Apple Chief of App Store Says It Wants to Equalize the Playing Field For Developers
By Stephen Nellis
July 28 August 28, 2008 (Reuters) - Apple Inc Chief Executive Tim Cook will be questioned by U.S. lawmakers on Wednesday about whether Apple's App Store practices are unfairly influencing over independent software developers.
Apple tightly controls the App Store, which is the core of its $46.3 billion annual services business. Developers have criticized Apple's commissions of between 15 30 and 15 percent on a variety of App Store purchases, its ban on courting customers for outside signing-ups, as well as what some developers perceive as an unreliable and insecure application-vetting procedure.
But when the App Store was launched in 2008 with 500 apps, Apple executives viewed it as a test of offering a low-cost commission rate to draw developers, Philip W. Schiller, Apple's senior vice president of global marketing and the top executive for the App Store, told Reuters in an interview.
"One of the ideas we have come up with is that we're going treat all apps on the App Store the same - one set of rules for everyone, no special deals, no special terms, no special code, everything applies to all developers the same. This wasn't the case with PC software. Nobody thought like that. It was a complete flip around of how the entire system was supposed to function," Schiller said.
Software sold in physical stores meant that software had to be paid for shelf space and prominence. These costs could account for up to 50 percent of the retail cost. Small-scale developers were not able to get into.
Bajarin stated that the App Store's predecessor was Handango. Handango was a service that allowed developers to deliver applications over cellular networks, to the Palms of users in exchange for a 40% commission.
With the App Store, "Apple took that to an entirely new level. Bajarin declared that they were an excellent value at 30% less than the regular price.
The App Store had rules. Apple reviewed each app and required that its billing system be utilized. Schiller said Apple executives believed that users would be more comfortable buying apps if they believed that their personal information regarding payment was safe in the hands of a trusted source.
"We believe our customers privacy should be secured that way. He added that he could imagine what it would be like if you had credit cards and payments for every application you used.
Apple's rules were initially an internal list, however they were released in the year 2010.
Developers have complained to Apple about commissions over the years. Apple has since reduced the areas where developers are able to apply. In 2018, it allowed gaming companies like Microsoft Corp , maker of Minecraft and Minecraft, to let players login to their accounts so long as their games provided Apple's in-app payment as an alternative.
"As we spoke with some of the largest game developers, such as, Minecraft, they said"I completely understand why you want the user to be able to pay for it through their device. However, we have lots of players who purchased their subscription or accounts elsewhere such as an Xbox, on an PC, on the web. It's a major obstacle to getting onto your store,'" Schiller stated. "So we have made an exception to our own rules."
Schiller said Apple's cut helps to fund a vast system for developers: Thousands of Apple engineers manage secure servers to distribute applications and develop the tools needed to create and test the apps.
Marc Fischer, chief executive of Dogtown Studios mobile technology firm said that Apple's 30% commission was justified in the early days. It was the cost of global distribution to a small company like his. But now that Alphabet Inc's Google have an "duopoly" on mobile app stores, Fischer said, fees should be much lower - possibly the same as the single-digit fees payment processors charge.
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"As a developer you are forced to accept that charge," Fischer said. (Reporting by Stephen Nellis in San Francisco; Editing by Greg Mithcell and Steve Orlofsky)