Apple encounters a super difficult opponent, the App Store business model is challenged

Because of their disagreement, Epic and Apple quarreled from social media and eventually went to court to confront each other.

Between you and me, a lot of secrets have been exposed, and even with the participation of Microsoft and other large technology companies, 30% of the revenue is not reasonable, why Epic can bear the 30% commission of PS4 and Xbox platforms Can't stand Apple?

Some questions can be answered based on court records, while others may not be solved by a lawsuit.

Epic: App Store’s 30% rake is unreasonable

The origin of the battle between Epic and Apple was that the popular game "Fortress Night" avoided the App Store's payment channels, and Apple was unable to obtain revenue sharing. This obviously violated the rules that Apple has always set for the App Store. Choose to remove the game "Fortress Night" operated by Epic.

▲ New payment method added by Epic

The outcry of Epic was surprisingly angry. It not only criticized Apple on social media, but also took Apple to court. This was not the case for Apple and Epic’s lawsuit against Apple in May of this year.

In Epic's view, Apple has become the "big brother" it once hated. It relies on the App Store to control the entire iOS software ecosystem, and uses this to monopolize and restrict competitors, making it convenient for its own services and even companies that have ultra-high profits. Gate.

In court, Epic also gave the reason why it believes that the 30% commission on the App Store is unreasonable. As a cross-platform game, Epic originally ran on multiple platforms such as PS4, Xbox, and iOS. The revenue share is also 30%.

However, compared to the App Store, most of Sony’s PS4 and Xbox businesses rely on consoles to distribute games. Microsoft and Sony not only pay a lot of resources for console R&D, production, and sales, but the actual console prices are not covered every time. cost.

Last year, the PS5 pricing has been delayed for this reason. Lori Wright, the vice president of development of Microsoft Xbox, said in court that Xbox hardware has been selling at a loss, and relying on software commissions to obtain revenue to develop the platform.

Epic believes that as a comprehensive application platform for the App Store, compared to game platforms such as Xbox, it does not provide game developers with the same value of support. Therefore, the 30% share is unreasonable, and Apple's benefits from the App Store are far Super imagination.

▲Picture from: Bloomberg

According to Epic witnesses in court, Apple earns more than 70% of its operating profits in the App Store each year, of which the profit in 2018 was 77.8% and the profit in 2019 was 77.8%.

In addition, Epic also questioned whether the App Store is considered fair competition, and Netflix is ​​a special case.

In 2018, Netflix planned to test payment methods that do not use the App Store in certain markets it operates, and what choices users will make. This move attracted Apple’s attention. According to internal emails disclosed in the court, Apple considered providing Netflix with a customized interface in order to get Netflix to abandon this test, and even provide specific recommendations in the App Store, but Netflix does not use it. Pay for it.

Another example is Roblox, a sandbox game platform, which provides a game creation tool that allows creators to build games and formulate rules so that other users can enter the game and gain revenue.

But Roblox soon agreed with Apple's claim that Roblox developers do not make games, and Roblox is a social platform rather than a gaming platform. There is still a lot of controversy over Roblox's assessment, but it seems that it does not intend to participate in the Epic and Apple lawsuits, and even changed the game section of the official website to "Explore".

Of course, the reason why the small company Epic dared to fight the industry giant Apple is not without relying on it. The App Store channel brings it profits and the proportion of users is not as high as imagined. According to court documents, the number of active users of "Fortress Night" in the App Store is only 10%, while revenue accounted for only 7%.

Sony's PS4, Xbox and other platforms are the main source of its profits. After Apple removed "Fortnite", the price of second-hand iPhones equipped with this game has risen continuously, even more than doubled.

Apple: "Free" App Store is not reasonable

Faced with Epic's steadily pressing on, Apple did not wait to die. Several executives took turns to confront Epic.

Apple first denied Epic’s claim that the App Store’s annual operating profit exceeds 70%, saying that the witness’s data comes from Apple’s public data estimates and is not accurate, and Apple has never tracked App Store profits.

▲ Picture from: Game World Observer

Similarly, in order to maintain a good App Store environment, Apple and Sony and Microsoft have paid a lot of money. Take the WWDC Developer Conference as an example. This is not only an event for Apple to launch a new system, but also communication and cooperation with global developers. activity.

According to the testimony of Phil Schiller, Apple’s former vice president of global marketing, Apple spends about $50 million in the WWDC Developer Conference each year, and afterwards, Apple will build a developer center in the headquarters park to Serve more external developers.

In addition, in recent years, Apple has also launched the "App Store Small Business Program", which aims to reduce the difficulty of operation for small and medium-sized enterprises. Starting from January 1, 2021, if developers’ income during the year is less than $1 million, their commissions The rake rate will be reduced from 30% to 15%.

