Should Tim Cook Reduce Apple App Store Fees? On the Other Hand
Doing a little test: I’m considering spitting off my On the Other Hand segment, which I write every week, into its own newsletter edition. What do you think?
Apple's App Store is in the spotlight again this week, as Twitter owner Elon Musk argues the company takes too large a cut of transactions on the platform. Should Tim Cook reduce Apple's App Store fees in a downturn? Jon Fortt is here to weigh in.
Yes. It's inconvenient that Elon Musk is the one to bring this up in such a confrontational way, but this really would be a great time for Apple to reduce App Store fees. For those who don't remember, Apple charges a 15% fee on paid apps and in-app purchases for developers who make less than a million dollars a year, 30% on those that make more. There's a lower 15% fee on subscriptions after the second year. The reason why Tim Cook should cut fees here? Inflation is making it more difficult for every business to run profitably, and that's got to be affecting digital businesses, too. By showing some flexibility now, Apple can take itself out of the regulatory spotlight. And if he plays this right, Cook can instead put the spotlight on Google and Amazon, which have a tougher argument to make with their platform policies. In Google Search and the Amazon marketplace, they're competing with third-party merchants for placement in the results. By lowering fees, Apple can turn the heat up on competitors. It's like that joke about the two guys getting chased by a bear in the woods, and one stops to lace up his sneakers. The one says, why are you stopping, we have to outrun the bear! The first says, I don't have to outrun the bear, I just have to outrun you.
Didn't Apple just lower fees a couple of years ago? Now they have to do it again for Elon Musk?
On the other hand, Apple absolutely should not lower its App Store fees. The idea is absurd. It's as absurd as critics who try to say Apple's a monopoly, when Android actually has higher market share. Here's an idea: If you don't want to pay Apple's App Store fees, don't sell on the App Store. Outside the digital world, you don't get to walk into a luxury storefront on Fifth Avenue and say, "You know, the rent you're charging here is insane. I could set up on Canal Street for much cheaper. I demand you lower the rent." Because the premium is the point. You go to Fifth Avenue for a high-end experience and genuine product. No one is forcing you to shop there. Apple's App Store is the same way. It's not Apple's fault they built a thousand-dollar smartphone a lot of people prefer to the $300 alternative, and an App Store on top of it where shoppers want to buy digital goods. The fact that it's popular doesn't mean you get to name your own price. Elon Musk tweeted Monday that Apple puts a secret 30% tax on App Store purchases. This revealed to the world that Apple must be really bad at keeping its own secrets. Because two years and two weeks ago on November 18, 2020, Apple put out a press release detailing its App Store fees, including who pays 30 percent and who pays 15.
What do you think? Which side do you find more convincing, and why?
Thanks for reading Fortt Knox: Innovation Curated! Subscribe for free to receive new posts and support my work.