Apple mulled 40% take of subscription fees in 2011

AppleInsider

Documents made public as part of a U.S. House probe into Apple's business practices reveal the company discussed taking a 40% cut of third-party services subscription revenue.

In an email dated 2011, Apple SVP Phil Schiller forwarded a strategy that would take a 40% slice of service subscription fees. The House Judiciary Committee produced the correspondence in a tweet posted during today's antitrust hearing.

"For recurring subscriptions, we should ask for 40% of the first year only but we need to work a few deals to see what is right," Schiller wrote.

The suggestion was in response to a fee structure proposed by Jai Chulani, Apple's director of worldwide product marketing for Apple TV & Digital Media products. At the time, Chulani said Apple should take a 30% "bounty" of one-time transactions, while asking for an ongoing 30% fee on continuing subscriptions for digital content services.

Subscriptions were a relatively new concept for Apple and it appears the company was hashing out how best to balance platform cost and platform access. Subscriptions for services like those offered by MLB and NBA, and recurring subscriptions for products like Hulu, were discussed by name in the email.

"I think we may be leaving money on the table if we just asked for about 30% of the sub," Chulani's email reads.

Apple ultimately settled on a 30% cut of third-party subscriptions, identical to fees levied on developers in the App Store. The company in 2016 updated its app subscription policy, reducing its take of developer revenue to 15% for customers who maintain a subscription for more than one year.

SpamSandwich

I don’t care. Whatever works for their business is OK by me.

tommikele

So almost 10 years ago the thought about making their cut 40%. So what? Discussions and executives expressing their opinion about strategy and revenue development is completely normal. Typical media move hoping to make something out of nothing and feeding the lowlife political machine in Washington.

sflocal

Is this click-bait, sensationalist reporting?  Who cares what Apple "mulled".  I'm sure they thought of all kinds of numbers.  I suppose maybe it could have been more so app-developers should be grateful.  In the end, it's what Apple IS doing, not what they were "thinking" of doing.

Rayz2016

sflocal said:

Is this click-bait, sensationalist reporting?  Who cares what Apple "mulled".  I'm sure they thought of all kinds of numbers.  I suppose maybe it could have been more so app-developers should be grateful.  In the end, it's what Apple IS doing, not what they were "thinking" of doing.

I wonder if they ever considered 70%, which is what so ever app stores were taking, and Amazon still takes for books. 

genovelle

Rayz2016 said:

sflocal said:

Is this click-bait, sensationalist reporting?  Who cares what Apple "mulled".  I'm sure they thought of all kinds of numbers.  I suppose maybe it could have been more so app-developers should be grateful.  In the end, it's what Apple IS doing, not what they were "thinking" of doing.

I wonder if they ever considered 70%, which is what so ever app stores were taking, and Amazon still takes for books. 

And Apple was taken to task for iBook pricing in which they lowered pricing. 

Xed

SpamSandwich said:

I don’t care. Whatever works for their business is OK by me.

Funny you don't feel that way when it comes to "their business" of investing in entertainment production.

entropys

Rayz2016 said:

sflocal said:

Is this click-bait, sensationalist reporting?  Who cares what Apple "mulled".  I'm sure they thought of all kinds of numbers.  I suppose maybe it could have been more so app-developers should be grateful.  In the end, it's what Apple IS doing, not what they were "thinking" of doing.

I wonder if they ever considered 70%, which is what so ever app stores were taking, and Amazon still takes for books. 

Yes as I recall that was the online rate for purchases (70%) prior to the App Store. There really wasn’t much of a subscription market for online.

Xed

sflocal said:

Is this click-bait, sensationalist reporting?  Who cares what Apple "mulled".  I'm sure they thought of all kinds of numbers.  I suppose maybe it could have been more so app-developers should be grateful.  In the end, it's what Apple IS doing, not what they were "thinking" of doing.

