutch penalty decision, which took effect on December 24, 2021, ordered Apple to lift the anti-boot clause restricting developers to use the IAP payment system, allowing dating iOS developers to use third-party payment systems other than IAP, and processing digital goods transactions outside the App Store or iOS app, in an attempt to circumvent the "unfair commission burden."
In response to the Netherlands' rectification request, Apple made only a small concession, stating that it would no longer restrict local dating iOS apps from using third-party payment systems, but insisted on charging a 27% commission and only 3% of the management fee for its digital goods transactions through third-party payment systems.
This year, the Dutch market antitrust agency once again proposed a rectification of Apple's App Store, requiring Apple to liberalize external payments and run third-party payment platforms in order to provide a more favorable market, but Apple has been uncompromising. In this case, the Dutch market antitrust agency has issued a fine of 5 million euros to Apple for several consecutive weeks since January this year, and as of March 29, the fine has reached 50 million euros. This state of affairs lasted for ten weeks, and neither side made concessions.
Indeed, for Apple, revenue in fiscal 2021 was $365.8 billion, of which hardware revenue was $297.4 billion and services revenue from the App Store and the like were $68.4 billion, with the latter's operating margin conservatively estimated at around 75%, with a very large portion of which came from Apple's commissions. So, a fine of €5 million/week may not be able to prick the sore spot. But news came on March 30 that the Netherlands had launched a class-action lawsuit against Apple, accusing the App Store of monopolizing, which the Dutch side expected to bring a potential loss of $5.5 billion to Apple.
Who is paying for the "Apple Tax"?
It is not difficult to see from the above that the antitrust controversy surrounding the "Apple tax" is mainly focused on the App Store, so what services does the App Store provide? How do I receive a commission?
As apple-specific app store, app store is a bilateral platform that brokers iOS users and iOS developers, through which users can buy and download free or paid apps, purchase in-app digital goods, subscribe to newspapers, magazines, music/video streaming and other digital content.
For application developers, the platform provides a distribution service, that is, the distribution of the application itself and the digital goods in the application to iOS system users around the world. So, in the face of Spotify's allegations, Apple has said it is "proud of the role it played in helping Spotify become the world's largest music streaming service", retorting: "Spotify wants to get the benefits but doesn't want to pay for it." ”
Spotify has claimed in the complaint that Apple's 30% fee share levied on it through the App Store undermines the fair competition between Spotify and Apple Music, so Spotify can only "artificially inflate" user fees to maintain operating costs. Spotify, for example, charges subscribers $12.99 per month for a subscription through the App Store, instead of the usual $9.99 per month.
Not only Spotify, due to the operating costs brought about by the "Apple tax", the subscription fees of most music and video streaming platforms in China, the purchase cost of virtual gifts in the live broadcast room, the reading cost of paid articles, the price of game equipment, etc., most of them have set prices "specially" for Apple mobile phone users. Because Apple has lowered the proportion of the cost of subsequent subscriptions in the APP under pressure from many parties, and reduced the commission ratio of subscriptions after more than one year to 15%, this is usually reflected in the user side, and the monthly paid subscription price of Apple mobile phone users is higher.
△ QQ Music Android (top) and Apple (bottom) mobile phone user membership price difference
It can be seen that the cost of the "Apple tax" is mainly paid by developers and users, in addition to professionals believe that "Apple is now one of the main obstacles to the flourishing of independent creators on the Internet." ”
The Apple tax has a much greater impact on creators than developers and users, as millions of creators are supposed to earn more revenue through the platform and connect with their fans. But due to mandatory in-app payments, as well as a 15%-30% Apple tax, the income that creators get their hands on has shrunk considerably. In addition, this practice has also led to a certain extent to increased consumer prices and a decrease in willingness to pay for content.
The good thing is that Apple has now allowed "reader apps" to use external links, bypassing Apple's commission mechanism. But there are also concerns that such limited concessions are unlikely to change the status quo for app developers, subscribers, and creators.
According to the information apple provides on the developer website, developers who want to provide backlinks for their users must submit an application to Apple, and the backlinks must be standard links, not buttons, and contain domain names that point to the website. Secondly, any application that provides an bypass for backlink applications cannot use the in-app purchase function. Regarding this clause, some people understand that the entire application cannot use the in-app purchase function, and some people understand that apple's in-app purchase channel cannot be used. How to implement it specifically, or wait until the major "reader applications" have tried the water to know the depth.
In general, the App Store can be said to be the builder of the entire Apple ecosystem, and its important position is self-evident. But under the pressure of many parties, Apple still made some concessions. At present, Apple has opened up the function of "reader apps" such as books, comics, videos, and music to use external links, and we will continue to observe what specific impact the new policy will bring to developers, users and creators.
Spotify shares rise 7% after Apple eased app store "taxes" For now, the stock price seems to have only a modest rise.