Apple CEO Tim Cook defended the company's App Store commission structure in his affidavit to the House's anti-trust subcommittee on Wednesday. He claimed that the majority of apps pay no commission at all, while others pay either 15 or 30 percent, depending on the specifics of their situation. He said that developers would be treated equally and that Apple would not charge commissions because it also had to compete for developers' interest in its platform.
However, the documents shared by the House subcommittee as part of its investigation indicate that exceptions to the Apple rules have been made – particularly with Amazon's Prime Video app. In addition, Apple may never have paid commission, but the discussions weren't off the table. It had even considered increasing commissions to 40% in certain situations.
Legislators came to hear Apple's internal email and interviews from app store developers, who argued that Apple does not enforce its rules consistently and play favorites. However, Cook's survey of fees in the App Store, combined with a format that limited the ability of executives to respond in detail, did not initially seem to provide much information about Apple's practices.
When asked directly about the functionality of the App Store, Cook simply adapted the published rules of the store, for example. For app developers who have to pay commissions, they only pay 15 or 30 percent. Current guidelines require 30% for apps that sell digital goods or services and a drop to 15% in the second year for subscription apps. The rules also document outsourcing for "reader" apps such as audiobook apps, streaming services, news publications and other competitive products that have the ability to forego in-app purchases.
Cook also expressed a mention of how the vast majority of app store apps, 84%, do not pay Apple any commission. It's the remaining 16% that pay, he noted.
And when Cook was asked if Apple was the only gatekeeper for publication in the App Store, he agreed – given that the App Store is "a function of the iPhone, similar to the camera and the chip". He clarified that Apple's control over apps was only extended to native software applications and not to web apps, but denied that Apple treats developers unfairly.
“We treat every developer equally. We have open and transparent rules, ”Cook said in his testimony. "It's a rigorous process because privacy, security, and quality are so important to us. We look at each app before it goes on," he added.
However, emails in 2016 between Apple SVP Eddy Cue and Amazon CEO Jeff Bezos, published here on the House Judiciary Committee website, indicate that Apple does appear to actually have a special contract with Amazon through its Amazon Prime Video app negotiated for iOS and Apple. In an email from November 2016 – before the launch of the Prime Video tvOS app in 2017 – Apple agreed to only take on a 15% share of sales for customers who signed up for the app using Apple's payment mechanism. (As a rule, subscription apps only drop from 30% to 15% in the second year.)
Apple confirmed this April that there is a dedicated program for Prime Video and a small handful of other apps that are subscription video entertainment providers. The program allowed these companies to rent or sell films and TV shows to customers using the payment methods the companies had already deposited and to integrate more deeply into Siri. However, Apple had not said that this particular program would include a reduced commission on subscriptions or other in-app upsells, as these emails confirm that these are issues for discussion.
This would not be the first time that Apple sees its commission structure as flexible.
When asked if there was anything that could stop Apple from increasing commissions to, say, 50%, the CEO replied that Apple had never increased commissions since day one. He also argued when asked if anything could prevent the competition for developer interest from preventing him from increasing its cut.
"There is a competition for developers, just like there is a competition for customers. And so is the competition for developers – they write their apps for Android or Windows or Xbox or Playstation," said Cook. "We have tough competition on the developer side and on the customer side, which is essentially so – it's so competitive that I would call it a street fight for market share in the smartphone business, "he added.
However, in internal emails from 2011, Apple discussed the increase in commissions – up to 40% for the first year of recurring subscriptions. "I think we could leave money on the table if we only asked for 30% of the sub's first year," Cue wrote at the time.
Documents from the hearing on “Online platforms and market power: investigation of the dominance of Amazon, Apple, Facebook and Google” pic.twitter.com/42o2Ye13jI
– House Judiciary Dems (@HouseJudiciary) July 29, 2020
Of course, Apple hasn't gone as far in the past few years to actually make this change. However, these emails show that Apple's thinking – and its discussions about commission structure – involves more than Cook's balanced playing field has shown.