30% commission on integrated applications and purchases Since last week, Apple and Google have been engaged in a battle against Epic Games...
30% commission on integrated applications and purchases
Since last week, Apple and Google have been engaged in a battle against Epic Games. Indeed, in an attempt to rebel against the commissions imposed by Apple and Google on developers, Epic has decided to add an alternative payment method to its Fortnite game (direct payment to Epic) to allow users to make in-game payments using a channel other than the one allowed by Apple and Google. It goes without saying that by using Epic's direct payment, Google and Apple would no longer receive the 30% commission that they typically charge on purchases made through applications installed through their online application stores. In retaliation for Epic's action, Apple and Google were quick to take action and immediately evicted Fornite from their respective platforms because, according to the two giants, Epic had violated their application store policies.
If Apple and Google didn't take half a step and reacted firmly by banning Fortnite from their respective stores, it's because there are big issues at stake. As far as Apple is concerned, for example, when a developer wants to publish an application on the App Store, he first has to pay 99 dollars a year to have a developer account. And for each published application, Apple will receive a 30% commission on the price of the application (if the application is paid for) and 30% on payments made into the application to unlock a feature or access an additional service. In the case of a subscription, the same 30% rate applies for the first year and increases to 15% in the second year. So for a developer who wishes to publish his application on the App Store, he should expect to receive 70% of the amount of sales obtained with his application. However, for revenues obtained with advertising integrated into applications or with sales of physical goods, the developer receives 100% of the sales price.
On the Play Store, the same 30% principle applies whether for paid applications, integrated payments or subscriptions (for the first year). As of 1 January 2018, Google's commission has increased to 15% for subscriptions that are retained after 1 year.
With this compensation system for developers and platform vendors, Apple has reported paying $155 billion to developers since 2008. If we consider that in January 2019, the company had declared that it had paid out $120 billion, that means that in 2019, $35 billion has been paid out to developers. From that, we can conclude that Apple alone received about $15 billion for the year 2019 alone, compared to $35 billion for all developers of the iOS platform. And as far as Google's earnings are concerned, the amounts are in billions of dollars as well.
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With this commission that allows Apple and Google to earn high amounts, some point to the fact that these two companies that dominate the mobile market make no effort to lower this rate. By applying this 30% commission, not only does it increase the price of the application on sale, but it reduces the earnings of developers, some publishers point out. For their part, the two giants defend their position by explaining that these application platforms require heavy investments in personnel, hardware resources, hosting, and many other expenses. In addition, they explain that if an application is published for free, they do not charge any commission to the developer. Only paying applications or applications that include purchases are taxed.
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Faced with the enormous amounts received by owners of application distribution platforms with this 30% commission, which some consider too high, Epic had already expressed its displeasure in 2018 by setting aside the Play Store when Fortnite was launched. Users were invited to download Fortnite directly from the publisher's website. This had also prompted other publishers such as Tinder and Netflix to follow suit. But 18 months after having rejected the Play Store, Epic Games reversed its decision and announced last April that it was difficult for application publishers to do without the Play Store, denouncing at the same time the use of commercial techniques and measures used by Google to block software obtained outside the Play Store. And on the App Store, the problem is more pronounced because it is almost impossible to install applications on the iPhone and iPad from other online stores.
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