Phil Schiller Reveals App Store Commission Concerns in Testimony on Web Sales Impact

In a recent court hearing, Apple Fellow Phil Schiller highlighted critical issues regarding the App Store commission rates that have sparked ongoing legal battles between Apple and app developers. Schiller, who oversees the App Store, expressed his initial apprehensions about the 27% commission Apple intended to impose on developers for purchases made outside the App Store, emphasizing potential compliance risks and the impact on developer relations.

Concerns Over the 27% Commission

During his testimony, Schiller revealed that he was worried about the implications of charging this commission. He stated that implementing such a fee could result in an “antagonistic relationship” between Apple and developers. Key points from Schiller’s testimony include:

• Compliance Risks: Schiller noted the potential compliance issues that could arise from the new fee structure.
• Developer Relations: He feared that Apple would have to act as a “collection agency,” which could damage its relationship with developers.
• Audit Rights: The commission structure might require Apple to conduct audits on developers regarding their transactions.

Background on Apple’s Commission Structure

Apple traditionally charges a 30% commission on in-app purchases. However, following a 2021 ruling from the Epic Games lawsuit, the fee was reduced to 27% for external purchases. This legal decision mandated Apple to allow developers to link to alternative payment methods.

Modifications to App Store Guidelines

In response to the court’s ruling, Apple adjusted its App Store Guidelines to permit developers to link to their websites, offering customers different payment options. Despite this compliance, Apple’s commission reduction was minimal, only decreasing by 3%.

Epic Games and Apple’s Ongoing Legal Battle

Since the initial ruling, Apple and Epic Games have returned to court to determine whether Apple has violated the original order that increased competition within the App Store. Schiller’s initial objections are central to this ongoing legal discourse.

Internal Discussions at Apple

The court hearings unveiled an extensive internal debate within Apple regarding the commission fees. Key executives, including Apple CEO Tim Cook and former CFO Luca Maestri, participated in discussions that ultimately led to the decision to maintain the commission on external purchases.

Impact of the New Guidelines on Developers

Documents presented in court revealed that Apple analyzed the potential financial implications for developers opting to link to their websites. This analysis included:

• Customer Abandonment: Apple assessed how a less seamless payment experience might lead customers to abandon transactions.
• Link Formatting Rules: The company explored how stricter rules on link placement could affect developers’ choices to implement these external links.
• Commission Timing: Apple considered various timelines for when to apply the 27% commission, eventually extending it to seven days from the initial 72 hours.

Concerns Over Perception

In internal meetings, concerns were raised about how charging fees for web transactions might be perceived negatively. One note from a meeting cautioned, “This might be perceived like we’re trying to charge for what happens on the internet.”

As the legal battle continues, the implications of Apple’s commission structure remain a focal point for developers and industry observers alike. For more information on App Store policies, visit the official Apple Developer site.