Question: why would developers complain about Apple handling the payment processing if they can't negotiate a better rate than 3% themselves? The reality for credit card processing fees is that online transactions are ALWAYS going to have higher cost than physical transactions with a card. That's how the banks have set it up.
It's not the 3% fee that's an issue. It's the attached 27% cut of the gross for Apple that the company insists on. Apple gets the same cut as before while doing far less to deserve it.
Apple's doing exactly the same for the 27% (and it's 12% for non-millionaires). This is a commission for being part of a well-curated store that serves 1.5 billion customers. The 3% is a transaction fee. Google's discount is similar:
"The company gave a 3% discount on fees for developers using third-party billing in the EEA region. With the new announcement, Google is offering a 4% discount on fees to developers."
Apple is already under a judge's order. What happens on another platform isn't immediately relevant.
EDIT: Google is operating under the premise that if Apple can game the ruling and maintain their prior commission, then it's leaving money on the table to do otherwise. If Apple ends up on the wrong side of the judge, and I'm confident they will, I fully expect Google to roll back their alternative payment commission voluntarily; no court order to do so is required. Simply reading the landscape is answer enough.
This is the entirety of Apple's and Google's app store revenue stream at risk. If external payment options had 0 commission, all that would need to happen is a payment system like Paypal comes along, offers them a small processing fee and nearly every developer would use it. This would cost Apple and Google over $100 billion. Not overnight but it would happen quite quickly as the biggest app developers would move first. The store commission is what pays for the whole operation, they have a right to charge it and for most developers a 12% fee is a small amount.
This issue is only about payment competition for the transaction fee being tied to Apple's payment processor. Apple's service here is 3%, that's all they need to remove. It's not Apple's problem if other payment processors charge higher fees. If they charge more then it shows Apple's option is fair and competitive.
If you have any interest in a more detailed report on the Judg's line of questioning and Apple's response, this Bloomberg article has more of the nitty-gritty: https://www.bloomberg.com/news/articles/2024-05-10/apple-says-no-major-app-developers-accept-new-outside-payments?sref=10lNAhZ9 One excerpt: “You’re telling me a thousand people were involved and not one of them said maybe we should consider the cost” to the developers? the judge said. “Not a single person raised that issue, of the thousand that were involved?”
My guess is the judge will settle in on something south of 10% tack-on for the IP.
You keep saying (about the 27%) ....
No way that the Judge will rule on how much Apple can charge for the commercial use of their IP.
Surprise, our opinions differ.
The Judge's ruling will come down soon enough.
The judge has already ruled. Those questions were already decided, in Apple’s favor. Epic lost.
The only things being decided here are the question of steering (the only question Apple lost) and the question of how much to discount for external payment handling/processing.
For external payment, I believe Google originally ceded 4% while Apple ceded 3%. My guess is Google did their homework so 4% is likely correct. Apple apparently (according to Bloomberg) has admitted they didn’t do their homework. The judge may penalize them, but as for what the percentage should be I’ll guess 4% will stick, or the judge will appoint someone to do the homework.
On steering, Apple wants to cede as little as possible and still comply with the ruling against them, but they needn’t worry, in my humble opinion. Epic should worry about overstepping here, because ultimately it’s about consumer choice, which works both ways.
Question: why would developers complain about Apple handling the payment processing if they can't negotiate a better rate than 3% themselves? The reality for credit card processing fees is that online transactions are ALWAYS going to have higher cost than physical transactions with a card. That's how the banks have set it up.
It's not the 3% fee that's an issue. It's the attached 27% cut of the gross for Apple that the company insists on. Apple gets the same cut as before while doing far less to deserve it.
Apple's doing exactly the same for the 27% (and it's 12% for non-millionaires). This is a commission for being part of a well-curated store that serves 1.5 billion customers. The 3% is a transaction fee. Google's discount is similar:
"The company gave a 3% discount on fees for developers using third-party billing in the EEA region. With the new announcement, Google is offering a 4% discount on fees to developers."
Apple is already under a judge's order. What happens on another platform isn't immediately relevant.
EDIT: Google is operating under the premise that if Apple can game the ruling and maintain their prior commission, then it's leaving money on the table to do otherwise. If Apple ends up on the wrong side of the judge, and I'm confident they will, I fully expect Google to roll back their alternative payment commission voluntarily; no court order to do so is required. Simply reading the landscape is answer enough.