It's just an interesting fact that came out during the probe, not unlike the interesting mockups for the original iPhone and iPad that came out during the Samsung trial.

dewme

Whew, how could Apple, or at least Phil Schiller, have lusted in his heart about asking for a 40% cut on subscriptions? Naughty boy. What’s next, Tim Cook sitting on the back porch in a wife beater t-shirt and swigging Billy Beer? 

CheeseFreeze

SpamSandwich said:

I don’t care. Whatever works for their business is OK by me.

So you’re “whatever works for their business” too when your mobile phone provider triples your subscription fee?

And you are also “whatever works for their business” too when your government increases VAT on products you purchase to 85%?

crowley

genovelle said:

Rayz2016 said:

sflocal said:

Is this click-bait, sensationalist reporting?  Who cares what Apple "mulled".  I'm sure they thought of all kinds of numbers.  I suppose maybe it could have been more so app-developers should be grateful.  In the end, it's what Apple IS doing, not what they were "thinking" of doing.

I wonder if they ever considered 70%, which is what so ever app stores were taking, and Amazon still takes for books. 

And Apple was taken to task for iBook pricing in which they lowered pricing. 

Huh?  No they didn't.  Amazons ebooks were and are routinely cheaper than Apples. 

tommikele

Rayz2016 said:

sflocal said:

Is this click-bait, sensationalist reporting?  Who cares what Apple "mulled".  I'm sure they thought of all kinds of numbers.  I suppose maybe it could have been more so app-developers should be grateful.  In the end, it's what Apple IS doing, not what they were "thinking" of doing.

I wonder if they ever considered 70%, which is what so ever app stores were taking, and Amazon still takes for books. 

Not true. I know from very direct experience.

Amazon does not, and for the last decade has not, taken 70%. On E-books, Amazon's standard commission is 30%. I speak from direct knowledge. My wife is a pretty successful author who generates about 75% of her revenue with Amazon.

Authors that are not independents end up giving up a total of about 70%, but Amazon's cut is still 30%. The author's publishing house is taking the other 40%.

Print books using Amazon's digital print on demand service will pay a higher rate.

GG1

dewme said:

Whew, how could Apple, or at least Phil Schiller, have lusted in his heart about asking for a 40% cut on subscriptions? Naughty boy. What’s next, Tim Cook sitting on the back porch in a wife beater t-shirt and swigging Billy Beer? 

+10 for squeezing in a reference to Billy Beer in a tech forum!

urahara

CheeseFreeze said:

SpamSandwich said:

I don’t care. Whatever works for their business is OK by me.

So you’re “whatever works for their business” too when your mobile phone provider triples your subscription fee?

And you are also “whatever works for their business” too when your government increases VAT on products you purchase to 85%?

85% is OK. The problem would have been only if they raided it to over 9000%. 

And the thought to change the provider hasn’t come to you. You just pretend to be smart?

SpamSandwich

urahara said:

CheeseFreeze said:

SpamSandwich said:

I don’t care. Whatever works for their business is OK by me.

So you’re “whatever works for their business” too when your mobile phone provider triples your subscription fee?

And you are also “whatever works for their business” too when your government increases VAT on products you purchase to 85%?

85% is OK. The problem would have been only if they raided it to over 9000%. 

And the thought to change the provider hasn’t come to you. You just pretend to be smart?

That’s right. Bad companies lose customers. Good companies gain them.

gmgravytrain

Why stop at 40%?  Apple should have gone for 50% and see what would have happened.  Knowing how iPhone sales have slowed, Apple has to find a way to make up for that lost revenue even if they have to squeeze blood out of a stone.  Wall Street doesn't care how Apple makes money.  Big investors don't mind if Facebook and Google steal data from subscribers to sell, so what difference does it make if Apple finds ways to make a little more cash by upping commission fees.  Developers would either pay or decide to move to Android OS where they can do anything they want.  Does Google Play charge commissions or are the commissions much lower than Apple's App Store?

geekmee

As if that means something, I don’t care if they discussed 80% commissions... 

At the time, they had no idea if the App Store was going to succeed. 

I am sure other app stores (the market) would have popped up at a 80% commission rate.

But they didn’t at 30%...So the discussion is moot.