Apple is experiencing a slump in its iPhone sales which has lowered its shares by 25 percent. If that wasn’t bad enough, it may also be losing ground in its digital services which earns the company about a third of its revenue.
This is due to the ever growing dissatisfaction of app companies having to pay Apple’s fees which can range from 15 to 30 percent. Take Netflix for instance. Every time a consumer paid $11 for Netflix through an iPhone app, Apple received a commission on the higher end – as much as $3.30.
Not only that but multiply that by every charge Apple makes through its iPhone apps Apple Store and you can understand why app companies are getting tired of Apple’s unfair market power.
Not only are companies fed up with Apple’s monopolistic power but so are consumers. Currently, consumers are being represented by attorneys in a Supreme Court case challenging Apple’s unfair market practices for its iPhone apps.
With Apple’s losses in iPhone sales due to losing legal battles in China and Germany and other places in the world, a hit in this area would be more bad news for the company. Especially since Apple’s strategy is to increase profits through its digital-services business.
Netflix rebelled against Apple’s ever growing fees by directing iPhone users to its website so that users can avoid the extra fees. With growing dissatisfaction among app companies, Apple could take a hit in this area if more companies follow Netflix’s action.
Granted, Netflix alone can’t put a big dent into Apple’s finances even though it paid out about $110 million last year which was more than any other non-gaming app company.
Spotify, the music streaming app, did the same thing three years ago. Spotify and Netflix reach more customers than all other apps in the market, thus Amir Ghodrati, director of market insights for App Annie, a firm that tracks the app market, believes that rebellion against Apple Store’s commission fees will not increase.
Apple is currently in negotiations with forming a news service similar to Netflix’s news service and is supposedly planning on charging a hefty 50 percent fee when it becomes available. Apple’s proposal is facing resistance from several publishers such as The New York Times and The Washington Post who feel that Apple is using its market power to get excessive fees.
In the video game app area, Epic Games, (maker of the popular Fortnite video game), CEO Tim Sweeney lashed out at app fees as a ”parasitic loss ” 18 months ago at a video game conference, according to the trade publication GamesIndustry.biz. He said the industry should be angry about this, and be constantly looking for other solutions, and new ways to reach gamers.
Sweeney says that a 30 percent commission feebreaks the economics of content distribution for all digital stores that want to compete. He says that this needs to change in 2019.