▲ Phil Schiller

Schiller also said that 90% of developers are eligible to participate in the App Store small business program, and the commission will be reduced from 30% to 15%. The real obstacles to this program are money laundering and fraud. Apple has also been looking for solutions.

As for the amount of income changes brought about by the adjustment share, it is still unknown.

In addition, Schiller also cited the history of Apple's construction of the App Store, saying that they took huge risks to build it and used this to provide ordinary consumers with a better iPhone, and to provide developers with a stable development environment and income channels.

What’s interesting is that in the documents provided by Epic, Schiller discussed with Apple’s head of service eddy cue ten years ago whether the 30% rake can continue. He believes that Apple will inevitably face a challenge and discussed reducing the share. Possible.

When the App Store's profit exceeds 1 billion US dollars, can the percentage be adjusted further?

At present, the operating profit of the App Store is unknown, but Apple has indeed ushered in doubts about the share, in addition to Epic and Spotify.

In addition to the split, Apple’s closed control of the App Store is also criticized by Epic. In its view, it is precisely because Apple prohibits third-party app stores and third-party payment methods from entering the App Store that it has absolute rights. And now This right has been abused.

Apple believes that closed control is the reason for the App Store to maintain good development. On the one hand, it reviews applications and games, reduces the appearance of low-quality, fraudulent, and secure ransomware. It also gives the iPhone excellent security. Look at the support in comparison. A Mac that downloads third-party software is not as safe as an iPhone.

▲ Mac allows users to download third-party applications

Cook stated in the court that Apple has created and maintained 150,000 development interfaces to serve developers, which has invested a lot of human and material resources. At the same time, a good store environment has also attracted many developers. There are many in the App Store. Free games, they attract huge users into the App Store.

At the same time, these users will also become potential users of paid game applications, and the App Store provides a large number of users for game developers. By embedding a payment interface in the App Store to charge a 30% commission, it is Apple's way of obtaining intellectual property income and filling the cost of building the App Store environment.

▲ Picture from: Cult of Mac

Apple provided the market, so it was natural to collect "rents." The court has gradually become anxious here. The two sides are not giving way to each other, and more and more information has been released.

Struggle for interests or monopoly?

The battle between Epic and Apple was at first a dispute over interests, but later it rose to whether the App Store is suspected of being a monopoly. It depends on whether ordinary consumers have benefited from it, how large this benefit is, and whether the App Store’s profits to Apple are reasonable.

This had to bring up the original monopoly case of Standard Oil in the United States. In the beginning, Standard Oil transformed its refining technology and obtained most of the oil market in the United States through acquisitions and alliances. At this time, consumers also benefited from it. Thanks to refining technology and railway transportation, oil prices have fallen under the control of Standard Oil.

▲ Standard Petroleum Business Hall

The reason why Standard Oil was judged to be a monopoly was that it controlled the rise and fall of oil prices through control of railways and oil refining alliances. Ordinary consumers did not benefit from it, and Standard Oil was also split due to control of oil prices.

In contrast, the Apple incident is more complicated than that of Standard Oil. On the one hand, as a multinational company, Apple is involved in many countries and regions, and there will be some legal differences. On the other hand, Apple still has a large number of competitors. Apple has always claimed that players can also choose Android, PS4, Xbox and other platforms in addition to iOS.

▲ Picture from: Tech talk today

Whether Apple, which controls the App Store, uses closed management to suppress competition also requires a lot of information to prove, but this is also an obstacle. This time Epic and Apple’s lawsuit involves a large number of companies, and not every company is willing to announce the business. information.

A typical case is Microsoft. Although, as one of Apple’s biggest competitors, it stated in court that the Xbox platform was selling at a loss, as a supplementary evidence of Epic’s testimony, it also requires relevant financial information to prove that the same competitor Microsoft does not I must be willing to show my key sensitive financial information to Apple.

Before the lawsuit was over, the judge in charge of the lawsuit also received requests from many game companies, hoping that the court would seal up relevant documents and information so that the company’s sensitive information would not be exposed.

The impact of the results of antitrust litigation is also different. If it is only a fine, it will not have much impact on Apple's ecology. Previously, Google was fined multiple times in the EU because of antitrust litigation and will not destroy it. Business model.

And many people call for the splitting of the App Store, there are many problems to be solved in actual implementation, the most important of which is whether ordinary consumers can profit from it. After all, the split requires a lot of manpower and material resources to transition, and these resources It may not necessarily bring a better application environment for consumers.

At the beginning, many people in the Microsoft monopoly case opposed the split because it hurts the people and hurts the money, and consumers can’t get benefits. A Gallup poll showed that 54% of the people surveyed opposed the split, and only 34%. People approve of this plan.

The lawsuit between Epic and Apple is just the beginning. It has sued Apple in many regions around the world, and in the future, regulators will pay more and more attention to Apple.

The title picture comes from: Pcmarket

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