Criticism of Apple's (AAPL 0.51%) 30% cut on digital sales in the App Store has intensified over the past year. Antitrust regulators are reportedly circling above, potentially preparing to launch formal investigations into the company's practices to determine if App Store policies undermine competition. CEO Tim Cook has agreed to testify before the House Judiciary Committee next week alongside the CEOs of peer tech giants Amazon, Alphabet, and Facebook.
Ahead of that appearance, Apple has released a study that it backed that suggests its 30% cut is totally worth it.
Image source: Apple.
Most digital platforms charge 30% (or more)
The Mac maker commissioned the study from Analysis Group, the same group of independent economists that also did an analysis last month of how big Apple's mobile economy really is. One ostensible goal of that previous study was to highlight how much commerce Apple facilitates but does not get a cut of -- namely, sales of physical goods and services that represented about 80% of App Store billings last year.
The new study tries to compare Apple's commission rates with other prominent digital platforms to determine whether it's excessive or not. Apple's cut of subscription revenue drops to 15% after the first year. Analysis Group points out that all of the dominant app stores from Google, Amazon, Microsoft, and Samsung carry similar commission rates of 30%. Google Play is banned in China, and many local companies have set up proprietary Android app stores that can charge 50% or more.
Analysis Group also looks at brick-and-mortar retail stores, noting that consignment stores can sometimes charge a commission of 50% to 75%. Since digital distribution is much cheaper, the study suggests that the App Store's 30% cut looks relatively good. "We find that sellers generally earn a substantially lower share of total revenue from the distribution through brick-and-mortar stores and marketplaces than through digital marketplaces such as the Apple App Store," the authors write.
This comparison is arguably misplaced in some contexts, but it's worth noting that certain software products like video games can be sold either physically or digitally. Selling a physical copy of a video game at a retail store typically only nets the developer 45% of the sales price after factoring in retail margins and physical distribution costs, according to the study, compared to the 70% that developers keep if they sell the same game digitally.
"To promote its success, Apple provides developers with distribution, search, and review services, as well as a set of tools to build and monetize apps," the study says. "Apple also invests in the safety of the App Store and in developing new technologies and functionalities."
What the study doesn't say
While Analysis Group concludes that the App Store commission rates are mostly in line with competing platforms, it skirts the key competitive concern: The App Store is the only place to buy digital stuff on iOS. On most of the other platforms mentioned, users have alternative ways of getting content onto their devices.
In contrast, Apple maintains tight control over iOS, and developers have sued the company alleging that the App Store represents an illegal monopoly over iOS app distribution. Developers looking to sell iOS apps to the over 900 million iPhone users out there have no choice but to go through the App Store and pay up.