This is the entirety of Apple's and Google's app store revenue stream at risk. If external payment options had 0 commission, all that would need to happen is a payment system like Paypal comes along, offers them a small processing fee and nearly every developer would use it. This would cost Apple and Google over $100 billion. Not overnight but it would happen quite quickly as the biggest app developers would move first. The store commission is what pays for the whole operation, they have a right to charge it and for most developers a 12% fee is a small amount.
This issue is only about payment competition for the transaction fee being tied to Apple's payment processor. Apple's service here is 3%, that's all they need to remove. It's not Apple's problem if other payment processors charge higher fees. If they charge more then it shows Apple's option is fair and competitive.
If you have any interest in a more detailed report on the Judg's line of questioning and Apple's response, this Bloomberg article has more of the nitty-gritty: https://www.bloomberg.com/news/articles/2024-05-10/apple-says-no-major-app-developers-accept-new-outside-payments?sref=10lNAhZ9 One excerpt: “You’re telling me a thousand people were involved and not one of them said maybe we should consider the cost” to the developers? the judge said. “Not a single person raised that issue, of the thousand that were involved?”
My guess is the judge will settle in on something south of 10% tack-on for the IP.
You keep saying (about the 27%) ....
No way that the Judge will rule on how much Apple can charge for the commercial use of their IP.
Surprise, our opinions differ.
The Judge's ruling will come down soon enough.
The judge has already ruled. Those questions were already decided, in Apple’s favor. Epic lost.
The only things being decided here are the question of steering (the only question Apple lost) and the question of how much to discount for external payment handling/processing.
For external payment, I believe Google originally ceded 4% while Apple ceded 3%. My guess is Google did their homework so 4% is likely correct. Apple apparently (according to Bloomberg) has admitted they didn’t do their homework. The judge may penalize them, but as for what the percentage should be I’ll guess 4% will stick, or the judge will appoint someone to do the homework.
On steering, Apple wants to cede as little as possible and still comply with the ruling against them, but they needn’t worry, in my humble opinion. Epic should worry about overstepping here, because ultimately it’s about consumer choice, which works both ways.
That is correct. The Judge ruling wasn't so much in favor of Epic or against Apple, but for the consumers. The California law that the Judge ruled that Apple is violating is the CA Unfair Competition Law . This is a vague and generalized law that allows the government to regulate business practices that they see as "anti-competitive" or "unfair", that are not clearly in violation of any "anti-trust" laws. And it's mainly a law that protects the consumers. The Judge saw that it was unfair for consumers (Fortnite players) that Epic was not allowed to inform them about being able to get a discount on purchases made on Epic own website, from within their free iOS app. Thus Apple was in violation of CA Unfair Competition Law with regard to the App Store anti-steering policies. No ruling was made that Apple 30% commission was in violation of the CA UCL or any other US anti-trust laws.
Here is a good article that points out how Judge Gonzales feel about Apple commission and Apple rights to monetize their IP. Plus how Apple is in violation of CA UCL. This from Judge Gonzales ruling on the original trial.
>First, and most significant, as discussed in the findings of facts,
IAP is the method by which Apple collects its licensing fee from
developers for the use of Apple’s intellectual property. Even in the
absence of IAP, Apple could still charge a commission on developers.It
would simply be more difficult for Apple to collect that commission. Indeed, while the Court finds no basis for the specific rate chosen
by Apple (i.e., the 30% rate) based on the record, the Court still
concludes that Apple is entitled to some compensation for use of its
intellectual property. As established in the prior sections, Apple is
entitled to license its intellectual property for a fee, and to further
guard against the uncompensated use of its intellectual property. The
requirement of usage of IAP accomplishes this goal in the easiest and
most direct manner, whereas Epic Games’ only proposed alternative would
severely undermine it. Indeed, to the extent Epic Games suggests that
Apple receive nothing from in-app purchases made on its platforms, such a
remedy is inconsistent with prevailing intellectual property law.<
Comments
On steering, Apple wants to cede as little as possible and still comply with the ruling against them, but they needn’t worry, in my humble opinion. Epic should worry about overstepping here, because ultimately it’s about consumer choice, which works both ways.